Bermuda—taking security and the rights of secured creditors
Produced in partnership with Alex Potts QC of Conyers

The following Restructuring & Insolvency practice note produced in partnership with Alex Potts QC of Conyers provides comprehensive and up to date legal information covering:

  • Bermuda—taking security and the rights of secured creditors
  • Various ways a creditor can take security
  • Judgment lien or charge over Bermudian real estate and assets
  • Assignment
  • Security over bank indebtedness
  • Retention of title
  • Unsecured creditors’ rights and automatic statutory stay of proceedings
  • Secured creditors’ rights
  • Set-off

Bermuda—taking security and the rights of secured creditors

Various ways a creditor can take security

As in other jurisdictions that follow English common law, there are various ways by which a creditor can take security over assets in Bermuda, by agreement between the creditor and the debtor, including by way of:

  1. legal mortgage

  2. equitable mortgage

  3. fixed charge

  4. floating charge

  5. pledge

  6. contractual lien, and

  7. assignment

The nature of the security interest in any particular case will be determined by:

  1. the terms of the party’s agreement, ordinarily set out in the relevant security documents

  2. the nature of the property being secured, and

  3. the nature of the debtor’s interest in the property being secured

In respect of immovable, movable and certain intangible property, a creditor may take, and a debtor may give, security as follows:

  1. legal mortgage:

    1. this results in legal title of the debtor’s property being transferred to the creditor as security for a debt

    2. the debtor remains in possession of the property but only regains legal title upon payment and satisfaction of the debt and reconveyance of legal title by the creditor

  2. equitable mortgage:

    1. the debtor retains legal title to, and possession of, the property but transfers the beneficial interest in the property to the creditor

    2. an equitable mortgage does not take priority over a third party who, without notice of the creditor’s beneficial interest, acquires the legal title

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