Taking Cross-Border Security Over UK-Based Assets

Different jurisdictions will require different types of security to be taken over different types of assets.

Security in the UK usually includes legal charges (whether over real property, a class of assets, or specific fixed assets), debentures (containing both fixed and floating charges), third-party charges, cross-guarantees, corporate guarantees, and personal guarantees.

The following points will need to be considered by both the lender and borrower:

• Will the lender become the legal owner of the assets once collateral is taken?
• What conditions must be met for certain types of security to be taken?
• Will the charge need to be registered to take effect and be enforceable?
• Where will the security rank?
• What will happen if the security provider becomes insolvent?
• Does the jurisdiction allow for the charge to be taken over future assets?
• Does the security agreement include a negative pledge which would prevent the borrower from giving future security?
• Is a third-party guarantee required by the lender?
• Are there existing security/facilities in place to which accession of a group company is required?

Where there is a group structure in place, it is usual for the group companies to be parties to a cross-guarantee arrangement whereby each company guarantees the financial obligations of the other companies.

This provides additional assurance to the lender that the loan/financial indebtedness of the main lender or group lending will be repaid.