Debt finance

The Angolan Civil Code in Book II, Chapter VI, establishes the following types of secure lending obligations:

I. Provision of Bonds;

II. Bail;

III. Consignation of income;

IV. Pledge;

V. Mortgage, and

VI. Right of Retention.

Angolan law establishes that the possibility to provide general security over the assets of a given entity through a general security agreement is treated as null and void since there is a lack of determination of the specific assets subject to the security.

Thus, a security agreement must identify the assets that are subject to the security created by the agreement. It must have a certain criterion that as a result gives the possibility to identify the secured assets at a given time.

As mortgages and consignation of income must be granted by public deed, whereas pledged may be granted by the celebration of private agreements, the adoption of one single agreement or separate agreements varies in accordance with the type of security being granted.

Moreover, in companies incorporated in Angola, security can be taken over shares by pledges of shares (quotas or shares).

The shares on a Joint Stock limited liability companies (Sociedades Anónimas) are carried out through means of registration in the securities holder's account, with an indication of the number of shares pledged, the guaranteed obligation and identification of the beneficiary. If the voting right is granted to the pledge creditor, the pledge may be constituted by registration in their account. In the other hand, on Private limited liability companies (Sociedades por Quotas), the pledge must be done through means of a public deed.

The said pledges of shares may be either in book-entry form or in a certified form. The procedure to be followed varies according to the type of company in question, since such security can be granted by a document governed by the laws of other jurisdiction (e.g. English law) upon the compliance of the formalities set out by Angolan Law.

Common types of guarantees

Guarantees may take a number of forms, including the following.

guarantees AND INDEMNITIES

Guarantees taken in support of loan facilities typically include both guarantee and indemnity provisions (albeit the document may be described simply as a ‘guarantee’). A guarantee is a promise by the guarantor to ensure that the borrower fulfils its obligations under the facility agreement (primarily to repay the loan) and a promise by the guarantor to fulfil those obligations if the borrower fails to do so. The borrower’s obligations are primary and the guarantor’s obligations are secondary. A guarantee is contingent on the borrower’s primary obligation remaining valid, so that if for any reason the borrower’s obligations are set aside, the guarantee will also fall away. An indemnity is also a promise to be responsible for another’s loss. However, unlike a guarantee, it is a primary obligation given by the indemnifier in favour of the beneficiary. It is not contingent on the borrower’s obligations remaining on foot. Therefore if the borrower’s obligations are set aside for any reason, the indemnifier will remain liable under the indemnity.

This category may include a parent guarantee and indemnity, whereby a parent company or sponsor promises to be accountable for its subsidiary's obligations. A parent guarantee and indemnity is sometimes limited by its terms or operation.

Performance guarantees

A guarantor's promise to be accountable for the performance of an act or contractual obligation of another individual. For example, a completion guarantee ensuring that completion of the project occurs on a specified date. This is distinct from a traditional guarantee only in so far as the guarantee usually is limited to performance obligations (rather than payment obligations) and, with the exception of damages, the guaranteed beneficiary's recourse is limited to demanding performance (rather than payment).

 

Bank guarantees

An unconditional and irrevocable undertaking by a bank in favour of a named beneficiary to make a payment upon receipt of a complying demand from the beneficiary. The bank will then seek reimbursement from its customer under the terms of the indemnity contained in the facility agreement between the bank and the customer.

Performance bonds

An irrevocable undertaking by a financial institution to pay an amount on demand or, in some cases, on the condition that the performance obligations of its customer are not met.

Common tyes of security

Security may be granted over almost all types of assets in Australia, subject to any contractual or statutory restrictions. The most commons forms of security are as follows.

MORTGAGES OVER LAND

State and Territory real property legislation applies. Mortgages of real property must be registered with the land titles office of the State or Territory in which the land is situated. Mortgages of leasehold interest in land must also (in most cases) be registered with the relevant land title office.

Mandatory electronic lodgement of land dealings, including mortgages, is currently being rolled out across Australia.

SECURITY OVER PERSONAL PROPERTY

The following forms of security over personal property are governed by the Personal Property Securities Act 2009 (Cth) (PPSA):

• a general security agreement, where the collateral is all of a grantor's personal property; and
• a specific security agreement, where the collateral is specific personal property of a grantor, such shares, book debts, plant or motor vehicles.

 

The PPSA adopts a substance-over-form definition of 'security interest', which captures not only traditional forms of security, such as charges and mortgages, but also quasi-security arrangements, such as turnover trusts and retention of title. The PPSA also deems certain other arrangements to be security interests, such as leasing or bailment interests and the interests in assigned receivables. Each of these types of 'security interests' should be perfected, (most commonly by registration) on the Personal Property Securities Register, to ensure that it operates effectively upon the grantor’s insolvency or liquidation. It is important to give careful consideration to whether a 'registrable form of ‘security interest’ under the PPSA arises in the relevant transaction.

The most common forms of guarantees and security are:

• security interest in rem:
  • pledge over tangible assets
  • pledge over receivables, bank accounts, securities or business);
  • title transfer as security interest;
  • mortgage over real estate; 
  • mortgage mandate (however, the mortgage mandate does not provide for an actual security right on the assets but only gives the right to establish a mortgage at a later point in time);
  • security interest over ships and planes; and
• personal security interest – a third party (such as a guarantor) will secure the claim of the creditor on the debtor, by committing its estate or by granting one of the security interests listed above.

Common forms of guarantees

Generally, there are two types of personal guarantees: surety (fiança) and the so-called ‘aval’. Under a surety, an individual or a legal entity undertakes to perform/repay an obligation if the obligor fails to do so. Aval is a specific guarantee used to secure debt instruments. Personal guarantees are always formalized in writing.

Common forms of security

There is more than one type of in rem guarantee. The nature of the assets that support the guarantee affect which type of in rem guarantee is used. Under Brazilian law, assets can be divided into the following categories:

• movable assets, eg shares and equipment; and
• immovable assets, eg land and buildings.

Certain assets such as aircraft and ships, although considered to be movable assets, are subject to the requirements applicable to immovable assets (such as registration requirements).

The two most usual types of in rem guarantees are:

• pledge (penhor), which relates to movable assets and credit rights; and
• mortgage (hipoteca), which relates to immovable assets.

In the case of in rem guarantees, each asset given as security must be duly referred to in the relevant agreement.

The Brazilian Civil Code provides for another form of guarantee in respect of movable assets which are not fungible. This type of guarantee results in the ownership of the asset and the indirect possession of it being transferred to the creditor, while direct possession remains with the guarantor. The guarantor assumes the duties and liabilities of a bailee in relation to that asset.

Common forms of guarantees

Guarantees can take a number of forms. Two common forms are performance bonds and payment guarantees.

Performance bonds

A performance bond describes a financial undertaking used to protect a buyer against the failure of a supplier to deliver goods or perform services in accordance with the terms of a contract. The issuer of the bond undertakes to pay to the buyer a sum of money if the seller fails to deliver the goods or perform the contracted services on time or in accordance with the terms of the contract.

Payment guarantees

A payment guarantee provides that the guarantor will be obligated to pay either all outstanding monies owed under the primary contract or an amount up to a fixed amount if the debtor or obligor fails to make such payments.

Common forms of security

The common types of security agreements are as follows.

General security agreements (GSAs)

A GSA normally charges all present and after-acquired personal property of the debtor, but can be limited to specific items of personal property and can include a floating or fixed charge against the debtor’s interest in real property. In Québec, the equivalent of a GSA is a hypothec which charges present and after-acquired movable property (ie personal property).

Pledges

Pledges require debtors to deliver certain assets, such as securities or negotiable instruments, to the creditor.

Mortgages

A mortgage charges the real property of the debtor. In Québec, the equivalent of a mortgage is a hypothec which charges immovable property (ie real property).

Additionally, it is possible to grant security over all of the assets of the debtor (which is called in Québec the universality of the assets of the debtor). Granting security over all of a corporation’s assets will tend to be achieved by way of a debenture which will include:

• a mortgage over real property (and, in Québec, that would be a hypothec over the universality of all the immovable assets);
• a fixed charge over assets which are identifiable;
• a floating charge over fluctuating and less identifiable assets; and
• an assignment by way of charge over receivables and contracts.

The Chilean framework establishes ‘guarantees over assets’ (which is a type of security arrangement) and ‘personal guarantees’.

