Pledged Fund: A Comprehensive Guide to Its Legal Definition

Q: Can a pledged fund be revoked?

Generally, once a fund is pledged, it cannot be revoked without the agreement of all parties involved unless specified otherwise in the contract.

Q: How do I know if my funds are pledged?

You can check the terms of your financial agreements or consult with your financial advisor or legal counsel.

Definition & Meaning

A pledged fund refers to any amount of money that is committed to ensure the payment of principal or interest on a financial issue, such as a bond. This commitment does not have to follow a specific format but must provide reasonable assurance that the funds will be available even if the issuer faces financial challenges. Additionally, if a pledge is made to a guarantor, it is considered an indirect pledge. However, a pledge involving over 50 percent of a corporation's outstanding stock is not recognized as a pledge unless the corporation is specifically created to avoid generating replacement proceeds.

Table of content

Legal Use & context

Pledged funds are commonly used in finance and securities law, particularly in the issuance of bonds and other debt instruments. In legal practice, these funds provide assurance to investors regarding the repayment of their investments. Users may encounter this term when dealing with bond agreements, loan documents, or financial disclosures. Legal forms related to pledged funds can often be found on platforms like US Legal Forms, allowing users to manage their financial agreements effectively.

Key legal elements

Real-world examples

Here are a couple of examples of abatement:

Example 1: A city issues bonds to fund a new public park. The city pledges a portion of its future tax revenues as a pledged fund to ensure that bondholders will receive their interest payments.

Example 2: A corporation takes out a loan and pledges its accounts receivable as collateral. This pledge provides assurance to the lender that the funds will be available to pay back the loan (hypothetical example).

State-by-state differences

Examples of state differences (not exhaustive):

State	Pledged Fund Regulations
California	Specific requirements for public bond issues.
New York	Strict guidelines on collateralized loans.
Texas	Allows broader definitions of pledged funds in local government financing.

This is not a complete list. State laws vary and users should consult local rules for specific guidance.

Comparison with related terms

Term	Definition	Difference
Pledged Fund	A commitment of funds to secure payment obligations.	Focuses on financial assurance for debt repayment.
Collateral	Assets pledged as security for a loan.	Collateral can include physical assets, while pledged funds are typically cash or cash equivalents.
Guarantee	A promise to cover a debt if the borrower defaults.	A guarantee is a third-party assurance, whereas a pledged fund is a direct commitment from the issuer.

Common misunderstandings

What to do if this term applies to you

If you are involved in a financial agreement that includes pledged funds, ensure you understand the terms of the pledge and its implications for your obligations. You may want to consult a legal professional for personalized advice. Additionally, consider exploring US Legal Forms for templates that can help you manage your agreements effectively.

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Quick facts

Pledged funds provide assurance for debt repayment.
They can be cash or cash equivalents.
Legal implications vary by state.
Important in bond and loan agreements.

Key takeaways

Frequently asked questions

What is the purpose of a pledged fund?

The purpose of a pledged fund is to provide assurance that funds will be available to meet payment obligations, such as interest or principal on debt.