Mortgaging Security

The executive regulation of the Money markets authority establishing law allowed security mortgaging even if it haven’t been paid fulfilly, whereas security is mortgaged by a contract signed by the mortgagor, debtor, and the kind sponsor if existed, also investment portfolios are mortgaged by a contract signed from mortgagor, debtor and the management corporate of the portfolio, and the kind sponsor if existed.

Whereas mortgaging proof between contractors should by writtenly, and the mortgaging is not enforced in front of the clearing agency, portfolio manager, exporter, or others unless it is notated.

Mortgaging Security Contract

The executive regulation of Money markets authority establishment law stipulated that mortgaging contract should declare the following:

  • The amount of debt secured by mortgage.
  • Whether mortgage guarantees fulfilling the debt and its consequences or not, if the case that the contract is void of this, then mortgage should guarantees fulfilling the debt and its consequences.
  • Whether the creditor has got an amount of security or not.
  • Whether a certain bank account has been allocated for all transaction related to the debt secured by mortgage to be recorded, thus the resulted amount of that account becomes acceptable evidence from the contract parties to prove fulfilling of debt amount for the creditor, also to prove debit payments, unless this is substituted by a periodic confirmation from the bank every time period about the debt balance.
  • Whether mortgage includes mortgaged stock returns or not, if the contract is void of this, then mortgage should include guaranteed stock returns.
  • Whether mortgagor has waived his voting rights.
  • The cases of breaches that lead to the maturity of the debt before its due date specified in the contract.
  • Whether mortgagor has agreed to the creditor’s possession of the security or selling it when the debtor infringes his contract obligations, also determining the value of possession and sale.
  • The procedures of announcing case of infringement when it is occurred, and the evidence of its existing proved in contract.

Notation of Mortgage

Notation of mortgage which is consequent on nominal security in that security records is to be at the clearing agency, by attendance of debtor, mortgagor, and kind sponsor if existed or their representor or legal representor, after providing the clearing agency by a true copy of original of the mortgage contract signed by them.

And it should be notated the investment portfolio mortgaging in that portfolio account at the investment portfolio manager, by an agreement between the portfolio owner, mortgagor and portfolio manager.

The executive regulation of Money markets establishment law also stipulated that the notation entity of recorded mortgaged security should provide the stock exchange and clearing agency by reports about what had been arranged of security mortgage, parties who were granted voting rights, resulted from this amount mortgaging according to mortgage contracts, whereas the stock exchange should declare mortgaged amount of every registered security, and parties that had been granted voting rights resulted from this amount mortgage according to mortgage contracts.

Besides, the clearing agency should provide the mortgagor, debtor, kind sponsor by his request by an official extract of the security deposit receipt indicated by mortgage.

Also, the portfolio manager or clearing agency, should provide mortgagor by periodic reports about the security pledged in his favor.

Validity of the Mortgage Contract on the Profits of the Mortgaged Security

In case of maturity of the mortgaged security by cash profits or security profits as a bonus, it should be applied on those profits the mortgage regulations stipulated on the mortgage contract, and the regulations declared in the executive regulation of Money markets authority establishment law, and unless the mortgage contract decides another, the clearing agency should notate on security a bonus by same mortgaging, by same notation which was for mortgaged security.

The Right of the Mortgagor of Voting by Mortgaged Security

The regulation allowed the creditor to abdicate – By the mortgage contract and its amendment – His right in attending the general assemblies’ meetings, shareholders authority or deeds meetings, and voting in it on behalf, to the mortgagor. In all cases the right of the creditor of voting by security is transferred to the mortgagor considering the second day of the date which the debit guaranteed by mortgage has its due date without fulfilling it.

If the abdication to the mortgagor of the right to attend and vote in general assemblies’ meetings and shareholders authority meetings or deeds has been done, thus the clearing agency must enable the mortgagor to attend and vote in general assemblies’ meetings of the debtor, and notate it by declaring referral of the right to attend and vote to the mortgagor by himself or his representor.

Also, the clearing agency – while notating mortgaging in security records or notating the copy of portfolio mortgage contract – should declare by notation whether the mortgagor has the right to vote by mortgaged security or not, and if there were infringement cases, which the debit within is matured before its stipulated due date in the contract or not.

It is applied on the mortgagor all the decisions that are taken by the corporate general assembly, or the collective investment fund, system, or shareholders authority, deeds, by same way it is applied on the debtor, while the mortgagor by thus, related to those decisions has the right to  make use of all decided rights of the debtor, by laws, regulations, decisions, and agreements that are applied on the mortgaged security, about appeal and objection on it, even if the debtor hadn’t waived to the mortgagor voting rights initiated from the security.

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