Common forms of guarantees

In Chile, there are different kinds of guarantees; however, both performance or payment guarantees are widely used. These are generally known as ‘personal guarantees.’ The personal guarantees regularly used are the fianzas (sureties) and fianza y codeudas solidarias (joint and several guarantees).

Through the fianzas one or more parties are obliged to pay the obligations of the debtor in the event that the latter does not pay the secured obligation. The fianza y codeuda solidaria, in turn, the liability for non-compliance is applicable directly against all debtors and guarantors as a group or against any of them individually at the creditor's choice.

Common forms of securities

Guarantees over assets may be divided between two groups. They are guarantees over moveable assets and over real estate.

The guarantee over moveable assets is performed through pledge agreements such as:

• civil pledge, which applies to any movable property, including all kind of personal rights and credits;
• commercial pledge, which secures merchant or commercial nature obligations;
• banking pledge over moveable assets over instruments of any kind, credit payable to the order and shares in favor of banks; and
• pledge without conveyance over any kind of corporeal or incorporeal, present or future, moveable asset to secure own or third party obligations, present or future.

Regarding guarantees over real estate, they are granted by means of mortgage agreements, by which it is possible to secure not only existing and determined obligations but also to secure all present and future obligations of the debtor (cláusula de garantía general). Mortgages also can be granted over mining concessions and water rights.

In addition, the parties can agree a conditional assignment of rights which is a mechanism to safeguard creditors´ rights, for example, in connection to the main agreements in a project (such as EPC and O&M). If a debtor fails to fulfill its obligation under the financing documents, the creditor would be entitled to exercise step in rights regarding the project agreements.

Common forms of guarantees

In general terms, a guarantee can take the form of policies issued by authorized insurance companies domiciled in Colombia or abroad; or bonds issued by authorized commercial banks domiciled in Colombia or abroad.

If the policy or bond is issued by an insurance company or commercial bank domiciled abroad, the policy and the bond, as the case may be, must be confirmed by a local insurance company or local commercial bank.

A particular distinction is between a performance guarantee and a payment guarantee:

• A performance guarantee is a term used to describe both performance bonds and performance policies. A performance guarantee describes an undertaking used to protect a buyer and/or a contracting party against the failure of a supplier or contractor to deliver goods or perform services in accordance with the terms of a contract. The issuer of the bond or policy, as the case may be undertakes to pay to the buyer and/or contracting party a sum of money if the seller, supplier or contractor fails to deliver the goods or perform the contracted services on time or in accordance with the terms of the contract.
• A payment guarantee (whether policy or bond) covers the payment of money rather than other contractual obligations.

Additionally, the compliance policies may include some other protections such as: protection for wages and social benefits; and protection for the stability of the work.

Another common policy is the extra-contractual civil liability policy that has the following common protections: employer liability; contractors and subcontractors liability; cross liability; medical expenses; civil liability of owned and not owned vehicles; adjacent properties, cables and underground tubes.

Common forms of security

Over real estate

Mortgage

A mortgage allows the creditor to enforce it regardless of a transfer of ownership. The creditor cannot directly take ownership of the secured real estate. More than one mortgage can be granted over the same real estate, in which case the secured creditors are paid on a first-registered, first-served basis.

Security trust

The owner transfers the real estate to a professional trustee (entities supervised by the Superintendency of Finance) for the benefit of the secured creditors. Upon an event of default, the trustee must dispose of the real estate according to the instructions in the security trust agreement, and use the proceeds to pay the secured debt.

Over movable assets

Law 1676 of 2013 (Law 1676) unifies the legal framework for all kinds of security interest over movable assets, regardless of whether it is a conditional sale, security trust, pledge, title retention clause, or other form of security interest over movable property.

Law 1676 provides for different types of security interest, as follows:

• fixed security interest;
• purchase-money security interest; and
• floating security interest.

Over dematerialized securities

Security is created through both:

• a pledge agreement; and
• recording of the pledge through a book entry by the relevant securities' depository (generally, DECEVAL or DCV).

Over share certificates

A security interest is created through a security agreement. The security interest is perfected by both:

• the secured creditor taking possession of the share certificates or registration with the National Registry of Security Interests; and
• registration in the company's stock ledger.

Common forms of guarantees

Guarantees can take a number of forms which are not specifically outlined in law. However, guarantees are most often created in written form.

Common forms of security

The basic types of security that can be created under Czech law include:

• a pledge;
• a secured transfer of a right; or
• a promissory note.

Under Czech law it is possible to grant security over all of the assets of a company or individual assets. Granting security will tend to be achieved by way of:

• a pledge over a business share (registered in the commercial register);
• a guarantee;
• a financial guarantee;
• a pledge over the real estate (registered in the land register);
• a pledge over the receivables;
• a pledge over assets which are identifiable and can be controlled by the creditors (such as equipment);
• a security assignment of receivables;
• a secured transfer of right to the property; or
• reservation of ownership of machines (registered in the land register).

In general, a cross-default and/or a cross-collateral can be used for strengthening of the creditor's position as well.

Common forms of guarantees

Guarantees may be given for one’s own debt or for someone else’s. In both cases the guarantees may be either performance guarantees or payment guarantees. Performance guarantees guarantee the performance of the underlying obligations of the debtor. Such guarantees are typically given by a parent company for the performance obligations of its subsidiary. Payment guarantees on the other hand cover the payment obligations of the debtor rather than any contractual performance obligation. The specific terms and conditions applicable to guarantees are determined on a case by case basis.

Common forms of security

The most common forms of securities granted by a company of its assets are:

• a mortgage over real estate;
• a pledge over assets which are identifiable and can be controlled by the creditors (such as equipment and vehicles);
• a floating charge over the fluctuating assets of the company (Yrityskiinnitys); and
• a pledge of receivables (such as rental income) and bank accounts.

Common forms of guarantees

Guarantees can take a number of forms, the more common ones being:

• a corporate guarantee (cautionnement), which is an undertaking taken by a guarantor towards a beneficiary to pay a debtor's debt in case of non-payment by the latter (such guarantee is ancillary to the principal obligation – the obligations of the guarantor are closely linked to the obligations of the main debtor);
• an autonomous guarantee (garantie autonome), which is an undertaking taken by a guarantor, in light of a third party's obligation, to pay a sum of money to a beneficiary on first demand or upon the terms and conditions agreed between the parties (it is a non-ancillary separate and distinct obligation – the guarantor may not raise any exception pertaining to the obligation of the debtor and, unless otherwise agreed between the parties, such guarantee does not follow the guaranteed obligation); and
• a letter of intent (lettre d'intention, lettre de confort or lettre de patronage), which is an undertaking to do or not to do, so as to support a debtor in the performance of its obligation towards the creditor (its purpose is to ensure that the debtor will be in a position to satisfy its obligations – otherwise, the issuer of the letter will have to indemnify the creditor for any damages incurred because of such failure).

Common forms of security

There are three basic types of security interest that can be created under French law and that are suitable for securing different types of assets:

• a pledge over non-tangible property (nantissement) (such as financial securities accounts (nantissement de comptes de titres financiers), receivables, bank account and intellectual property rights);
• a pledge over tangible property (gage) (such as stock or equipment); and
• a mortgage (hypothèque) over real estate, vessels or aircrafts.

Under French law, as a matter of principle, there is no assignment for security purposes, except:

• the so-called ‘Dailly assignment’ of receivables; and
• the French trust for security purposes ‘fiducie-sûreté’ (which is only used in practice under exceptional circumstances).

It is not possible to grant security over all of the assets of a company, such as an English law debenture. The closest security would be to grant a pledge over business (nantissement de fonds de commerce), which covers the logo, commercial name, commercial leasehold, customers, some fixed assets (equipment, machinery and tools) and intellectual property rights.

Common forms of guarantees

Guarantees may take the form of a performance guarantee or a payment guarantee. The most common form in finance transactions is the payment guarantee.

German law further distinguishes between an accessory guarantee and an independent (non-accessory) guarantee, such as payment guarantees upon first demand. German courts held that, to be valid, a guarantee upon first demand needs to be granted by a guarantor experienced in international transactions and familiar with guarantees upon first demand. This is due to the fact that a guarantor giving a guarantee upon first demand has only limited defenses, for example the objection of abuse of law. In contrast, a guarantor who gives an accessory guarantee may rely on the defenses to which the principal debtor is entitled.

