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VIII SOME ASPECTS OF SURETYSHIP LAW

merely the amount of the contribution to which he is entitled, so long as he does not receive in total more than IOOp in the pmmd. 168

(iii) Bankruptcy of both debtor and surety

The general rule

8-33 Where both debtor and surety become bankrupt, the creditor is in general entitled to maintain a proof in both estates for the full amount of the debt, and is not obliged to reduce his proof in one estate so as to give credit for dividends declared or received in the other, 169 so long as he does not receive

in toto more than 1OOp in the pound.

Negotiable instruments

8-34 Where the debtor and the surety are both liable on a negotiable instrument, as where the debtor is the acceptor and the surety is the drawer or indorser of a bill of exchange held by the creditor, a different rule applies. In this case, when proving against one estate the creditor must give credit for sums received or dividends declared (whether or not paid) from the other estate before he lodged his proof in the former estate, 170 though be is not obliged to revise his proof lodged in one estate where the receipt from or declaration of dividend in the other estate does not take place until after the lodging of the proof in the first estate. 171

Finally, mention must be made of the rule in Ex p. Waring.l72 Under this rule, where a bill is accepted for the accommodation of the drawer and the latter deposits money with the acceptor to meet the acceptances, then if the drawer and the acceptor become insolvent the bolder of the bill is entitled to have the amount so deposited paid to him. The theory appears to be that as the deposit was made for the specific purpose of covering the acceptor's liability under the bill, it is impressed with a trust for that purpose and cannot be treated as an asset in the acceptor's estate. 173 In lodging his proof of debt, the bold~r must give credit for any;sums received under the rule. 174

!t'i&\::Re Parker, Morgan v Hill [1894] 3 Ch. 400.

!W •Tile same principle applies here _,s where only one of the parties is insolvent. See Re Rees (1881) 17 Ch.D. 98; Re Sass [1896]2 Q.B. 12; and above para.IH8.

'"' Cooper v Pepys(1741) 1 Atk. 107; Re Stein Exp. Royal Bank of Scotland(1815) 2 Rosa 197: Re Houghton (1857) 26 L.lBey. 58.

m Re Fothergill (1876) 3 Ch.D. 445; Re London, Bombay & lvfediterranean .Bank (1874) L.R.

9 Ch.App. 686.

m (1815) 19 Ves. 345.

"'Exp. Dever {No. 2) (1885) 14 Q.B.D. 611.

174 Re Earned's Banking Co (1875) L.R. 10 Ch. 198.

374

VJ.:LNERABILITY OF GUARANTEE AS TRANSACTION AT UNDERVALUE

3. VULNERABILITY OF GUARANTEE AS TRANSACTION AT UNDERVALUE

The statutory provisions

Where a company in administration or liquidation has at a relevant time175	8-35
entered into a transaction at an undervalue and is at that time unable to pay
its debts as they fall due176 or becomes unable to do so in consequence of the
transaction, the Insolvency Act 1986 confer~ wide powers to restore the
status quo. 177 Similar provisions apply on the bankruptcy of an individual. 178
It would seem that the giving of a guarantee is capable of constituting a
transaction at an undervalue for the purpose of these provisions, though their
application to guarantees is not free from difficulty.
What constitutes a transaction at an undervalue
A company enters into a transaction with a person at an undervalue if;	8-36

(a)the company makes a gift to that person or otherwise enters into a transaction with that person on terms that provide for the company to receive no consideration; or

(b)the company enters into a transaction with that person for a consideration the value of which, in money or money's worth, is significantly less than the value, in money or money's worth, of the consideration provided by the company.m

The general notion is clear enough. If a company makes a payment, transfers an asset or provides services or other things and receives in exchange either nothing at all or something less than the value of what it parts with or provides, it enters into a transaction at an undervalue. But bow do the provisions apply in relation to a guarantee, which does not at the time it is given involve a payment, transfer or provision of any kind by the surety, merely the incurring of a contingent obligation to pay"

175For the meaning of this see above para.8-22.

176Within the meaning of s.l23 of the Act.

177 Insolvency Act 1986 ss.238, 240, 241.

17& Insolvency Act 1986 ss.339, 341, 342. Note that it is necessary that the bankrupt person is insolvent at the relevant time or becomes insolvent as a result of the transaction.

:H Insolvency Act 1986 s.23S(4}. The comparable provision in bankruptcy is s..339{3).

