Reforming the law of security—what is the state of play?

Reforming the law of security—what is the state of play?  

The LexisPSL Banking & Finance team attended the Secured Transactions Conference on the 6 November 2019 held at University College London. This News Analysis discusses some key points to emerge from the conference and next steps.

What was the purpose of the conference?

Academics, practitioners and industry representatives came together on 6 November 2019 to discuss the most recent version of the Secured Transactions Code (Code) at a conference organised by the Secured Transactions Law Reform Project and the City of London Law Society (CLLS).

The Code was initially drafted, along with a commentary, by the CLLS in 2016 and a revised version was circulated for discussion in September 2019 following comments from the market. The Code sets out a vision of a clearer and simpler system of taking security under English law that is easily comprehensible to everyone involved in giving and taking security, including those based overseas. It is hoped that this will enhance the UK's reputation as a place to do business globally.

The conference was split into four separate sessions. The first focused on participants’ comments on the Code. This was followed by a session looking in detail on the continuing relevance of the legal/equitable distinction. The third session looked at whether law and practice in relation to title-based financing needed to be reformed and the final session looked at possible next steps for secured transactions law reform.

What are the key changes envisaged by the Code?

Key points of departure from the existing law as envisaged in the current draft of the Code include:

  • mortgages, pledges, security assignments, charges and contractual liens are replaced by one type of security interest only, described in the Code as a charge 
  • the distinction between fixed and floating charges is abolished, though a distinction is drawn between current and fixed assets for the purposes of setting out a chargee’s rights following an unauthorised disposal of charged assets 
  • a registrable charge is not created until it has been registered (though contractual

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About the author:

Miranda is a solicitor specialising in leveraged and acquisition finance. She trained at Hogan Lovells International LLP and qualified into the international banking and finance team. During her time at Hogan Lovells she worked on a variety of domestic and cross-border transactions, acting for both borrowers and lenders. She also experienced secondments to Barclays Bank PLC and Kaupthing Bank hf.