Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

security definition

What does security mean? In legal practice, security means money or other assets provided as a guarantee that a legal obligation will be performed, with forfeiture if it is not. In criminal proceedings, it most often refers to a cash deposit or equivalent required as a condition of bail to secure a defendant’s attendance at court and compliance with bail; failure to surrender may lead to forfeiture. The concept and procedures are set by bail legislation and court rules in each jurisdiction. Practice varies: in England & Wales and Northern Ireland, courts commonly take recognisances, with or without sureties, and may require a...

Third-party security: guarantees, limited recourse, drafting pitfalls, enforcement, guarantor rights, antecedent transaction risks, corporate benefit and directors’ duties, and undue influence (England and Wales)

Published by a LexisNexis Banking & Finance expert

Practice notes

This Practice Note addresses:

what is meant by third party security?
when third party security is commonly granted?
drafting considerations when taking third party security
whether third party security constitutes a guarantee
the risks of third party security being considered voidable
corporate benefit and directors' duties, and
undue influence

What is meant by third party security?

Third party security describes security granted to support another person or entity’s obligations. It is frequently taken in commercial transactions alongside security from the borrower over its own assets, giving the lender(s) additional credit support. It is commonly granted in commercial transactions to bolster lenders’ overall credit support available to them.

It can be provided:

with a guarantee, securing the provider’s own liability under that guarantee and the borrower’s, and potentially other guarantors’, obligations; or
as security for the borrower’s debt only

In the latter case, the security provider assumes no personal liability for the obligations of the other person or entity. Instead, it simply offers an asset as security for the other’s obligation. In practice, this second arrangement is relatively uncommon. If a security provider seeks to limit the lender’s recourse to the security alone, it will typically include a covenant to pay...

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Web page updated on 22/05/2026

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