Write notes on the following: Pledge of dematerialized shares.

A beneficial owner may, with the prior approval of the depository, pledge or hypothecate his shares held in a depository. Upon receipt of intimation from the beneficial owner about the pledge or hypothecation of his shares, the depository shall accordingly make entries in its records. Such an entry in the records of a depository shall be an evidence of a pledge or hypothecation [Refer Section 12 of of the Depository Act, 1996]. Both the pledger and pledgee must have a depository account. The procedure for pledge or hypothecation of shares held in demat form is as under:- Investor shall submit the details of shares to be pledged to the Depository Participant (DP) in the prescribed format. DP shall verify the records and on being satisfied that the shares are available for pledge, make a note in the records and forward the application to the Depository for approval. Depository shall obtain confirmation from pledgee and the records the pledge within 15 days of application. Depository shall send intimation to the DP of both the pledgor and pledgee who will inform the pledgor and pledgee respectively. The pledgee may invoke the pledge in accordance with the terms of pledge and on such invocation the name of pledgee is entered in the Register of Beneficial Owners by the Depository. During the pledge is in force, the DP shall not give effect to transfer of any security without the concurrence of the pledgee. As per the terms of the Pledge Agreement, the pledgor shall request the DP to close the pledge. The pledgee, on getting payment, shall make a request for closure of pledge to his DP. For making hypothecation of shares held in demat form the above procedure is to be followed. However before registering the hypothecatee as a beneficial owner, the Depository should obtain the consent from the hypothecator.