Perfecting security

The following Banking & Finance practice note provides comprehensive and up to date legal information covering:

  • Perfecting security
  • Why is it necessary to perfect security?
  • How is security perfected?
  • The difference between perfection and priority
  • Perfecting security by registration at Companies House
  • What security does this apply to?
  • What is the impact of registering security at Companies House?
  • Other methods of perfection
  • Pledges and liens—possession
  • Financial Collateral Arrangements—possession or control
  • More...

Perfecting security

Why is it necessary to perfect security?

When a creditor takes security, it will be concerned with three issues:

  1. whether the security is binding on the security provider (ie whether the security has been validly created)—see: Taking security—overview

  2. whether the security is enforceable against third parties, and

  3. whether the security has the intended priority as against other creditors with competing security interests in the same asset(s)—see: Priority of security—overview

The term 'perfecting security' refers to steps taken following creation of the security to ensure enforceability against third parties such as creditors, liquidators and administrators.

The term is also sometimes used in a broader sense to refer to steps that can be taken to improve or protect the creditor's position, eg in terms of obtaining a legal interest or to ensure the priority of its security.

This Practice Note:

  1. considers perfection by registration at Companies House (applicable to a company incorporated under the Companies Act 2006 (CA 2006) (a UK company) and a limited liability partnership incorporated under the Limited Liability Partnerships Act 2000 (LLPA 2000) (an LLP)

  2. briefly covers perfection by way of possession and control, and

  3. discusses additional steps that may be taken by a secured creditor to improve or protect its position

This Practice Note does not cover perfection issues relevant to individuals or entities which are not UK Companies or LLPs. For more

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