Pledge On An Owner’s Account

It is now practicable to pledge an owner's account, after new rules were introduced by the Central Securities Depository.

The new rules contain the essential information needed to enable creditors to decide whether to opt for a pledge of the whole account, or of individual shares. The pledging of an owner's account has been permitted under Czech law for about eight months.

Given its newness, the usefulness of this tool is difficult to assess but the flexibility it offers may well make it popular with creditors and lead to it being used in increasingly creative ways.

The procedure is broadly similar to that for pledging a single share:

• an order must be issued (usually by the pledgor, but possibly by the pledgee) to the participant in the depository that administrates the pledge (ie the bank or broker)