Buying Pledged Shares at a Bank Auction (Share Lilami)

Shares can be pledged as धितो (dhito) in the same way as land. When the borrower defaults, the lending bank publishes a lilami suchana naming the company, the number of shares (कित्ता) on offer, the type of share, the base price and how to bid. Share notices on AuctionMandu are grouped under share auctions, so you can compare what is on offer and then contact the bank.

Listed shares belong to companies traded on the Nepal Stock Exchange (NEPSE). They are held electronically in demat form, so a buyer generally needs a demat account to receive them, and there is a market price to compare the base price against.

Unlisted shares belong to companies that are not traded on the exchange. There is no market price to compare with, and a transfer is usually recorded by the company or its share registrar rather than through the exchange. Unlisted shares can be harder to value and harder to sell later, so ask for the company’s recent financial statements before you decide what to bid.

Ordinary shares (साधारण शेयर) are held by the general public. Promoter shares (संस्थापक शेयर) are held by a company’s founders and promoters, and many share auctions involve them, especially promoter shares of banks, insurers and hydropower companies.

Promoter shares are treated differently from ordinary shares. They may be subject to a lock-in period during which they cannot be sold, restrictions on who can buy them, and conditions in the company’s own rules. For regulated companies such as banks, financial institutions and insurers, buying promoter shares may also need approval from the relevant regulator. The notice should say what applies. If it does not, ask the bank and the issuing company before you bid.

For listed shares you will generally need a demat account with a depository participant to receive the shares, and an account with a licensed stockbroker to trade them on the exchange later. You will also need the identity documents and the deposit the notice asks for, and some notices ask bidders to give their demat account details with the bid.

For unlisted or promoter shares the requirements can differ, and the bank may ask for extra documents or for confirmation that you are eligible to hold that class of share. Ask the auctioning bank for its exact list before you apply.

Start with the company. Read its latest annual report and financial statements and its recent announcements and, for listed shares, look at its recent trading history. Then look at the shares themselves:

• The exact number and class of shares, and whether they are listed.
• Whether any lock-in period or transfer restriction applies.
• Whether the pledge will be released when the shares are transferred to you.
• How dividends, bonus shares or rights declared around the time of the sale will be treated.
• How long the bank expects the transfer into your name to take, and what it depends on.

Bids go to the auctioning bank as its notice sets out, usually with a deposit (धरौटी). If your bid is accepted, you pay the balance within the time allowed and the bank arranges the transfer. Listed shares in demat form are transferred through the depository system into your demat account. For unlisted shares, the company or its share registrar records the transfer. A promoter share transfer may need further approvals before it is complete, and contacting the issuing company or its share registrar can confirm how a transfer of that class of share works. Keep every receipt and letter from the bank until the shares are in your name.

Beyond the price of the shares there may be demat and transfer charges, broker fees if you later sell on the exchange, and tax on any gain when you sell. These are set by the relevant institutions and can change, so confirm the current amounts with the bank, your depository participant or broker, and a tax adviser. Our guide to costs to budget for has a wider checklist.

Share auctions sometimes sit alongside other sales from the same borrower, such as a hydropower project or company property. Browse all current notices on the auctions page, and contact the listing bank for the full notice.