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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.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
