Stock Pledge Agreement Template for Saudi Arabia

The Stock Pledge Agreement is a crucial security document used in Saudi Arabian financing transactions where shares are provided as collateral. It is commonly used in corporate financing, acquisition financing, and general secured lending transactions where a shareholder pledges their shares to secure either their own obligations or those of another party. The agreement must carefully balance the rights of the pledgee to enforce their security with the requirements of Saudi law, including the Commercial Pledge Law and CMA regulations. When drafting a Stock Pledge Agreement, special attention must be paid to Sharia compliance, particularly regarding enforcement mechanisms and the treatment of dividends. The document typically includes detailed provisions on pledge perfection, voting rights, dividend distributions, and enforcement procedures, all tailored to comply with Saudi regulatory requirements and market practice.

1. Parties: Identification of the Pledgor(s) and Pledgee(s) with full legal names and addresses

2. Background: Context of the pledge arrangement, underlying obligations, and relationship between parties

3. Definitions and Interpretation: Definitions of key terms and interpretation rules, including references to Saudi law concepts

4. Pledge Creation: Express creation of the pledge over the shares, including compliance with Saudi Commercial Pledge Law requirements

5. Secured Obligations: Clear description of the obligations secured by the pledge, ensuring Sharia compliance

6. Perfection Requirements: Steps required to perfect the pledge under Saudi law, including registration requirements

7. Representations and Warranties: Standard and share-specific representations by the Pledgor regarding ownership, authority, and absence of encumbrances

8. Covenants: Ongoing obligations of the Pledgor regarding the pledged shares, voting rights, and corporate actions

9. Dividends and Other Rights: Treatment of dividends, bonus shares, and other corporate rights during the pledge period

10. Events of Default: Circumstances constituting default and consequences thereof

11. Enforcement: Enforcement mechanisms compliant with Saudi Enforcement Law and Sharia principles

12. Power of Attorney: Appointment of the Pledgee as attorney for specific enforcement actions

13. Notices: Communication procedures between parties

14. Governing Law and Jurisdiction: Explicit reference to Saudi law governance and jurisdiction of Saudi courts

15. Miscellaneous: Standard boilerplate provisions adapted to Saudi law requirements