Change in share holding pattern-lenders interest
This query is : Resolved
18 October 2013
Consequent upon the change in share holding pattern, the promoters of a company have become minor share holders. Please advise what steps Banks should take to safeguard their interest for already having lent sufficient amount to the company.
19 October 2013
First you need to check whether such a change in shareholding pattern in any manner have negative connotations for the Bank.
Often promoters are not in majority. That doesn't necessarily be a bad thing.
If the bank sense any threat to the quality of the asset in terms of commitment of the new shareholders etc, the bank anyways can call back the on-demand advances. Additional security covers can be asked for where necessary. personal guarantees of the directors, pledging of shares etc can be insisted upon. In case of change in management consequent to shareholding change, personal guarantees of new directors be insisted on.
It would be for the benefit of the bank to enter into constructive dialogues with new shareholders to ensure that the company is on track with its plans and is committed to its planned expenditure and repayments.
remember prevention is always better than cure. If there is any signal of company going bad, the bank should review the viability of the company operations and review its exposures in line of the same.
Often promoters are not in majority. That doesn't necessarily be a bad thing.
If the bank sense any threat to the quality of the asset in terms of commitment of the new shareholders etc, the bank anyways can call back the on-demand advances. Additional security covers can be asked for where necessary. personal guarantees of the directors, pledging of shares etc can be insisted upon. In case of change in management consequent to shareholding change, personal guarantees of new directors be insisted on.
It would be for the benefit of the bank to enter into constructive dialogues with new shareholders to ensure that the company is on track with its plans and is committed to its planned expenditure and repayments.
remember prevention is always better than cure. If there is any signal of company going bad, the bank should review the viability of the company operations and review its exposures in line of the same.
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