June 26, 2022

Volume XII, Number 177

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June 24, 2022

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Can A Corporation Pledge Its Own Shares?

A "pledge" is a bailment for security.   It is effected by delivery of possession of the pledged property, although title remains in the pledgor.  Hartford v. State Bar,  50 Cal. 3d 1139, 791 P.2d 598, 270 Cal. Rptr. 12 (1990).   California Corporations Code Section 207(d) unequivocally states that, subject to Section 510, a corporation has the power to pledge its own shares.  But how is that possible? 

Section 510(a) provides that when a corporation reacquires its own shares, those shares are restored to the status of authorized but unissued shares, unless the articles prohibit the reissuance.   Thus, it seems that any shares held by the corporation will be unissued and thus in the title of no one.  

© 2010-2022 Allen Matkins Leck Gamble Mallory & Natsis LLP National Law Review, Volume XII, Number 146
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About this Author

Keith Paul Bishop, Corporate Transactions Lawyer, finance securities attorney, Allen Matkins Law Firm
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Keith Bishop works with privately held and publicly traded companies on federal and state corporate and securities transactions, compliance, and governance matters. He is highly-regarded for his in-depth knowledge of the distinctive corporate and regulatory requirements faced by corporations in the state of California.

While many law firms have a great deal of expertise in federal or Delaware corporate law, Keith’s specific focus on California corporate and securities law is uncommon. A former California state regulator of securities and financial institutions, Keith has decades of...

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