375

VIII SOME ASPECTS OF SURETYSIUP LAW

·~-----····~--

Guarantee as a transaction at an undervaluellill

8-37 Let us take a typical case where a company gives a guarantee in respect of advances to be made to its parent by a third party. The gh1ng of the guarantee confers a benefit on the creditor, and the advance of funds by the creditor to the parent may be expected to benefit the subsidiary in facilitating its support and development by the parent, but the value of the benefit in each case mav be difficult to estimate. This brings us to a fundantental problem in applying the statutory provisions to a guarantee. Whether a transaction is a transaction at an undervalue has presumably to be tested as at the time it is entered into, not the time when performance of the obligations incurred under it is demanded or effected. 181 So in deciding whether a guarantee gives rise to a transaction at an undervalue the act which constitutes the transaction is the;,giving of the guarantee, not the creditor's subsequent call under the guaqmtee or payment by the surety in response to such a call; and the time as at Which the benefit conferred by the creditor by the guarantee falls to be valued is the time the surety becomes bound by the guarantee, 182 not the time wher!tpayment under it is demanded or made. Similarly, the benefit derived by the surety from the prospective provision of funds to its parent must be valued at the date of the guarantee. not at the date the funds are actually pro\1ded to the parent or the date when the surety receives a benefit as the result of their provision. Hence the task is to assess the present value of the contingent right conferred on the creditor by the

too See generally Goode, Principles of Corporate insolvency Law paras 11-33-11--37. Also, for a discussion of tb.is problem in the context of jntm-group guarantees, see D. Spahos, "Lenders, Borrowing Groups of Companies and Corporate Guarantees: an Insolvency Perspective" [2001) J.C.L.S. 333.

181This does not seem to be affected by the House of Lords decision in Phillips vBrewin Dolphin

Bell Lawrie Ltdl2001] UKHL 2. In that case, Lnrd Scott appeared to be advocating the use of hindsight in valuing a transaction; however, it is clear that the ex post facto events were only to be used to determine the value of the consideration at the time of the transaction, where this was itself uncertain, and a decline in the value as a result of the ex post facto events would not be relevant, see Goode. Principles of Corporate Insolvency para.ll-31 and L. Ho, "The common sense of transactions 1tt an undervalue" (2004) 20 I.L. and P 202. lf this were

otherwjse, it wouid mean that almo,St)':yery guarantee which is subsequently called upon would, be a transaction at an undervalue; seeR Parry (2001) 2 Insolvency Lawyer 58,

182 This will depend on the circumstances, Where the consideration for the guarantee is the creditor's counter~promise to make advances t6, the parent. the contract of guarantee is bilateral and comes into effect by the exchange of the promise and counter~promise. More :'commonly, however, the creditor makes no promise of any kind to the sure~y~ and the ~consideratlon for the latter's promise is the actual making of the advance by the creditor.In

SUch a case the contract of guamntee is unilateral and comes into existence only when the t'Tcditor accepts the surety's otlCr by making the advance, until which time the document is legally inoperative and the surety is fr~ to 'Withdraw from his guarantee. For this purpose it is immaterial that the guarantee is under seal, since as a purely accessory engagement it is intended to come into effect only on the furnishing of consideration by tbe creditor. See McGuinness, The Law of Guarantee, para.4,62. It fullows from the above that the apparent difficulty of valuing a guarantee at the time it is given and before the creditor has either made his advance or undertaken to the surety to make it cannot arise, for until then the guarantee is not legally operative at alt

376

VULNERABILITY OF GUARANTEE AS TRANSACTION AT UNDERV.~LUE

guarantee and then determine whether this is significantly greater than the present value of the contingent benefit to be received by the surety from the advance to the parent. The onus of showing this lies on the liquidator or other office-holder seeking to impeach the transaction.

The benefit conferred on the creditor by the giving of the guarantee varies inversely with the strength of the parent. If the parent is solvent and there is little likelihood of default the guarantee has a correspondingly low value to the creditor. We cannot say that it has no value, for the guarantee relates to the future, and though the parent may be solvent when the guarantee is given it does not follow that it will still be solvent when repayment falls due. On the other hand, even if there is some prospect of default the value of the guarantee is not necessarily the full value of the debt, for against this must be set whatever part of the debt is likely to be recoverable from the parent as debtor and from any security furnished by the parent. It follows that whilst the benefit to the surety of an advance made to the parent.will usually be considerably less than the amount of the advance, it will not necessarily be less or "significantly" less than the benefit conferred on the creditor by the guarantee.

