Close

About Security Agreement

As stated above, a safeguard clause cannot be considered valid if the guarantee is not adequately described. In particular, descriptions of security rights should not be too broad or generic. An overly broad description may include a flat-rate description or rely on « all assets » held by the debtor. Since procedures and the filing of funding declarations may vary somewhat between States, it is important to subject security agreements to the right jurisdiction. For individuals, it`s simple: the person`s jurisdiction is determined by their principal residence. However, in the case of registered organizations, jurisdiction may be determined by the State in which the enterprise is incorporated or organized. In the absence of registers (as in a complementary trading company), competence may be based on the manager`s registered office or registered office. Three things must be in place for the insured party to have a protected security right over the security rights: (1) The insured party must pay to preserve the interest in the security or to give something of value; (2) the debtor must hold the security or have appropriate authority over the security right to mortgage the security right and (3) the debtor must sign a contract of security. As soon as the three points occur, the insured party rightfully has a guarantee right over the guarantees. This process is called « seizure » of a security interest.

In the event that the first two subject-matter is present, the secured party must be accompanied by a related security interest when the debtor signs the security agreement. Second, the insured party must « perfect » its security interest. This means that the insured party has taken steps to ensure that no other creditor is entitled to the advance security and that the insured party can claim the guarantees in the event of the debtor`s insolvency or declaration of bankruptcy. While the law does not require the development of a guarantee right, it is often the only way for the insured party to be sure that its security interest is safe from other creditors. You can further your interest by simply filing a brief document, which is called a financing statement, in the debtor`s state or local jurisdiction. Where the debtor is a natural person, this is the State in which the debtor resides; If the debtor is an enterprise, it is the State in which the enterprise was established. While the rules vary by location, a financing statement normally requires only the identification of the parties and the provision of a description of the security rights. In most countries, you can easily provide this information by filling out form UCC-1 and submitting it to the office of the Minister of Foreign Affairs. You can find your country`s requirements online or by phone at your National Office. In most cases, a security interest may include real estate that the debtor must acquire in the future. This approach is actually common, especially when a future property is actively used as collateral.

However, certain restrictions may apply to consumer goods purchased. If guarantees are constituted for commercial offences, clauses acquired a posteriori may be prohibited. . . .

Tagged: