A floating pledge agreement is one that is entered into between a lender and a borrower wherein the securities pledged have a changing valuation in the market. The lender and borrower in a floating pledge agreement are known as pledgor and pledgee. Usually a floating pledge is applied to9 assets that change in value or quantity over a period of time. Some such assets are stocks that are traded in the market, motor vehicles, gold ornaments etc. The floating pledge agreement provides the lender with a buffer to recover both the principal and the interest even the value of the asset that has been pledged changes.
Some of the aspects covered in a floating pledge agreement are name of the pledgor and pledgee including their correspondence addresses, amount of pledge, date of pledge, floating rate of interest applicable for the pledge, security provided for the pledge, date of maturity of loan, repayment schedule for the loan etc.
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