Common forms of security

The security package which is granted for financings mainly depends on the financed asset and the specific transaction. Typically, the following security interests are requested by the lenders:

Share/interest pledge

A pledge of shares in a German limited liability company (Gesellschaft mit beschränkter Haftung – GmbH) requires notarization whereas a pledge over interests in a limited partnership (Kommanditgesellschaft – KG) can be entered into in simple written form. A pledge over shares in a stock corporation (Aktiengesellschaft – AG) may also be completed without observing specific formalities; only the share certificates issued for the relevant shares need to be transferred to the pledgee. The notification of the relevant company/partnership is not required for the perfection of the security. However, the articles of association of a company may provide for the requirement of the company's approval. As an accessory security interest, the share/interest pledge must be granted to and held by each secured creditor. Therefore, a parallel debt structure is usually implemented in syndicated financings. For more information, see Lending and borrowing.

Bank account pledge

The notification of the account bank is required for the perfection of the security. The account bank usually has a first ranking pledge pursuant to its general business terms; if the lending bank wishes to obtain a first ranking security, the account bank then may be asked to waive/subordinate its rights pursuant to its general business terms. Security must be granted to and held by each secured creditor. Therefore, a parallel debt structure is usually introduced in syndicated financings. For more information, see Lending and borrowing.

Security assignment of receivables and claims

Unless disclosed to the debtors of the assigned receivables (third party debtors), the debtor may continue to pay with discharging effect to the assignor. The notification of the assignment is no perfection requirement, but common where there are only a small number of third party debtors (eg with respect to claims under insurance agreements).

Security transfer of moveable assets (such as inventory and equipment)

It is very important to describe the assets precisely, for example by using maps or serial numbers, in order to ensure their determinability when acquired (particularly in relation to future assets) or enforced. Typically, the specification of transferred assets is done by a combination of describing the area where the assets are located and by delivery of a list of the relevant assets. If the assets are fixtures (ie they relate to the relevant premises in such a way that they cannot be legally separated from the premises) then land security should be obtained.

Mortgage or land charge over land and buildings

A mortgage or land charge must be created by notarized deed. In addition, the registration of the mortgage or land charge in the relevant land register (Grundbuch) is required for its effectiveness. The notary and registration fees depend on the nominal amount and may be significant.

Guarantees 

The types of guarantees commonly used are corporate guarantees and personal guarantees.

Security 

Security arrangements can take various forms depending on the agreement of the parties. In Ghana, parties usually use fixed or floating charges, pledges or mortgages.

Where the borrower is a company, the ideal form of security is a full debenture containing fixed and floating charges over all assets of the company.

Common forms of guarantees

Unless the parties agree otherwise, under the general rules of the Hungarian Civil Code the guarantee contract, and the statement of guarantee means a guarantor’s commitment under which payment is to be made to the creditor subject to the conditions laid down in the statement. The obligation of the guarantor set out in the statement of guarantee is independent of the underlying obligation of the debtor. The guarantor may not raise the same objections that can be made by the debtor against the creditor. The guarantor is liable to make payment under the guarantee if the creditor requested payment in writing, strictly abiding by the requirements specified in the statement of guarantee.

Common forms of security

There are three basic types of security interest that can be created under the laws of Hungary:

• a pledge;
• a charge; and
• a mortgage.

Different types of security are suitable for securing different types of assets.

Under Hungarian law it is possible to grant security over all of the assets of a Hungarian company or over individual assets. Granting security over all of a company's assets will tend to be achieved by way of a pledge agreement which will include:

• a mortgage over real estate;
• a pledge over assets which are identifiable and can be controlled by the creditors (such as equipment);
• a pledge over assets identified by detailed description (such as stock); and
• an assignment or pledge over receivables and rights.

Guarantees

Contracts of suretyship may be divided into two broad categories: guarantees and indemnities. The key distinction between a guarantee and an indemnity is that under a contract of guarantee, the guarantor assumes an obligation to answer for the debt of another (i.e. a secondary obligation contingent on the obligation of the principal to the beneficiary of the guarantee). Accordingly, a guarantor will only be liable if the principal debtor is liable. However, in the case of an indemnity, the party providing the indemnity has a primary obligation to make good the loss suffered by the beneficiary. The obligation of the party providing the indemnity does not depend on the existence of an underlying obligation. Whether a surety is liable where the main contract is void because of, for example, the principal’s incapacity, depends on whether the contract is a guarantee or an indemnity. Guarantees incorporating indemnities are common on Irish financing transactions.

It should be noted that while an Irish regulated fund can provide guarantees or security in respect of any 100% owned subsidiary, it is however restricted from acting as a guarantor on behalf of third parties. The term “guarantor” for this purpose is not defined and so it potentially extends to all forms of credit support. In addition, this prohibition extends to one sub-fund providing security for the obligations of another sub-fund of the same ICAV.

Common forms of security

There are a number of different types of security interest that can be created under Irish law, including charges, mortgages and pledges.

Different types of security are used to secure different types of assets.

Under Irish law it is possible to grant security over all of the assets of an Irish company or over individual assets. Granting security over all of a company's assets will tend to be achieved by way of an “all assets” debenture which will typically include:

• a charge over real estate;
• a fixed charge over assets which are identifiable and can be controlled by the creditors (such as equipment);
• a floating charge over fluctuating and less identifiable assets (such as stock); and
• an assignment by way of charge over receivables and contracts.

Common forms of guarantees

Guarantees can take a number of forms.

A particular distinction worth remembering is between a personal guarantee (fideiussione) and an autonomous first demand guarantee.

• A personal guarantee (fideiussione) is a strictly regulated form of guarantee. Some of its main features are that:
  • it remains valid only if the underlying guaranteed obligation is valid;
  • the guarantor is entitled to object to a payment request by invoking the exceptions and objections which pertain to the debtor in the interest of which the guarantee was issued (the relevant debtor);
  • the guarantor may, before paying and under certain conditions, act against the relevant debtor to be released from the guarantee or to obtain due counter guarantees or counter security for the satisfaction of its claims after the payment; and
  • the guarantor is released if the guaranteed creditor has further financed the relevant debtor although it was aware of its difficult financial conditions.
• An autonomous first demand guarantee is intended as an instrument ensuring payment to the relevant creditor irrespective of the circumstances affecting the relevant debtor or the underlying guaranteed obligation if the contractual conditions/steps and procedures provided by the relevant agreement are met.

Both of the above described guarantees shall expressly provide for the maximum guaranteed amount should the guaranteed obligation be a future/conditional obligation.

Common forms of security

There are four basic types of security interest that can be created under Italian law:

• a mortgage;
• a pledge;
• an assignment by way of security; and
• a privilegio (general or special lien).

Different types of security are suitable for securing different types of assets.
Under Italian law it is not possible for a single security to cover all of the assets of an Italian company, but only individual assets or classes of assets. Granting security over all of a company's assets will tend to be achieved through the granting of the following multiple security interests:

• a pledge over movable assets (including shares/quotas of a company) or receivables;
• a mortgage over real estate assets or vehicles or ships;
• a privilegio (general or special lien) over movable assets different from vehicles and ships; and
• an assignment by way of security of receivables.

With respect to financial transactions it is customary to establish securities in the form of “financial collateral guarantees” according to Legislative Decree 170/2004 implementing in Italy Directive EC 2002/47. Financial collateral guarantees relating to financial transactions are documented as transfer-title pledge over assets granted by a transferor in favour of a transferee covering the exposure of one party to another under the relevant financial transactions.

In addition to the above, the following securities have been recently introduced in Italy:

• Security transfer of immovable asset; and
• Non-possessory pledge (not implemented).

SECURITY TRANSFER OF IMMOVABLE ASSET

A loan granted to an entrepreneur by a bank or another financial entity authorized to grant loans to the public in Italy can be secured by transferring to the creditor (or to a company in the creditor’s group authorized to purchase, hold, manage and transfer rights in rem in immovable properties) the ownership of an immovable asset of the entrepreneur or of a third party. Such transfer is subject to the condition precedent of the debtor defaulting. In such a case, the creditor is entitled to notify the pledgor its intention to enforce such security pointing out the amount of its credit; following such notification an independent valuer is appointed by the relevant Court in order to determine the value of the relevant immovable asset  and consequently the sale process is carried out. The creditor shall pay to the pledgor the difference (if any) between the transfer price and the amount of its credit towards the pledgor.