The practical problems involved .in valuing the contingent benefits received by the creditor on the one hand and the surety on the other, coupled with the fact that the onus is on the otiice-holder to prove an undervalue and the availability of the statutory defence referred to below, mean that in the ordinary way a guarantee is unlikely to be held a transaction at an undervalue unless there is both a serious risk of default and no benefit to the surety, as where the guarantee is taken to support an advance already made to the parent which the latter is unlikely to be able to repay.

Defence in respect of bona fide business transactions

Even where it is established that the guarantee is a transaction at an 8-38 undervalue, the court cannot exercise its powers of adjustment if it is satisfied:

(a)that the company which entered into the transaction did so in good faith and for the purpose of carrying on its business; and

(b)that at the time it did so there were reasonable grounds for believing that the transaction would benefit the company. 183

Powers of court

\Vhere the guarantee constitutes a transaction at an undervalue and the 8-39 statutory defence referred to above is not available the court may make such

·~--·····-~-····----····~~----

1&3 Insolvency Act 1986 s..238(5). There is no comparable provjsion fo:r bankruptcy.

377

VIII SOME ASPECTS OF SURETYSHIP LAW

order as it thinks fit for restoring the position to what it would have been if the company had not entered into the transaction184 and without prejudice to the generality of this power may include in such an order provision for any of the matters listed in s.241(1) of the Act, subject to tbe restrictions imposed by s.241(2).185

184Insolvency Act 1986 s.238(3). The comparable provision in bankruptcy is s.339(2).

185The bankruptcy equivalent is to be found in s.342(1), (2).

378

INDEX

Abatement

common law doctrine, 7-72 scope, 7-73

set-off distinguished, 7-15, 7-74 significance, 7-75

substantive defence, 7-74 Accessory contracts

suretyship, 8-02

Accretions

security interests, 1-56 Accrued liabilities

suretyship guarantees, 8-09, 8-10

Administration

administrative receivership replaced by, 1-01

application, 4-37

appointment of administrator, 4--37 does not denote cessation of

training, 4-34, 4-35 expenses, 5-68

order

effect, 4-37

no crystallisation, 4-48 prescribed part, 5-67

Administrative receivership abolition, 1-01 crystallising event, 4-41

precludes decrystallisation, 4--57 Administrator

appointment, 4--37, 4--42 Agreements of security

attachment requirements, 2-04 conditions and effect, 2-11 contingency limitations, 2-15 creation of charges, 1-52 future assets

security interests, 2-12

time of attachments, 2-13, 2-14 treated as transfers, 1-18

Agricultural charges crystallisation, 4-30, 4-52

Aircraft

registration of security, 1-12 Appropriation

directions as to application of sale proceeds, 1-26, 1-27

requirement of fixed charges, 1-17 Assets

controls necessary to preserve fixed charges

accounting for proceeds, 4--26 charge instrument, 4--22 direct control of goods, 4--:23 necessity, 4--21

policing, 4-27

restrictions on dealings, 4--25 segregation and preservation,

4-24

current and fixed distinguished,

4-20 ' fixed charges

current and fixed distinguished,

4-11

powers of disposal, 4-12

Assignment

book debts, 3-30, 4-01

character of security interest, 1-12 creditor agreeing to pay excess over

debt, 3-06

direction to debtor to pay, 3-19 equitable

agreement for transfer, 3-16 declarations of trust, 3-17 direction to pay, 3-19 manifest intentions, 3-16

transfers to trustees or nominees,

3-18 investment securities

priority, 6-13

no-assignment clauses, 1-55 contract benefits, 3-41 elfeels, 3-39

379

INDEX

Assignment~ont. floating charges, J.-42 right to proceeds, 3-40

statutory assignment of receivables, 3-14

priority of successive c-hoses in action, 5·--08

proceeds, 3-03, 3-40 receivables

equitable, 3~15, 3~19 novation distinguished, 3-03 statutory, 3-14

dghts acquired by assignee equities, l34

trustee of sums received, 3-35 set-off

against assignees, 7---64, 7-67 x by assignees, 7-63

statutory	(
statutory
perfection by notice, 3~31
unassignab1e rights, 1~55

Attachment

see also Tracing

automatic _crystallisation, 4-53 companies, 2-22

concept, 2-02 conditions, 2-03 floating charges

consequences, 4--07

effect of crystallisation, 4-06 future assets, time when effective,

2~13, 2--14

importance of understanding, 2--01 ineffective intervention by

debenture holder, ,4·-46 investment securities

direct holdings, 6-23 unecrtificated holdings, 6--26

legal requirements of priority, 1~02 meaning, 2-02

negative pledges, 1-76 requirements, 2--04

current obligations, 2-08 debtor's interest or power of sa1e,

	2~07
	enforceable agreement, 2-04
	fulfilment of contractual
\j	obligations, 2-ll9
	·generally, 2-03	,

