Q&As

A company wants to be permitted to sell assets without having to consult the security holder and for there to be an agreed order for selling the secured assets should it default. Is this possible?

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Published on LexisPSL on 13/12/2017

The following Banking & Finance Q&A provides comprehensive and up to date legal information covering:

  • A company wants to be permitted to sell assets without having to consult the security holder and for there to be an agreed order for selling the secured assets should it default. Is this possible?
  • Summary
  • Permission to sell without consulting the seller
  • Agreeing order of selling assets on default

Summary

If a security holder consents in advance to the sale of an asset which is within the scope of the security and the free use of the sale proceeds by the security provider that may amount at law to a release of the asset from the security. Any advance consent to disposal of an asset and the use of its proceeds by the security provider must be carefully regulated to avoid this problem. It is unlikely that any agreement between the security provider and security holder specifying the order in which assets subject to security are realised on default would be binding on an officeholder in the event of a formal insolvency of the security provider.

Permission to sell without consulting the seller

The simplest way to achieve this would be to exclude the asset, if identifiable, from the scope of the security given by the company at the outset. The company would be free to deal with the asset as it wished.

The security holder may not wish to do this as it could affect its rights including the ability to appoint an administrator, see Practic

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