NON-POSSESSORY PLEDGE

A non-possessory pledge allows the pledgor (who shall be engaged in entrepreneurial activities) to continue to use, transfer or otherwise dispose of the pledged assets for business purposes, provided that in such a case, the pledge would extend to any asset resulting therefrom. A non-possessory pledge agreement requires a written form and shall indicate a maximum secured amount. However, the pledge is enforceable vis-à-vis third parties only upon registration on an electronic register of non-possessory pledges to be set up. In this respect, since such electronic register has not been implemented, such security is not currently effective.

Common forms of guarantees

Under OHADA, personal securities are surety bond and autonomous guarantee and counter guarantee.

Surety bond: A surety-bond shall be a contract whereby the surety undertakes, and the creditor accepts, to discharge an existing or future debt contracted by the debtor in the event of the latter failing to do so.

Autonomous guarantee and counter guarantee:

An autonomous guarantee shall mean an agreement by which the guarantor undertakes, following an obligation signed by the principal and on its instructions, to pay a fixed sum of money to a beneficiary either at the earliest demand of the latter or as per the agreed terms. The autonomous counter guarantee shall mean the agreement by which the counter guarantor undertakes, following an obligation signed by the principal and on its instructions, to pay a fixed sum of money to a guarantor either at the earliest demand of the latter or as per the agreed terms.

Transferable securities consist of possessory lien, assets held or transferred as security, pledge of real property, pledge of intangible assets and privileges.

Common forms of security

Pledge

Liens

Mortgage

Different types of security are suitable for securing different types of assets.

Under Ivoirian law it is possible to grant security over all of the assets of a company or on individual assets. Granting security over all of a company's assets will tend to be achieved by way of a debenture which will include:

• a mortgage over real estate; and
• a pledge over movable goods.

Moreover, guarantees and security, to be enforceable as against third parties need to be perfected and registered.

Common forms of guarantees

Two types of guarantees may be given.

(Normal) guarantee (hosho)

A guarantor has the right of defense of demand which permits a guarantor to require that the beneficiary first demand performance by the principal obligor. The further right of defense of reference permits a guarantor to require that the beneficiary first enforce against the principal obligor's property by demonstrating that the principal obligor has sufficient financial resources to satisfy the debt and that the satisfaction of the obligation could be easily performed by enforcing against the principal obligor.

Joint and several guarantee (rentai-hosho)

A joint and several guarantor does not have the right of defense of demand or the right of defense of reference. Under this type of guarantee, the guarantor owes the same obligation as the primary obligor.

Under the amended Civil Code that is effective as of 1 April 2020, regardless of the type of the principal obligation, if the guarantor of such obligation is an individual, the amount guaranteed by such individual much be subject to a clear cap. As a result, in the case of a guarantee of any type of principal obligation, including tenant’s obligation under a lease agreement or purchaser’s obligation under a continuous sales and purchase agreement, as long as an individual is the guarantor, the guarantee must specify the maximum amount of the guarantor’s obligation. Otherwise, such individual guarantee would be invalid.

Common forms of security

Three basic types of security interest can be created under Japanese law.

Mortgage (teitouken)

A mortgage may be created on rights to real property and certain other types of property such as automobiles, aircraft and factories.

Pledge (shichiken)

A pledge may be created on an asset that can be assigned to others such as chattels, real property and rights. For a pledge (other than a pledge on right without a deed) to be effective, the asset must be ‘delivered’ (hikiwatashi) to the pledgee. In the case of a pledge on movable property, the pledgee must continuously possess the pledged asset for the pledge to remain valid.

Security by way of transfer (joto-tampo)

A security by way of transfer is not a statutory security. It is commonly used to avoid the potentially stringent requirements for a pledge on a movable property, in particular, that the pledgee must continuously possess the pledged asset. A security by way of transfer enables the pledgor to possess and use the pledged asset even during the security period.

Common forms of guarantees

First demand guarantee (garantie à première demande)

This creates an abstract, autonomous and independent contractual recourse by the beneficiary against the guarantor. The guarantor may not rely on any exception, or exemption, derived from the underlying debt arrangement.

Suretyship (cautionnement)

The suretyship is an accessory to the main monetary obligation. The guarantor may rely on exceptions, or exemptions, derived from the underlying debt arrangement.

It is worth noting that Luxembourg law only envisages payment guarantees (and not performance guarantees).

Other contractual arrangements can also be assimilated to a personal guarantee (e.g. “promesse de porte-fort”, personal commitment letters).

Common forms of security

The most common types of security agreements are:

• pledge agreements over financial instruments and claims (including among others, intragroup or trade receivables and investors commitments);
• assignment for security purposes of financial instruments and claims;
• commercial pledges over assets (other than financial instruments); 
• mortgages; or
• repurchase agreements.

It is worth noting that security must be granted on an asset by asset basis, except that pledges over ongoing business concerns are permitted but rarely used in practice.

The most common guarantees and security are: 

• corporate guarantees;
• personal guarantees;
• fixed/floating charges;
• pledges; and
• mortgages.

Common forms of guarantees

Guarantees to secure compliance with obligations are commonly used in Mexico in all types of transactions. The most common types of guarantees are as follows.

Civil guarantee (Fianza Civil)

The Federal Civil Code establishes that the civil guarantee is an agreement by means of which a third party undertakes to pay the creditor if the debtor does not meet its obligations.

Surety bond (Fianza Mercantil)

Under Mexican law, a bond is a guarantee issued by an authorized entity which grants bonds on a customary basis. The bond is an agreement between a guarantor and the creditor of the original debtor under which the guarantor undertakes to pay or otherwise comply with the debtor’s obligations in case the debtor defaults. The bond can be granted only if a valid underlying obligation exists. A guarantor may validly agree to pay a certain amount of money which is owed and not paid by the debtor, or if the debtor does not comply with a payment obligation.

Surety bonds can be of various types, including administrative, judicial, credit and fidelity bonds.

Unconditional endorsement (Aval)

According to the General Law of Negotiable Instruments and Credit Operations, a person may guarantee total or partial payment of amounts described in a negotiable instrument (eg promissory note) by means of an unconditional endorsement. The guarantor is jointly liable with the principal obligor and its obligations are valid notwithstanding that the principal obligation is null for any reason whatsoever.

Common forms of security

The most common forms of security are as follows.

Mortgage

A mortgage is a security interest granted over real estate assets that are not delivered to the creditor, and that give the creditor the right (in case of default of the secured obligation) to be paid from the value of the asset.

Guarantee trust

This is a contract under which a person transfers to a trustee the ownership or title of one or more tangible and/or intangible assets in order to secure the obligations of a settlor in favor of a third party.

Traditional pledge (prenda mercantil)

The pledgor (a debtor or a third party) transfers possession of the movable asset to the lender (or a third party for the benefit of the lender) to hold as security for compliance with an obligation. This pledge is commonly used to pledge stock of a private company, for instance, where the lender takes actual possession of endorsed stock certificates.

Non-possessory pledge (prenda sin transmisión de posesión)

Possession and operation of the assets remain with the pledgor. This type of pledge includes the possibility of creating a floating or generic pledge over all present and future movable assets of a business.

Securities pledge (prenda bursátil)

This is a pledge over securities traded in the Mexican stock exchange. Securities are deposited in an account at the S.D. Indeval, S.A. de C.V., Institución para el Depósito de Valores (clearing agency).

Common forms of guarantees

Guarantees can take a number of forms, the more common ones being:

• a corporate guarantee (cautionnement), which is an undertaking taken by a guarantor towards a beneficiary to pay a debtor's debt in case of non-payment by the latter (such guarantee is ancillary to the principal obligation – the obligations of the guarantor are closely linked to the obligations of the main debtor);
• an autonomous guarantee (garantie autonome), which is an undertaking taken by a guarantor, in light of a third party's obligation, to pay a sum of money to a beneficiary on first demand or upon the terms and conditions agreed between the parties (it is a non-ancillary separate and distinct obligation – the guarantor may not raise any exception pertaining to the obligation of the debtor and, unless otherwise agreed between the parties, such guarantee does not follow the guaranteed obligation); and
• a letter of intent (lettre d'intention, lettre de confort or lettre de patronage), which is an undertaking to do or not to do, so as to support a debtor in the performance of its obligation towards the creditor (its purpose is to ensure that the debtor will be in a position to satisfy its obligations - otherwise, the issuer of the letter will have to indemnify the creditor for any damages incurred because of such failure).