identifiable subject matter, 2~05 possession. 2~10

simple perfection of security interests, 2~18

Attonunent

not an independent security device,

1~54

perfection of receivab]es~ 3~33

Avoidance of transactions on insolvency EC directive on collateral

agreenrrent~ ~

statutory grounds, 5~69

Bankruptcy

suretyship guarantees

debtor and surety, 8--33, 8--34 generally, 8--16, 8~17

inrrpac,'t on surety's liability, 8-27, 8--29

interest accruing after bankruptcy order, 8--28

invalidation of securities, 8·-29 negotiable instruments, 8--19,

8~34

preference of surety, 8-20, 8~21 proof by co--!lurety, 8-20, .8~21 proof by creditor, 8~31

proof by surety, 8--23, 8~24 receipts generally, 8--18 subrogation of surety, 8-25, 8~26

Bearer securities delivery, 6--25

indirectly held securities, ~16 Bills of exchange

pledges, 1-46 Bills of landing pledges, l-45

Bills of sale

perfection of company securities by registration, 2~30

Bona fide purchasers !or l'ftlue priority of legal and equitable

interests1 5--09

Bond Markrt Association, The ('!'BMA)

investment transfers and retransfers, 6--17

Book debts

assignment, 3~30, 4-01 bank accounts, J-26

<dividends

from securities, J-26 in liquidation, 3-26

fixed charges, 4--13,<4-14, 4-·15,

416

floating charges, 4·08, 4--13,4--14, 415,4--16

general assignment, 3~30, 4-01 meaning, 3-26

mortgages, 3-13

negotiable instruments; 3--27

380

INDEX

priority of fixed and floating charges, 5·78

registration by companies, 3-23 registration by unincorporated

trader, 3~30

Bulk cargoes

identification for attachment, 2---05

Cape Town Convention international interest'i in mobile

equipment, 1~02 Capital adequacy

purposes of Consensual security, 1-02

Central Securities Depository (CSD) move from direct to indirect

holdings, 6 02

Certificates of non-crystallisation waiver compured, 5-57

Cessation of trading

crystallisation of floating charge, 4--31,4--33

Champerty

bar on assignments of bare right of action, 3-38

Characterisation assignment, 1···12

fixed or floating charges, 4--13, 4--16

floating charges, 4-03 funds, 4--04 intangible assets, JOt securities, 1-05

suretyship guarantees, 8·-02 Charge-backs

conceptual problems, 3<.12 fixed charges, 1-40 investment securities, 6·-23

overridden by busi11ess practice,

3~12

Charges

see also Fixed charges; Floating charges; Mortgages

equitable

attachment requirements, 2-04 classification of c-onsensual

security, 1-05

existing and future assets, 1-09 failure to perfect legal charges by

registration, 2- 30

legal charges distinguished, 1~12 postponement to subsequent legal

intere.o;;ts~ 5-0i trust~ 1~53

legal

classification of consensual security, 1-05

equitable security distinguished,

1~12

mortgages distinguished, 1-52 receivables

enforcement, J-21

mortgages distinguished, J-10 scope and nature, 1~51, 1~52 transfer of title and encumbrance

distinguished, 1~11 Charities

security expressly prohibited, l-55 Choses in action

mode of creating legal mortgages, l-13

priority of successive assignments, 5-08

Circularity

current and fixed assets distinguished, 4--11

effect of crystallisation, 4--29 subordination of fixed to floating

charges, 5-60, S-{)1 Clearing houses

insolvency

statutory amelioration, 7--31 uncompleted multilateral netting

arrangements, 7-30 Clearstream

International Central securities depository (ICSD), 6·02

aose-outs

inso)vency netting, 6-44, 7-20 Co--tmnership interests

distinguished from rights to fungibles, 2-06, 6~09

investment securities, 6-09,- 6~11, 6--15

Collateral Dlre<tive avoidance, 6--44 categorisation, 6--38 enforcement, 6--40, 6--42 financial collateral, 6--44

Financial Collateral Arrangement,,

5~37,6--36

reduction of formalities, 6 39 regulatory basis, 6--36

rights of use, 6-43 scope, 6--37

Settlement Finality Directive, ~35

Combination of accounts

see Current account set~off Commercial credits

transaction/equitable set-<:>ff, 7~59

381

----------------------------1.....

