SGS 9 Flashcards
What steps do CH take on receipt of documents?
Include in the register the certified copy of the debenture.
Allocate a unique reference code to the security.
Issue certificate of registration of the security to the person who delivered the form MR01 (conclusive proof of correct registration)
How is security released?
Bank execute deed of release
B / L file a statement at CH that debt has been paid (Form MR04)
Registrar includes in register a statement of satisfaction of debt.
What are the potential issues where a Borrower is acquiring a Target?
Target will become a subsidiary and therefore form part of the ‘Group’.
Does the Target have any outstanding: CBWLM, debentures, security D’s?
Issues with Borrower’s negative pledge clause in existing loan agreement?
May be breached if Target has outstanding security as:
permitting a security to subsist if acquires target.
What steps should you take in relation to a potential breach of negative pledge?
Check de minimis carve out.
Within the grace period?
Waiver from lenders.
Amend loan agreement to include the charges as carve out.
Ask L to increase the loan, to repay T’s debt and thereby discharge the security.
Issues with an NFI?
Existing lender is in breach as Borrower will be permitting FI to subsist.
Solutions to NFI breach?
Ask Lender to increase the loan and use the money to: Repay Target’s lending on completion (satisfies NFI).
Carve out in LMA to cover situations where company becomes a member of the group and has existing security (but must discharge the security within a set no of months).
Why could structural subordination be an issue?
If bank are a creditor of Target’s parent co (i.e. the borrower), Targets secured and unsecured creditors will be paid before the Borrower, as shareholder gets any proceeds.
Nb less of an issue where the Borrower has assets of their own (e.g. not merely a holding co).
Describe the Clayton’s case problem.
in the absence of an agreement to the contrary, repayments by the debtor will be used to repay loans in the order in which they arose i.e. the oldest debt will be paid off first
Clayton’s case solutions?
Appropriation clause – bank has the right to allocate sums received from the borrower in any way it chooses
“All monies” in definition of Secured Liabilities – all monies ever owed by the borrower fall within the ambit of the security; rule in Clayton’s case less of an issue assures subsequent lending automatically.
Describe a potential issue with hardening period.
Hardening periods ate IA periods during which transactions can be challenged.
If L makes two separate secured facilities and HP for the earlier facility has already expired, L will prefer repayments to apply to later facility (reduces liability exposure)
What is the repay / release problem?
if a borrower repays a sum of money for which it gave security, when it repays that sum, the security will be released (also operates in relation to guarantees)
Solution to repay / release ?
Describe security as “continuing” – it will not be discharged by repayment; it will continue for the entire term of the loan regardless of any intermediate repayment and re-borrowing; important for RCF
Hopkinson v Rolt?
where a borrower has granted security over its assets to two different lenders, the first priority of lender X in respect of any NEW advances made under its loan will be lost to lender Y once lender X has notice of lender Y’s security
Solutions to Hopkinson v Rolt?
“Ruling off” provisions (permits bank to rule of B’s account once it hears of subsequent charges and preserves original loan)
Specify security as securing all amounts from time to time due.
Tacking (for security over registered land, where lender is obliged to make further advances)