Common forms of security

Mortgages (Hypoteques)

A mortgage is "an accessory real right relating to immovable property registered or in the process of being registered and used to guarantee the payment of a debt". 

It may be conventional or forced and is subject to strict conditions for the constitution of the property and the rights that may be mortgaged, the grantor, the principle of speciality, form and publicity.

Pledge with dispossession and pledge without dispossession

Moroccan law makes a distinction between the pledge with dispossession which requires the dispossession of the pledged asset (gage) and the pledge without dispossession which does not require such dispossession (nantissement).

There are several types of security interest that are suitable for securing different types of assets such as receivables, bank accounts and securities accounts.

A national electronic register of pledges has been created by the law 21-18 dated 22 April 2019 which should be functional at the beginning of 2020 and administrated by the Ministry of the Economy and Finance.

Assignment of trade receivables

The Moroccan legislator was inspired by the Dailly assignment under French law to establish the legal framework for the assignment of professional receivables.

Moroccan law defines the transfer as "the delivery, by way of a slip to a banking institution, of the claim held on a third party, a natural person in the exercise of its activity, or a legal person governed by private or public law".

Common forms of guarantees

Guarantees have essentially three forms under Dutch law, ie joint and several liability (whereby all debtors are obliged, as their own debt, to pay the relevant obligations concerned), a suretyship (whereby a debtor guarantees the performance of the obligations of another person) and an abstract guarantee (being a guarantee payable on demand, irrespective of the existence of any underlying obligation).

Common forms of security

Pledges on shares, receivables, moveable assets, intellectual property and mortgages on registrable objects.

Common forms of guarantees

Guarantees can take a number of forms.

A particular distinction worth remembering is between a performance guarantee and a payment guarantee:

• A performance guarantee is a term used to describe both performance bonds (in the context of trade finance) and ‘see to it’ guarantees (in other contexts):
  • A performance bond describes a financial undertaking used to protect a buyer against the failure of a supplier to deliver goods or perform services in accordance with the terms of a contract. The issuer of the bond undertakes to pay to the buyer a sum of money if the seller fails to deliver the goods or perform the contracted services on time or in accordance with the terms of the contract.
  • A ‘see to it’ guarantee is a promise by the guarantor to see to it that the primary obligor fulfils its obligations under the primary contract. If the primary obligor fails to fulfil its obligations under the primary contract, the guarantor will be in breach of its obligations under the guarantee.
• A payment guarantee is narrower in scope than a performance guarantee as it only covers the payment of money rather than other contractual obligations.

Other types include rental guarantees, advance payment bonds, collateral guarantees, bid, tender, warranty bonds, custom bonds and shipping guarantees.

Common forms of security

Common forms under New Zealand law include:

• a mortgage over interest in land;
• a security interest over personal (i.e. non-land) assets; such as inventory, goods, plant and investment securities such as shares;
• possessory security such as a pledge; and
• rights of set-off.

Different types of security are suitable for securing different types of assets.

Under New Zealand law it is possible to grant security over all of the assets of a New Zealand company or individual assets. Granting security over all of a company's assets will tend to be achieved by way of a debenture which will include:

• a mortgage over real estate;
• a fixed charge over assets which are identifiable and can be controlled by the creditors (such as equipment);
• a floating charge over fluctuating and less identifiable assets (such as stock); and
• an assignment by way of charge over receivables and contracts.

Common forms of guarantees

Under Norwegian law, guarantees have traditionally been classified into three main categories;

• conditional guarantees (simpel garanti);
• unconditional guarantees or sureties (selvskyldnerkausjon); and
• on-demand guarantees (påkravsgaranti).

There are also other types of guarantee which lie between these guarantees and where the degree of independence between the guarantee and the underlying obligation varies. Each guarantee must be assessed and interpreted in accordance with its specific content/wording.

Common forms of security

In Norway, security may not be validly attached as a whole to all the present and future property of the mortgagee.

Norwegian law states that security may be established in inter alia these forms and objects:

• Ownership and special rights in real property or unspecified parts of real property (including property comprised of the mortgage on a lease of land and houses thereon, mortgage of an owner section and leases of dwelling) may be mortgaged.
• Possessory liens may be created by agreement on movables that cannot be entered in a real property register.
• Liens on movables that can be entered in a real property register and accessories of such movables acquiring legal protection by being entered in the proper register.
• Business enterprises may create non-possessory liens on operating assets (driftstilbehør) that are used in or are designed for their business operations (such liens are created together with liens on ownership of or a registered and assignable right to use the real property to which the business relates).
• Business enterprises may create non-possessory liens – combined or individual – on motor vehicles that are used or intended for use in the business operation, and mobile construction machines that are used or intended for use in the enterprise's contractor business.
• Movables that are used or intended for use in agriculture operations but which are not accessories to real property and goods that are produced in the operations, can be separately attached with non-possessory liens.
• Movables that are used or intended for use in commercial operations conducted from fishing, whaling or sealing vessels, but which are not accessories of a vessel, may be separately attached with non-possessory liens.
• Business enterprises may create non-possessory liens on their stocks of goods used in the business (varelager).
• In connection with the sale of movable objects, a lien may by agreement be imposed on said objects as security for the seller's claim on the purchase price with the addition of interests and costs, or loans which a third party has granted to the buyer for full or partial payment of claims and which the lender has paid out directly to the seller.
• Securities, such as negotiable promissory notes and similar documents, share certificates and life policies, may be attached with possessory liens.
• A claim or a right evidenced by a redemption paper which is not a security may be attached with liens.
• Shares that are not registered in a securities register may be pledged unless the contrary is stated in the company's articles of association.
• Non-negotiable monetary claims on a named debtor may be attached with liens, as may non-negotiable money claims that will arise against a named debtor in a specifically mentioned legal situation.
• A business enterprise may conclude an agreement to assign, assign for security purposes or attach the non-negotiable money claims which it has or acquires in its business or a specific part thereof. It is not necessary that the debtors are named.
• Some authorizations may be pledged (see for instance section 20 of the Aquaculture Act (Akvakulturloven) and section 6-2 of the Petroleum Act (Petroleumsloven)).
• Vessels and aircraft may be pledged.

Common forms of guarantees

Guarantees can take a number of forms under the Peruvian law with a majority of them having a payment guarantee nature, covering the payment of money (compensation, penalties, and reimbursement) and other contractual obligations.

Common forms of securities

There are four basic types of security interests that can be created under Peruvian law:

• a pledge (garantía mobiliaria);
• a charge;
• a mortgage; and
• a guarantee trust.

Different types of securities are suitable for securing different types of assets.

Under Peruvian law it is possible to grant security over all the assets of a Peruvian company or individual assets. Granting security over all of a company's assets will tend to be achieved by way of a debenture which will include:

• a mortgage over real estate;
• a fixed charge over assets which are identifiable and can be controlled by the creditors (such as equipment);
• a floating charge over fluctuating and less identifiable assets (such as stock); and
• an assignment by way of charge over receivables and contracts.

Common forms of guarantees

Guarantees can take a number of forms.

A particular distinction worth remembering is between a performance guarantee and a payment guarantee:

• Performance guarantee is a term used to describe both performance bonds (in the context of trade finance) and ‘see to it’ guarantees (in other contexts):
  • A performance bond describes a financial undertaking used to protect a buyer against the failure of a supplier to deliver goods or perform services in accordance with the terms of a contract. The issuer of the bond undertakes to pay to the buyer a sum of money if the seller fails to deliver the goods or perform the contracted services on time or in accordance with the terms of the contract.
  • A ‘see to it’ guarantee is a promise by the guarantor to see to it that the primary obligor fulfils its obligations under the primary contract. If the primary obligor fails to fulfil its obligations under the primary contract, the guarantor will be in breach of its obligations under the guarantee.
• A payment guarantee is narrower in scope than a performance guarantee as it only covers the payment of money rather than other contractual obligations.

Common forms of security

Polish law provides for real and personal security interests.

Personal security interests include:

• suretyship;
• guarantee; and
• statement on submission to enforcement.

The following types of security interest in rem can be created under Polish law:

• a pledge (under Polish law a distinction can be made between a registered pledge, a civil pledge and a financial pledge);
• a mortgage;
• a security assignment of receivables; and
• a security transfer of assets.

Different types of security are suitable for securing different types of assets.