------------~~---~~-----

INDEX

Companies

see also floating charges exceptions to priority rules, 5-22

mortgages, no notice to be received by company, 3-14, 5-08

notice of restrictiOn on grant of security

generally, 2-24, 2-27, 5-40 resolutions to be filled, 2-28

perfection of receivables by registration

book debts, 3-23, 3-29

charge includes assignment and novation, 3-25

effect, 3-28
failure to register, 3-29
meaning of book debts, 3-26		,l
negotiable securities, 3-27	!
Conditional buyers	!
ownership for the purpose of		"t
security, 1-04		"t

Conflict of laws

BC control of investment securities,

6-45, 6-46

Hague Convention, 6--46 Consensual security

see also Security interests attornment,.l-54 classification, 1----05 forms

charges, 1-51, 1-52 contractual liens, 1-49 mortgages, 1-50 pledges, 1-43, 1-48

nature and scope of interest, 1-16 purposes

control, ]-{)I reduction of risk, 1-01

scope of intangibles, 1---02 true and quasi-security

distinguished, 1-{)3

trusts, 1-53	l'
Constructive notice
effect of registration on priority,
5-15

inferred knowledge

·, particulars of registered company

~~charges, 2-27

Particulars of registered company charges, 2-26

registration of company charges

Companies Act 2006, 5-22 exceptions to priority rules,

5-22

Constructive possession attachment requirements, -2-10

Contingent claims

attachment requirements, 2-09 contractual set-off, 7-22 insolvency set-off

against solvent party, 7-93, 7-94 by solvent party, 7-92

Continuing security

fixed indebtedness distinguished,

1-14

suretyship guarantees, 8-05, 8-06 Contractual consolidation

see Netting; Novation Contractual liens

attachment requirements, 2-10

classification of consensual security,

1-{)5

scope and nature, 1-49 security, 1-07

Contractual set-off assignees, 7-26

current bank accounts, 1-20:' distinguished from security interest,

1-19

freezing injunctions, 7-28 impact of insolvency, 7-29 legal limits, 7-25 requirements, 7-21

third party claims, 7-27 unliquidated and contingent claims,

7-22

Control

see also Attornment perfection by, 1-54, 3-33

preservation of fixed charges, 4--20,

4-27

purposes of consensual security,

1-01

Corporate investment securities see Investment securities

Counterclaims

set-off distinguished, 7-16 CREST

attachment of uncertificated securities, 6--26

dematerialisation, 6-04, 6--05 'move from direct to indirect

holdings, 6-02

priority of successive assignments,

5-08

CrosS-border issues claims

BC control of investment securities, 6--45, 6--46

set-off, 7-23, 7-24 currency

current account set-off, 7-34

382

INDEX

Crown

set-off, 7-71

Crown preference abolition, 4-10

Crystallisation

administration orders, 4--37 agricultural charges, 4--52 automatic

dangers of overkill, 4-54, 4-55 generally, 4-51

validity, 4-53 categorisation of events, 4--30 cessation of trading

generally, 4-31, 4-33 liquidation, 4--32

de-crystallisation, 4-57 effect, 4--06

exercising right of enforcement,

4-49

fixed and floating charges, 1-10 general effect

appointment of receiver by debenture holder, 4-35

crystallisation of prior charge,

4-36

crystallisation of subsequent charge, 4-36

generally, 4-29, 4-34 ineffective intervention by

debenture holder

assertion of 1ights over part security, 4-46

demand for payment, 4-45 enforcement proceedings, 4--47 freezing injunctions, 4-48 simple default, 4-44

