Mr. Z


Dear Sir,


We refer to your letters no. ………………. dated July 03, 2007and ………… dated July 31, 2007 on the above subject.

We have perused your letters and the provided documents including the Memorandum of Company 1 (“Company 1”). It appears that, Bank 1 (“the Bank”) has sanctioned a loan to Company 2 (“COMPANY 2”) against registered mortgage of apartment at Flat (“the Apartment”). The Apartment although allotted to Mrs. A, mother of the Chairman of COMPANY 2, is in fact owned by Company 1, which is a housing society having 30 apartments and 60 shares. 2 shares and 1 share certificate have been issued against possession of each apartment. Mrs. A is in possession of the Apartment vide Share Certificate No. 33 comprising Shares no. 19 & 20 (“the Shares”).

COMPANY 2 has informed the Bank that the remaining 29 shareholders did not agree to let Company 1 to Mortgage the Apartment in favour of the Bank on apprehension that the company may be liable to repay the loan in case of default by COMPANY 2.

As such, COMPANY 2 has approached the Bank to pledge the Shares and has deposited the share certificate and Form-117 signed by Mrs. A in favour of the Bank. Mrs. A has informed Company 1 about the matter and Company 1 has given their consent to Mrs. A to pledge the shares with the Bank.

In these circumstances, you require our legal opinion regarding whether or not pledge of the Shares instead of registered mortgage of the Apartment shall protect the interest of the Bank.


Apprehension of the other 29 shareholders of Company 1 that, if Company 1 gives 3rd Party Mortgage in favour of the Bank, Company 1 may be liable to repay the loan in case of default by COMPANY 2, is without any legal basis. However, we have perused the Memorandum of Association of Company 1, and found that Company 1 is not authorised under the object clauses of its Memorandum of Association to give 3rd Party Mortgages. Therefore, even if the other 29 shareholders approved, Company 1 could not have given 3rd Party Mortgage in favour of the Bank without changing its Memorandum of Association.

Regarding the pledge of the Shares, we are of the opinion that Lien over the Shares vide a Letter of Lien along with Irrevocable General Power of Attorney (“IGPA”) to sell the Shares shall be more cost effective then Pledge of the Shares because the stamp duties for Letter of Lien and IGPA are Tk. 150.00 and Tk. 200.00 respectively and on the other hand stamp duty for pledge is as follows:

If the Loan is drawn singly – 0.5% of the value of the consideration.

If the Loan is drawn in set of two for each part of the set – 0.25% of the values of the consideration.

If the Loan is drawn in set of three for each part of the set – 0.12% of the value of the consideration.

At the time of executing the Letter of Lien and IGPA, the Bank should ensure that Mrs. A provides the Bank with the Share Certificate No. 33 and a blank Form-117 signed by her. The Bank should also ensure that the Shares are marked “under Lien” in the Register of Company 1.

The Bank should beware of the fact that, there have been instances whereby shares which were under lien were transferred unscrupulously by the owner of the shares by creating another Share Certificate.

If you have any further query, please do not hesitate to contact us.

Thanking you,

Yours faithfully,


For: “The Lawyers & Jurists”