Under Polish law, it is possible to grant security over all of the moveable assets and rights of a Polish company or over individual assets. Granting security over all of a company's assets may be achieved by the establishment of a registered pledge. However, real property cannot be encumbered with a pledge. The only security interest that can be established over the real property is a mortgage.

Common forms of guarantees

Guarantees can take different forms, as follows.

Performance guarantee

A third party (guarantor) personally undertakes the obligation of the debtor if the debtor fails to fulfillment its obligations.

Promissory note (fiança)

The guarantor promises in writing to pay a determinate sum of money to the creditor if the debtor fails to fulfill its obligations.

Common forms of security

There are two basic types of security interest that can be created under Portuguese law:

• a pledge; and
• a mortgage.

Different types of security are suitable for securing different types of assets (eg financial pledge and a fiduciary alienation/transfer of collateral).

Common forms of guarantees

Guarantees can take a number of forms.

A particular distinction worth remembering is between a performance guarantee and a payment guarantee:

• A performance bond describes a financial undertaking used to protect a buyer against the failure of a supplier to deliver goods or perform services in accordance with the terms of a contract. The issuer of the bond undertakes to pay to the buyer a sum of money if the seller fails to deliver the goods or perform the contracted services on time or in accordance with the terms of the contract.
• A payment guarantee is narrower in scope than a performance guarantee as it only covers the payment of money rather than other contractual obligations.

Common forms of security

Security interests are mostly governed by Article 9 of the Purto Rico Uniform Commercial Code (UCC). A security interest is created by a security agreement under which the debtor grants a security interest in the debtor’s property as collateral for a loan or other obligation. Depending on collateral, security interests are perfected by possession, or filing of a UCC-1 financing statement with the Puerto Rico Department of State. Security agreements may take various forms depending on the collateral.

Mortgages are perfected by filing a Deed of Mortgage with the corresponding Registry of Property. Different types of security are suitable for securing different types of assets. Fixture filings may also be filed with the relevant Registry of Property, if applicable.

Different types of security are suitable for securing different types of assets.

Under Puerto Rican law it is possible to grant security over all of the assets of a Puerto Rican company or individual assets through a combination of:

• a security interest on movable property of all types, including inventory, receivables, equipment, intellectual property etc; and
• mortgage(s) over real property(ies).

Romanian law regulates two main types of guarantees/security: personal guarantees and in rem security.

Personal guarantees

The most common ones are:

• suretyship (fideiusiune); and
• autonomous guarantees (which, in their turn, may take the form of:
  • letters of guarantee; and
  • letters of comfort).

In rem security

The most commonly available in rem security are (conventional) mortgages, which do not entail the dispossession of the security provider. Depending on the type of assets taken as security, mortgages can be either:

• movable mortgages – covering various tangible or intangible, present and future movable assets (by way of example, a movable mortgage may be created over bank accounts, shares, receivables, intellectual property rights, insurance policies rights, machinery, inventory, universalities of movable assets which are assigned to the activity of an enterprise etc); or
• immovable mortgages – covering immovable assets together with their accessories, superficies rights etc (the Romanian Civil Code expressly recognizes the possibility to create an immovable mortgage over future buildings).

Romanian law also regulates privileges, which are claims preferred by law and which have in principle the highest rank. Privileges can be either general (over all movable and immovable assets of the debtor) or special (eg the privilege of the seller's claim for the unpaid price of a movable asset sold to a natural person, save for the case when the buyer acquires the asset for the service or exploitation of an enterprise). There are special priority rules provided by the law with respect to privileges and mortgages.

Furthermore, quasi-security may also be used in practice, such as assignment of receivables for security purposes (cesiune de creanta in scop de garantie), retention of title (clauzele de rezerva a proprietatii). They are subject to the same priority and enforcement rules as those provided by law for mortgages.

There are various methods of securing performance of obligations under the Russian law.

The common types of security interest include:

• pledge (including mortgage);
• surety (note that the surety and the debtor shall be jointly liable to the creditor unless the surety agreement or law provides for secondary liability);
• independent guarantee (a written guarantee issued by a bank or other legal entity to pay the creditor a certain amount of money irrespective of the validity of the obligation secured by this guarantee);
• security payment (a sum of money paid by one party to another party to secure a monetary obligation, including the obligation to pay a penalty for breach of contract and certain other specific types of obligations);
• penalty (a sum of money which the debtor is obliged to pay to the creditor in the event of its failure to discharge its obligations); and
• retention (a creditor has the right to retain tangible property in its custody in the event that the debtor fails to discharge its payment obligations relating to the property).

Common forms of guarantees

Under OHADA, personal securities are surety bond and autonomous guarantee and counter guarantee.

Surety bond: A surety-bond shall be a contract whereby the surety undertakes, and the creditor accepts, to discharge an existing or future debt contracted by the debtor in the event of the latter failing to do so.

Autonomous guarantee and counter guarantee:

An autonomous guarantee shall mean an agreement by which, the guarantor undertakes, following an obligation signed by the principal and on its instructions, to pay a fixed sum of money to a beneficiary either at the earliest demand of the latter or as per the agreed terms. The autonomous counter guarantee shall mean the agreement by which the counter guarantor undertakes, following an obligation signed by the principal and on its instructions, to pay a fixed sum of money to a guarantor either at the earliest demand of the latter or as per the agreed terms.

Transferable securities consist of possessory lien, assets held or transferred as security, pledge of real property, pledge of intangible assets and privileges.

Common forms of security

• Pledge
• Liens
• Mortgage

Different types of security are suitable for securing different types of assets.

Under Senegalese Law it is possible to grant security over all of a company’s assets or on individual assets. Granting security over all of a company's assets will tend to be achieved by way of a debenture which will include:

• a mortgage over real estate; and
• a pledge over movable goods.

 

Moreover, guarantees and security, to be enforceable as against third parties need to be perfected and registered.

Common forms of guarantees

Guarantees can take a number of forms.

A particular distinction worth remembering is between a performance guarantee and a payment guarantee:

• A performance guarantee is a term used to describe both performance bonds (in the context of trade finance) and 'see to it' guarantees (in other contexts):
  • A performance bond describes a financial undertaking used to protect a buyer against the failure of a supplier to deliver goods or perform services in accordance with the terms of a contract. The issuer of the bond undertakes to pay to the buyer a sum of money if the seller fails to deliver the goods or perform the contracted services on time or in accordance with the terms of the contract. However, note that unlike a guarantee, the essential difference is that the obligation to pay is intended to be unconditional and independent of the underlying obligation. The essence of a ‘true’ performance bond is that it is an unconditional undertaking by a third party to pay the beneficiary upon demand, independent and irrespective of the underlying contract between the beneficiary and the principal. The issuer of a performance bond has primary liability, unlike a guarantor, who has secondary or collateral liability.
  • A 'see to it' guarantee is a promise by the guarantor to see to it that the primary obligor fulfils its obligations under the primary contract. If the primary obligor fails to fulfil its obligations under the primary contract, the guarantor will be in breach of its obligations under the guarantee.
• A payment guarantee is narrower in scope than a performance guarantee as it only covers the payment of money rather than other contractual obligations.

Common forms of security

There are four basic types of security interest that can be created under Singapore law:

• a pledge;
• a lien;
• a charge; and
• a mortgage.

Different types of security are suitable for securing different types of assets.

Under Singapore law it is possible to grant security over all of the assets of a Singapore company or individual assets. Granting security over all of a company's assets will tend to be achieved by way of a debenture which will include:

• a mortgage over real estate;
• a fixed charge over assets which are identifiable and can be controlled by the creditors (such as equipment);
• a floating charge over fluctuating and less identifiable assets (such as stock); and
• an assignment by way of charge over receivables and contracts.

Guarantees

In general, by providing a guarantee, the guarantor undertakes that it will fulfil the obligation of the debtor (as a whole or part), in case the debtor fails to duly perform its obligation. The law does not differentiate between the performance of payment obligations or any other kind of obligation. Therefore, the guarantee may also be granted in order to secure the obligation of the debtor to provide services etc.

Common forms of security

Basic types of security that can be created under Slovak law include:

• pledges;
• secured transfer of a right; and
• bills.

Under Slovak law it is possible to grant security over all of the assets of a company or individual assets. Granting security will tend to be achieved by way of:

• pledge over a business share;
• pledge over the real estate;
• pledge over the receivables or over accounts receivables;
• a pledge over assets which are identifiable and can be controlled by the creditors (such as equipment); or
• secured transfer of right to the real estate.