intervention by debenture holder appointment of receiver by the

court, 4--43

appointment of receiver out of court, 4-41

generally, 4-38

orders for possession or sale,

4-40

taking possession, 4--39 meaning, 4-28

notice, 4-50 partial, 4-56 prior interests

buyer or incumbrancer in ordinary course of busines~

5-39

buyer or incumbrancer outside ordinary course of business,

5-41

execution creditors, 5-43, 5-48

express restrictions in debenture,

5-40 generally, 5-38

later floating charges, 5-42 priority of subsequent interests,

5-49, 5-52

semi-automatic, 4--50 Current account set-off

see also Set-off combining accounts, 7-32

cross-border combination, 7-33 cross--currency, 7-34

exclusion by agreement, 7-35 mutuality requirement, 7-32 nature of, 7-07

not a security interest, 1-20

Debenture certificates pledges, 1-47

Debenture holders

crystallisation of floating charge by intervention, 4--38, 4-48

Debt issues

form of investment security,

6-{)1 Debts

see also Book debts assignment with repayment of

excess by creditor, 3-06 existing and future distinguished,

3-11 independent/statutory set-off

condition for entitlement, 7-42,

7-43

mode of creating legal mortgages,

1-13

priority of floating charges execution creditors, 5-43--46,

5-48

Decrystallisation effect, 4-58, 4-59 meaning, 4--57

Demand guarantee distinguished from suretyship

guarantee, 8-{)2

Dematerialised securities

CREST, 6-04, 6-05

formalities of attachment, 2-04 legal development~ 6-07 modern form of investment

