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Company Asset as Security (Security maybe in the form of (A mortgage over…
Company Asset as Security
Security maybe in the form of
A mortgage over
one asset
(LAND) - eg the company's freehold factory premises
A mortgage over
one type of asset
(SECURED/UNSECURED) - eg the company's equity investments
A
debenture
- eg floating charge over the company's assets (Inventory, Receivables, etc)
Parties: THE COMPANY itself
Parties: A THIRD PARTY
A
guarantee
from the directors (personal guarantee)
An assignment over an
insurance policy
A
corporate guarantee
from parent and/ or related companies
DEBENTURE: A loan document outlining the
terms of a loan agreement
between the company and the bank which, the company executes by applying the
company's common seal
Issued by a company to the bank
Secured
: by a fixed or floating charge
Unsecured
: NAKED DEBENTURE
Typical clauses in a debenture form
all
monies & liabilities
now or hereafter due;
continuing security
debt due is repayable
on demand
any property secured under the debenture must be adequately I
NSURED
and in good condition
bank has a right to appoint receiver
an undertaking NOT to create a charge which would rank in priority to or on the same level as the bank's interest;
an undertaking to provide the bank with a copy of the company's audited financial statements at regular intervals
an undertaking to deposit with the bank all documents of title relating to assets subject to the debenture
Procedure - to ensure that it is in a position to enforce the securities that it has taken
Inspect company's memorandum of association to establish
objects of the company
whether the com. has the
power to borrow
whether co. is
empowered
to give the type of security offered
inspect the comp. articles of association to establish the
directors' borrowing power
carry out a search at ACRA to ensure security offered has
not been charged
to anyone else
obtain
doc. of title
obtain
cert. copy of the board resolution covering the borrowing request
ascertain that the insurance coverage is adequate to cover & loss/profit aft fire
give notice of
the bank's interest &
seek an acknowledgement
from the insurance company
do search again
ensure
that charge is properly registered
Why must register a charge?
Within 30 DAYS & stipulated time frame, does not lodge, security is VOID. Charge is effective from the date of ACTUAL REGISTRATION
"INTERESTED" DIRECTORS
not allowed to vote