Common forms of guarantees

The most common type of guarantee in financing transactions is a first demand payment guarantee where the guarantor undertakes to make payment in the event of a default by the borrower.

It is important to ensure that the guarantee creates a principal obligation to pay or perform regardless of the enforceability, validity or legality of the underlying obligation. For more information, see Giving and taking guarantees and security – other issues.

Common forms of security

The most common forms of security are as follows.

Pledge of shares

Perfection requirements include the delivery of share certificates evidencing the shares together with signed, undated share transfer forms where the shares are in certificated form or the noting of the pledge on the account held by the security provider with a central securities depository where the shares are dematerialized.

Cession of rights

All incorporeal rights may be cede in security, provided that the subject of that cession does not expressly prevent the cession of such rights. The most common forms of rights ceded are rights in and to insurance policies and amounts payable thereunder; bank accounts and amounts standing to the credit thereof; key customer contracts; and debtors book.

Mortgage bonds

These provide real security over immovable property and are required to be registered in the South African Deeds Office nearest to where the property is located. This form of security must be prepared and filed by a conveyancing lawyer.

Special notarial bond

A special notarial bond is provided over specified movable assets and is required to be registered in the South African Deeds Office where the security provider's principal place of business is located. This form of security must be prepared and filed by a conveyancing lawyer.

General notarial bond

A general notarial bond is provided over the security provider's movable assets in general and is required to be registered in the South African Deeds Office where the security provider's principal place of business is located. This form of security must be prepared and filed by a conveyancing lawyer.

In relation to the Security SPV structure, also see Lending and borrowing – common structures.

Common forms of guarantees

There are two common forms of guarantees used in Spain.

Guarantee (fianza)

A guarantor undertakes to pay the guarantee obligation if the borrower fails to pay. The guarantor's liability with respect to the borrower can be either:

• subsidiary (subsidiaria) – the guarantor is only required to pay if the borrower fails to do so; or
• joint and several (solidaria) – the creditor may claim against the debtor or the guarantor at the same time.

As to each guarantor's liability with respect to other guarantors, it can be can be either:

• several (mancomunada) – each guarantor would only be required to pay up to the obligations expressly guaranteed by such guarantor); or
• joint and several (solidaria) – each guarantor would be liable for the total amount of the guaranteed obligations.

Usually, the guarantor's liability is joint and several (both with respect to the borrower and the remaining guarantors).

First demand guarantee (garantía a primer requerimiento)

A guarantor undertakes to pay the guarantee obligation at any time, upon first demand from the relevant creditor, if the relevant conditions set out in the guarantee clause or agreement are met, without any further requirements or exceptions (other than willful misconduct of the creditor). The guarantee is autonomous and independent from the guaranteed obligation.

First demand guarantees are the most common form of guarantee used in Spanish wholesale financing transactions.

Common forms of security

There are two main types of security in rem available for creditors: mortgages (hipotecas) and pledges (prendas).

Mortgage

A mortgage may be sub-categorized as:

• a mortgage over real estate assets (hipoteca inmobiliaria); and
• a mortgage over movable assets (hipoteca mobiliaria).

Pledge

A pledge may be sub-categorized as:

• a pledge without delivery of possession (prenda sin desplazamiento); and
• a pledge with delivery of possession (prenda con desplazamiento).

The nature of the security taken will depend on the asset expressed to be subject to such security.

In this regard:

• Movable assets which may be subject to a mortgage include intellectual and industrial property rights, industrial machinery, commercial establishments, motor vehicles, tramways, train carriages and aircrafts.
• Movables assets which may be subject to a pledge without delivery of possession include machinery, stored merchandise, raw materials, agricultural machinery, works of art, credit rights arising from permits, licenses and authorizations, subsidies or from other agreements with governmental authorities, and other credit rights not represented by securities and not qualifying as financial instruments for the purposes of Royal Decree-Law 5/2005 of 11 March 2005, implementing Directive 2002/47/EC of the European Parliament and the Council of 6 June 2002 on financial collateral arrangements.
• Movable assets which may be subject to a pledge with delivery of possession include shares, quotas, credit rights, receivables and bank accounts.

When the creation of security triggers a significant amount of stamp duty tax and the relevant assets are not significant in the context of the transaction, it is standard market practice to grant a promissory security over the such relevant assets.

The promissory security does not grant to the beneficiary any in rem right over the asset expressed to be subject thereto, until:

• the relevant security is effectively granted; and
• each of the actions required for the perfection of the security is fully performed.

Finally, it is relevant to note that Spanish law permits the creation of guarantees and security interests in favor of future obligations (such as, those arising under the hedging agreements if not signed at closing of a transaction), provided that the main features defining the relevant future obligation are duly determined at the date of creation of the guarantee or security interest.

Common forms of guarantees

Some common forms of guarantees include:

• a tender guarantee (anbudsgaranti), which covers the buyer's loss in the event the seller refuses to sign the contract, withdraws his offer or cannot provide the required performance guarantee;
• an advance guarantee (förskottsgaranti), which covers the repayment of any advanced monies in the event that delivery does not occur;
• a performance guarantee (fullgörelsegaranti), which covers all of the seller's contractual obligations;
• a warranty guarantee (garantitidsgaranti), which covers the seller's obligations under the warranty period; and
• a payment guarantee (betalningsgaranti), which is usually issued in connection with larger building projects and consists of two parts:
  • a guarantee covering the building period; and
  • a guarantee covering the warranty period.

Common forms of security

There are four basic types of security interest that can be created under Swedish law:

• a pledge;
• a floating charge;
• a mortgage; and
• security assignment.

Different types of security are suitable for securing different types of assets.

Under Swedish law it is not possible to grant security over all of the assets of a Swedish company. A floating charge covers several types of personal property but excludes others (eg cash).

Common forms of guarantees

According to the CCC, a guarantee can secure the performance and payment of principal obligations which must legally valid. A guarantee must be made in writing in order for it to be used as evidence in court proceedings and only an original signed version may be used as evidence in such proceedings.

Common forms of security

There are three basic types of security interest that can be created under Thai law:

• a pledge under the CCC;
• a mortgage under the CCC; and
• a business security under the Business Security Act B.E. 2558 (2015) (BSA); and
• a leasehold right under the Leasehold Right in Immovable Property Act B.E. 2562 (2019) (LRIPA).

A mortgage may only be taken over immovable property and certain registrable movable property, e.g. registered machinery, ships of five tons and over, floating houses and beasts of burden (ie elephants, horses, cows, buffalos, mules and donkeys). A pledge, on the other hand, is available only for movable property.

Business security is a new security interest recognized under Thai law which may be granted by a legal entity or a natural person over its business, including all property relating to such business. Collateral under BSA includes:

• the business itself;
• its claims;
• movable property that the security provider uses in its business operation (e.g. machinery, inventory or raw materials);
• immovable property if the security provider operates a business involving immovable property (e.g. property development business); and
• intellectual property.

In addition to the business security, a leasehold right in immovable property is recently upheld as another class of asset under the new law, i.e. LRIPA which is aimed to increase the economic possibilities of the leased property and investment of immovable properties and growth in Thai economy.

Under the LRIPA, the registered leasehold right can be transferred and used as security, for example, an owner of the property who registers the leasehold right over such property is able to transfer such leasehold right to the lessee and the lessee can utilise such leasehold right as if they are the owner of the immovable property.  The 30-year period is the maximum leasehold right duration permissible under the LRIPA.

Common forms of guarantees

Ukrainian law distinguishes between guarantee (garantiya) and suretyship (poruka).

A guarantee is a security which can only be granted by a regulated entity (a bank or other financial institution), whereby the guarantor is under a primary obligation to the creditor to pay upon a debtor's default. A guaranteeing obligation is independent to the validity and existence of the principal obligation.

A suretyship can be provided by corporates or individuals. Under suretyship a surety undertakes to perform the principal obligation secured by suretyship, for and instead of the defaulting debtor. Under Ukrainian law a suretyship is a secondary obligation, meaning that its validity and existence is entirely dependent on the validity and existence of the principal obligation.

Common forms of security

There are three basic types of security interest that can be created under Ukrainian law:

• a pledge;
• a suretyship; and
• a mortgage.

Different types of security are suitable for securing different types of assets.

