Q&As

Would rights of set-off extend to monies held in a security account secured in favour of a third party lender? Presumably, contractual set-off could be stopped by giving notice of the charge over the account to the bank? However, would it be possible to prevent insolvency set-offs by giving notice of the charge to the bank?

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Published on LexisPSL on 27/04/2021

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

  • Would rights of set-off extend to monies held in a security account secured in favour of a third party lender? Presumably, contractual set-off could be stopped by giving notice of the charge over the account to the bank? However, would it be possible to prevent insolvency set-offs by giving notice of the charge to the bank?

Would rights of set-off extend to monies held in a security account secured in favour of a third party lender? Presumably, contractual set-off could be stopped by giving notice of the charge over the account to the bank? However, would it be possible to prevent insolvency set-offs by giving notice of the charge to the bank?

Security over a cash deposit held with a third party bank can be created by mortgage or charge. In practice, when taking security over cash deposits in commercial transactions a charge is the most commonly used form of security where security is being granted in favour of a third party bank. For a detailed explanation of how to take security over bank accounts, see Practice Note: Taking security over cash deposits in bank accounts.

Notice of a charge over a cash deposit should be served on the account bank where the deposit is held. The notice will instruct the account bank to do various things, including, for example:

  1. disclose information about the account to the secured lender on

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