® By in-house counsel, for in-house counsel.® InfoPAKSM Finance Multi-Jurisdictional Guide: United Kingdom (England and Wales) Sponsored by: Association of Corporate Counsel Association of Corporate Counsel 1025 Connecticut Avenue, NW, Suite 200 1025 Connecticut Avenue, NW, Suite 200 Washington, DC 20036 USA Washington, DC 20036 USA tel +1 202.293.4103, fax +1 202.293.4701 tel +1 202.293.4103, fax +1 202.293.4701 www.acc.com www.acc.com 2 Finance Multi-Jurisdictional Guide: United Kingdom (England and Wales) Finance Multi-Jurisdictional Guide: United Kingdom (England and Wales) December 2014 Provided by the Association of Corporate Counsel 1025 Connecticut Avenue, NW, Suite 200 Washington, DC 20036 USA tel +1 202.293.4103 fax +1 202.293.4107 www.acc.com This InfoPAKSM provides a high level overview of the lending market, forms of security over assets, special purpose vehicles in secured lending, quasi-security, negative pledge, guarantees, and loan agreements. It covers creation and registration requirements for security interests; problem assets over which security is difficult to grant; risk areas for lenders; structuring the priority of debt; debt trading and transfer mechanisms; agent and trust concepts; enforcement of security interests and borrower insolvency; cross-border issues on loans; taxes; and proposals for reform. The information in this InfoPAKSM should not be construed as legal advice or legal opinion on specific facts, and should not be considered representative of the views of PLC or of ACC or any of its lawyers, unless so stated. This InfoPAKSM is not intended as a definitive statement on the subject but rather to serve as a resource providing practical information for the reader. This material was developed by PLC. For more information about PLC, visit their website at http://www.practicallaw.com/ or see the “About the Author” section of this document. Copyright © 2014 Practical Law Company (PLC) & Association of Corporate Counsel 3 Contents I. Overview of the Lending Market .................................................................................................... 6 A. What Have Been the Main Trends and Important Developments in the Lending Market in Your Jurisdiction in the Last 12 Months? ............................................................................................................................................................ 6 II. Forms of Security over Assets ........................................................................................................ 7 A. Real Estate ................................................................................................................................................................................. 7 B. Tangible Movable Property .................................................................................................................................................... 9 C. Financial Instruments ............................................................................................................................................................. 10 D. Claims and Receivables ......................................................................................................................................................... 12 E. Cash Deposits ......................................................................................................................................................................... 14 F. Intellectual Property .............................................................................................................................................................. 15 G. Problem Assets ....................................................................................................................................................................... 16 III. Release of Security over Assets .................................................................................................... 17 A. How Are Common Forms of Security Released? Are Any Formalities Required? ................................................ 17 IV. Special Purpose Vehicles (SPVs) in Secured Lending ................................................................ 17 A. Is It Common in Your Jurisdiction to Take Security over the Shares of an SPV Set up to Hold Certain of the Borrower's Assets, Rather Than to Take Direct Security over Those Assets? .............................................. 17 V. Quasi-Security ................................................................................................................................. 18 A. What Types of Quasi-Security Structures Are Common in Your Jurisdiction? Is There a Risk of Such Structures Being Recharacterised as a Security Interest? ............................................................................................. 18 VI. Guarantees ...................................................................................................................................... 21 A. Are Guarantees Commonly Used in Your Jurisdiction? How Are They Created? ................................................ 21 VII. Risk Areas for Lenders ................................................................................................................... 22 A. Do Any Laws Affect the Validity of a Loan, Security or Guarantee (or the Terms on Which They Are Made or Agreed)? .................................................................................................................................................................. 22 B. Can a Lender Be Liable under Environmental Laws for the Actions of a Borrower, Security Provider or Guarantor? ............................................................................................................................................................................... 23 VIII. Structuring the Priority of Debts .................................................................................................. 24 A. What Methods of Subordination Are There? ................................................................................................................. 24 IX. Debt Trading and Transfer Mechanisms ...................................................................................... 25 For more ACC InfoPAKs, please visit http://www.acc.com/infopaks 4 Finance Multi-Jurisdictional Guide: United Kingdom (England and Wales) A. Is Debt Traded in Your Jurisdiction and What Transfer Mechanisms Are Used? How Do Buyers Ensure that They Obtain the Benefit of the Security and Guarantees Associated with the Transferred Debt? .......... 25 X. Agent and Trust Concepts ............................................................................................................ 27 A. Is the Agent Concept (Such as a Facility Agent under a Syndicated Loan) Recognised in Your Jurisdiction? . 27 B. Is the Trust Concept Recognised in Your Jurisdiction? ................................................................................................ 27 XI. Enforcement of Security Interests and Borrower Insolvency ................................................... 27 A. What Are the Circumstances in Which a Lender Can Enforce Its Loan, Guarantee or Security Interest? What Requirements Must the Lender Comply with? ................................................................................................... 27 XII. Methods of Enforcement ............................................................................................................... 28 A. How Are the Main Types of Security Interest Usually Enforced? What Requirements Must a Lender Comply with? .......................................................................................................................................................................... 28 XIII. Rescue, Reorganisation and Insolvency ........................................................................................ 29 A. Are Company Rescue or Reorganisation Procedures (Outside of Insolvency Proceedings) Available in Your Jurisdiction? How Do They Affect a Lender's Rights to Enforce Its Loan, Guarantee or Security? ................... 29 B. How Does the Start of Insolvency Procedures Affect a Lender's Rights to Enforce its Loan, Guarantee or Security? ................................................................................................................................................................................... 30 C. What Transactions Involving Loans, Guarantees, or Security Interests Can Be Made Void if the Borrower, Guarantor or Security Provider Becomes Insolvent? .................................................................................................... 30 D. In What Order Are Creditors Paid on the Borrower's Insolvency? ......................................................................... 31 XIV. Cross-Border Issues on Loans ....................................................................................................... 33 A. Are There Restrictions on the Making of Loans by Foreign Lenders or Granting Security (over All Forms of Property) or Guarantees to Foreign Lenders? ........................................................................................................... 33 B. Are There Exchange Controls that Restrict Payments to a Foreign Lender under a Security Document, Guarantee or Loan Agreement? ........................................................................................................................................