Under Ukrainian law it is possible to grant security over all of the assets of an Ukrainian company or individual assets. Granting security over all of a company's assets will tend to be achieved by way of mortgage over a business unit (an integral property complex) which will include:

• a mortgage over real estate; and
• a mortgage over fixed assets and equipment (except for movable equipment).

Common forms of guarantees

Guarantees can take a number of forms.

A particular distinction worth remembering is between a performance guarantee and a payment guarantee:

• A performance guarantee is a term used to describe both performance bonds (in the context of trade finance) and 'see to it' guarantees (in other contexts):
  • A performance bond describes a financial undertaking used to protect a buyer against the failure of a supplier to deliver goods or perform services in accordance with the terms of a contract. The issuer of the bond undertakes to pay to the buyer a sum of money if the seller fails to deliver the goods or perform the contracted services on time or in accordance with the terms of the contract.
  • A 'see to it' guarantee is a promise by the guarantor to see to it that the primary obligor fulfils its obligations under the primary contract. If the primary obligor fails to fulfil its obligations under the primary contract, the guarantor will be in breach of its obligations under the guarantee.
• A payment guarantee is narrower in scope than a performance guarantee as it only covers the payment of money rather than other contractual obligations.

Common forms of security

There are three basic types of security interest that can be created under English law:

• a pledge;
• a charge; and
• a mortgage.

Different types of security are suitable for securing different types of assets.

Under English law it is possible to grant security over all of the assets of an English company or individual assets. Granting security over all of a company's assets will tend to be achieved by way of a debenture which will include:

• a mortgage over real estate;
• a fixed charge over assets which are identifiable and can be controlled by the creditors (such as equipment);
• a floating charge over fluctuating and less identifiable assets (such as stock); and
• an assignment by way of charge over receivables and contracts. 

Common forms of guarantees

Guarantees can take a number of forms.

A particular distinction worth remembering is between a performance guarantee and a payment guarantee:

• A performance guarantee is a term used to describe both performance bonds (in the context of trade finance) and ‘see to it’ guarantees (in other contexts).
  • A performance bond describes a financial undertaking used to protect a buyer against the failure of a supplier to deliver goods or perform services in accordance with the terms of a contract. The issuer of the bond undertakes to pay to the buyer a sum of money if the seller fails to deliver the goods or perform the contracted services on time or in accordance with the terms of the contract.
  • A ‘see to it’ guarantee is a promise by the guarantor to see to it that the primary obligor fulfils its obligations under the primary contract. If the primary obligor fails to fulfil its obligations under the primary contract, the guarantor will be in breach of its obligations under the guarantee.
• A payment guarantee is narrower in scope than a performance guarantee as it only covers the payment of money rather than other contractual obligations.

Common forms of security

The law of Scotland differs greatly from that in England and Wales in relation to the forms of security which can be taken over assets located in Scotland. Scots law does not recognize a distinction between equitable and legal charges. In general, Scottish security can be taken over a much more limited range of assets than is the case in England and Wales and there is no overarching security document which would replicate an English debenture. The main forms of security available in Scotland are as follows.

Standard security

This is the equivalent of an English legal mortgage and relates to security over heritable or feuhold property (the equivalent of freehold under English law) and leasehold property for a term of more than 20 years. Standard securities follow a statutory form.

Floating charges

A floating charge is a charge over all of the assets of a company and, unlike the position in England, the floating charge is a separate legal document in Scotland covering all of the assets of a company that are held at the time of enforcement, subject to the priority of certain fixed charges and of certain other preferred debts (included a ‘prescribed part’ which is made available for unsecured creditors). A floating charge is usually enforced by way of appointment of an administrator.

Assignations in security

This is a form of security which can be created over incorporeal moveable assets in Scotland and is the equivalent of an English law assignment. However, because there is no concept of equitable security in Scotland, any assignation in security must be intimated (effectively notified to the counter party) in order for the security to be treated as valid.

Pledges

A pledge is a fixed security over corporeal moveable property. In order to perfect a pledge, the chargee, or its nominee, must have possession of the actual asset. For that reason the only form of pledge which is common to see in Scotland is a pledge over shares. In order to perfect a pledge over shares, the shares in the relevant company must be transferred to the chargee, or its nominee. This is often an issue for banks out with Scotland even though the Companies Act does largely address the various concerns that are raised in relation to this, for example, by making it clear that where shares are only held by way of security, the registered shareholder does not need to treat the relevant company as part of its overall group for various purposes including tax. It should be noted that, in addition to this, the introduction of the person with significant control regime in the UK has led to an (ongoing) debate amongst lawyers in Scotland as to whether a bank which holds shares in a company by way of security should be treated as a person of significant control in relation to that company. The view that the firm takes at present is that this is not the case. However, other firms in the market disagree.

Common forms of guarantees

Guarantees are common in the UAE and it is also quite common to see personal guarantees given in relation to a loan for commercial purposes.

Guarantees are specifically codified in Chapter V of the Civil Code. Separate rules apply to bank guarantees under the Commercial Transactions Law. Although UAE courts have taken different approaches as to whether a guarantee of a bank loan is a civil or commercial transaction, it is common to disapply certain provisions of the Civil Code which may have an impact on the lenders' position (such as Article 1092 of the Civil Code which provides that a creditor must claim for a due debt within six months from the date of maturity).

The Commercial Code recognizes bank guarantees (which often take the form of a bond). Certain rules apply to these instruments such as assignment and time limits and there is a provision that ‘in exceptional circumstances’, the guarantor can successfully resist payment. It should be noted that the courts have been reluctant to apply this provision.

Types of security

Security over real estate and real estate interests (such as usufructs and musatahas (akin to a development agreement) are taken by way of mortgage. Some of the Emirates (and free zones) have specific laws dealing with mortgages but in the absence of legislation, mortgages are governed by the Civil Code. Although the practices of the relevant registrars may differ (and the practice at a particular registrar might evolve as well), generally mortgages over real estate may only be granted in favor of a bank which is licensed by the UAE Central Bank, be translated into Arabic and notarized prior to registration.

In relation to moveable property, UAE Law No. 20 of 2016 on the Mortgage of Moveable Assets to Secure a Debt (Pledge Law) governs how security is taken over certain classes of moveable assets such as accounts, trade payables, equipment and tools, goods and raw materials and agricultural products.  The Pledge Law provides that security over such moveable property should be by way of written security agreement or mortgage and, contrary to the previous position in the UAE, allows security to be taken over property without demonstrating possession and also allows security to be taken over future property (including bank accounts with fluctuating balances). It is therefore possible to take security over such moveable property which is similar in effect to an English debenture or law floating charge (provided that the requirements of the Pledge Law are adhered to).

We note, however, that the Pledge Law does not govern security over all moveable assets, and so care should be taken when securing a particular asset class to ensure that the security is in the correct form. For example, the Pledge Law specifically excludes insurance contracts and proceeds from its operation, meaning that any security taken over insurance contracts and proceeds should follow the traditional form (which is security by way of assignment). Security over ships, aircrafts and vehicles are also subject to different laws and regulations in the UAE. Depending on the nature of a transaction, this may require the security document to be notarized and for registration to be made in an appropriate asset register.

Due to the introduction of the new Companies Law, it is possible to take security over the shares in a company, including onshore LLCs. (It should be noted that the position differs from free zone to free zone and would need to be checked.) The process for taking security over pledges of shares should be checked with the relevant department in each Emirate as the process differs. However, generally the practice has been that this security may only be granted in favor of a bank licensed to carry out business in the UAE and is subject to notarization requirements.

Common forms of guarantees

Guarantees can take a number of forms. A particular distinction worth remembering is between a guarantee of payment and a guarantee of collection.

Under a guarantee of payment, the guarantor is obligated to repay the lenders immediately upon default of the borrower. The lenders are not required to first take any action against the borrower. Guarantees of payment are customary in the US.

Under a guarantee of collection, the lenders must first exhaust all remedies against the borrower before they may make a claim under the guarantee. The lenders are only entitled to the shortfall not paid by the borrower.

Common forms of security

Under US law, personal property, fixtures, general intangibles and other certain types of collateral are governed by the Uniform Commercial Code (UCC) as adopted in the borrower’s state of organization. Other types of collateral, including mortgages and motor vehicles, are governed by applicable state or federal laws, instead of or in addition to the UCC.

Under US law it is possible to grant security over all or a portion of the assets of a US borrower or guarantor.