The following Banking & Finance guidance note provides comprehensive and up to date legal information covering:
Creating effective security is the first step in improving a creditor's position. Once that is done, it is then necessary to ensure that the security will take priority over competing security interests in the same asset.
The rules governing priority of security interests generally are discussed in Practice Note: Priority between security interests.
There are additional potential pitfalls relating to priority which a secured creditor needs to be aware of if it intends to make further advances to the borrower under a loan agreement. In commercial transactions, this is very common in the context of term loan facilities which permit multiple draw downs and revolving credit facilities (see Practice Note: Overdrafts, term loans and revolving credit facilities).
This Practice Note looks at what is meant by 'tacking', before looking in detail at the relevant rules and the impact on priority. It also looks at practical steps that can be taken to protect the priority position of a creditor who may wish or be contractually obliged to make further advances under the facility documentation.
'Tacking further advances' refers to the process by which a secured creditor may attempt to add a further advance to an initial advance without creating new security for the further advance while retaining its position in the order of priorities for the total
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