How To Identify If Shares Are Restricted: Affiliated Shareholders
Michael R.
Capital Markets@Mountbatten Global|Direct lender, Lic’d & Reg’d Fund|Loans Against Stocks&Digital Assets $1M+|Liquidity for Listed Co’s, Executives, Founders, HNWI/UHNWI & Family Offices|Michael(at)mountbattenglobal.com
This article is to help sales agents to better understand and identify clients who have restricted shares.
First, let’s discuss what restricted shares are.
As the name implies, restricted shares are shares that are under either a contractual or regulatory restriction that prohibits the sale, trading or transfer of said shares.
Contractual restrictions are typically those placed on the shares by the listed company when issuing shares to an individual or business in lieu of cash payments for services performed.
This is common among advisors and intermediaries who have performed a service for the listed company who in an effort to preserve cash, offers them payment in shares that must be held for a period of time.
Regulatory restrictions are those placed on shares held by certain individuals or entities and are overseen by a local securities regulatory or the stock exchange where the shares are listed and traded.
Shareholders who call under the regulatory restrictions are typically referred to as “Affiliated Shareholders” which can encompass any number of individuals as well as entities.
The typical list of what constitutes one to be considered an Affiliated Shareholders are:
So why does it matter if the potential borrower is an Affiliated Shareholder or has Restricted Shares?
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Because the loans are non-recourse, Mountbatten Global and its investment manager and advisors need the ability to structure hedging methods such as rehypothecation or off market trades/repo’s.
In many cases, if the shares are restricted, this can pose issues with the ability to structure these hedging strategies or it can potentially cause a regulatory or contractual violation to have occurred.
For these reasons, it is imperative that sales agents understand and identify these types of shareholders and if the shares are restricted before requesting terms from Origin8 and The Mountbatten Global SPC Fund.
This will save all parties a great deal of time, effort and money that would otherwise be wasted in chasing a transaction that can not be performed.
Michael Rowe
Sr. Loan Advisor
Origin8 Partners
Scalping is my key to being a profitable futures trader!
8 个月absolutely. Don't be in such a hurry. No deal is done until a deal is done. I have done so many of these and many have not closed. I have closed 2 in the past 5 years. I've learned to get all the information first, make sure I'm talking to an individual with direct connection with the shareholder as well as making sure I can get them on the phone should the need arise because the lender at some point in time will have to speak and deal direct with them. Have all the information needed and don't be very strong in what the lender requests. If supposed client wants to make things difficult tell them to have a good day and good luck. Doesn't matter what the client says, the only thing that matters is that they qualify and are willing to follow the procedures your lender has.