After studying this chapter, you should be able to:
1 Discuss the key concepts, nature, and characteristics relating to the use of charges, shares and stocks, goods, and life assurance policies as security
2 List the formal requirements for the creation of each type of security
3 Identify the rights and duties of the parties to the taking of a security, in particular the powers and remedies available to a bank as the security holder
4 List the basic rules for determining priority between competing securities and other interests
While guarantees and mortgages over land are among the most popular forms of security, it is also common for banks to take security over other types of assets. This chapter explains the legal concepts and issues in relation to taking security given by companies, the most widely used being the company charge. We also discuss the use of shares and stocks, goods, and life assurance policies as security by both a company and an individual. This chapter also gives a brief overview of the banker’s common law lien.
The security used most widely to secure bank advances made to a company is the charge. A charge is the appropriation of real or personal property for the discharge of a debt or other obligation, without giving the creditor a general or special property in, or possession of, the property. In case of default in payment of the debt or discharge of the obligation, the creditor ...