NISM Certifications · NISM-Series-VI: Depository Operations · Special Services - Pledge and Hypothecation
Meera pledged shares with a lender and meanwhile the company announced a cash dividend. Who is generally entitled to the dividend on the pledged shares?
Meera, the pledgor, is generally entitled to the dividend because pledging does not change beneficial ownership. The shares remain in her account, only blocked. The pledgee would receive benefits only if the pledge was invoked and shares transferred before the record date.
- AThe pledgee, because it holds the shares
- BThe pledgor, because the pledgor remains the beneficial ownerCorrect
- CThe depository
- DThe DP of the pledgee
Explanation
A pledge does not transfer ownership, so the pledgor stays the beneficial owner and corporate benefits like dividends go to the pledgor unless the pledge is invoked before the record date.
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