security, 6--01

priority of successive assignments,

5-{)8 scope, 6-05

383

			INDEX	INDEX

Depository Trust Company of New			approach to floating charges, 4--02	move from direct to indirect	conversion from fixed charges, 4--58
	York(DTC)		assignments	holdings, 6--02	crystallisation, 4-06, 4-28, 4-56,
	central securities deposit (CSD),		agreement for transfer, 3-16	omnibus accounts, 6-12, 6-14	5-65, 5-66
6--02			declarations of trust, 3-17	Fixed charges	enforcement,4-60
Derivative assets			direction to pay, 3-19	see also Priority	fixed charges distinguished, 1-10,
	proceeds, I-59, I-69		manifest intentions, 3-16	advantages, 4--10	4-09
	products, 1-58		transfers to trustees or nominees,	assets	fund distinct from its components,
Derivative security interests			3-18	controls, 4--20, 4--27	4-04
	meaning, 1-57		independent/statutory set-off	current and fixed distinguished,	genesis, 4----02
Direct holdings			condition for entitlement, 7--46	4-11,4-20	immediate security interest, 4--03
	see Investment securities		suretyship guarantees	powers of disposal, 4--12	intentions of parties, 4--05
Directions as to application of sale			creditor's duty of care, 8-13	book debts, 4-13,4-16	judicial approach, 4----02
	proceeds,		transaction/equitable set-off	control by creditor, 1-01	nature, 4----03
	procedure, 1-26, 1-27		condition for entitlement, 7-56	conversion to floating charges, 4--58	nature and scope of interest, 1-16
Disintermediation			manifestly unjust to refuse set-off,	floating charges distinguished, 1-10,	negative pledges, I-72
	meaning, 1-82		7-56	4-09	no-assignment clauses, 3--42
Documentary intangibles			Equity issues	generally, 4-11	perfection of security
	nature, l-02, 1-44		form of investment security,. 6-01	liquidation, 4-10	registration, 2-26
Domestic transactions		/	Estoppel	nature and scope of interest, 1-16	who has notice, 2-29
	negative pledges, 1-72		enforcement of waiver, 5-54	negative pledges, 1-72	preferential creditors, 4--10
			waiver of crystallisation, 4--57	priority	prescribed part, 4-10
			Euroclear	book debts, 5-78	priority
Economic effect			International Central Securities	factoring, 5-75, 5-76	book debts, 5-78
			Depository (ICSD), 6-02	failure to register, 5-79	preferential debts, 5-65, 5-66
	ownership for the purpose of		European Community (EC)	purchase money providers, 5-74	prescribed part, 5-68
	security, 1-04		insolvency of clearing houses, 7-31	receivables, 5-80, 5-81	purchase money providers, 5-62,
Election			investment securities	reservation of title, 5-73	5-63, 5-64
	enforcement against sale proceeds,		collateral agreements, 6-36, 6-37,	stock in trade, 5-82	stock in trade, 5-82
1-62, 1-63			6-44	subsequent fixed charges, 5-72	waiver, 5-83
Encumbrances			conflict of laws, 6--45, 6--46	raw materials and goods in process,	proceeds of receivables, 1-67
	method of creating charge, 1-11		regulatory basis, 6--33	4-18	raw materials and goods in progress,
Enforcement			settlement finality, 6--33	requirement to appropriate asset,	4-18
	charges of receivables, 3-21		Exclusion clauses	1-17	reform proposals, 4--61
	EC control of collateral agreements,		suretyship guarantees, 8-15	scope of assets, 4--11	security interests, 1--41
6-40, 6-42			Execution creditors	security interests	significance as present security, 4----06
	floating charges, 4-60		effect if perfected security interest,	charge-backs and pledge-backs,	stock lending, 4-02
	ineffective intervention by		2-16	l-40	stock in trade, 4-17, 4-19
	debenture holder, 4--47		prior interests, 5--43--46, 5--48	generally, 1-39	subordination of fixed charges,
Equitable charges			Existing assets	restriction on debtor's dominion	5-60, 5-61
	attachment requirements, 2-04		equitable charges, l-09	over asset, 1-39	waiver and certificates of non-
	classification of consensual security,		Expenses	stock in trade, 4-17,4-19	crystallisation compared, 5-57
1-05		,,	administration, 5-68	subordination of flOating charges,	Foreclosure orders
	existing and future assets, 1-09		winding up, 5-68	5-60,5-61	EC control of collateral agreements,
	failure to perfect legal charges by			Fixed indebtedness	6-41
	registration, 2-30			continuing security distinguished,	enforcement of floating charges,
	legal charges distinguished, 1-12			1-14	4-60
	postponement to subsequent legal		Facilities	Flawed assets	Formal approach to security
	~ interests, 5-07		continuing security, 1-14	security interests, 1-21	jurisdictional variations, 1-04
	tiusts, 1-53		Factoring	Floating charges	Freezing injunctions
Equities			priority of fixed charges, 5-75,	see also Priority	ineffective intervention by
	floating charges, 5--40		5-76	advantages, 4--09	debenture holder, 4-48
	rights acquired by assignees, 3-34		Financial collateral	attachment, 4--07	set-off, 7-28
	set-off against assignees, 7-66, 7-67		see collateral	book debts, 4-08, 4-13, 4-16	Freight
	subordination, 5-58		First-tier intermediary	characteristics, 4--03	bills of lading pledges, 1-45
Equity			holding patterns for investment	conceptual difficulties, 4--01	transaction/equitable set-off of
	agreements for security, 2-11		securities, 6-03	control by creditors, 1-10	charges, 7-61
			384	385

~~~~-·-------------------------------...-------------------------·--··-···

INDEX

Functiolllll approach to security concept which varies between

jurisdictions, 1~4 Funds

see also Omnibus accounts; Segregated accounts

agreements for security, 1-18 attornmentJ 1~--54

fiXed and floating charges, 1-10 floating charges, ~4

security interests. 1-41 Fungibility

see also Omnibus accounts identification of security interest for

attachment, 2-05 investment securities, 6-09

Further advances see Tacking

Future assets

agreements for security

security interests, 2-12	~
time of attachment, 2-13,2-14

debts, 3-11

equitable charges. 1~9

fixed or floating charges, 4-16 priority and purchase money

providers, S.~62, 5-63 value, 2-13

Future Indebtedness

ascertaining the obligations of the parties, 1-36

Glohal certificates

use,~2

Going concerns

crystallisation of floating charge,
4-34,4-37
Goods
mode of creating legal mortgages,
1-13	,,

in-process

fixed,or floating charges, 4-18 statutory changes to tracking, 5-21

Guarantees

indirect holdings, 6-10, 6-26
legal developments, 6-07
market charges, 5-70
mode of creating legal mortgages,
1-13	:;,
shares directly held, 6-09
Issuers
dematerialised securities, 6--05

Omnibus accounts	(
Omnibus accounts
form of investment security, 6-01
formalities of attachment, 2-06 ~
holding patterns for investment
securities, 6-03
ownership elements, 6--12, 6--14
personal and real rights, 6--11
Ostensible authority
nemo dat quod non habet, 5-05
Overdrafts
continuing security, 1-14
Ownership
see a/so Transfers
charge by transfer or encumbrance,
1-11
concept which varies between
jurisdictions, 1---04 .
investment securities, 6---09
omnibus accounts, 6--12, 6--14
rights in rem and ad rem
distinguished, 1-17