Legal Practice Notes

The purpose of security in securitisations In a classic (non-synthetic) securitisation, security is broad in scope: the issuer charges all of its rights in favour of a security trustee for the benefit of all secured creditors, commonly under a single security deed. For guidance on synthetic securitisations, see Practice Note: Synthetic securitisations. Creating effective security interests over the issuer’s underlying assets (the ‘security package’) therefore supports both the credit and the legal assessment of a securitisation: Credit analysis— A key strand of the credit review assumes value will be realised via enforcement rather than scheduled repayment. In the same way, a mortgage lender primarily prices and approves a loan by reference to the mortgage collateral—the asset to be enforced on default—rather than the borrower’s income capacity. Legal analysis— Transaction counsel focus closely on ensuring each issuer asset is properly charged and that the...

Scope of this note When security is properly created, it is binding as between the security provider and the secured party. However, it is not necessarily binding on every third party, such as a liquidator or administrator of the security provider. In numerous cases, further steps are required to ‘perfect’ the security interest. Perfection is the process by which the security is made enforceable against certain third parties (though not necessarily all third parties). For details about the third parties who may not be bound even after perfection, see: The difference between perfection and priority below. Perfection can be achieved in a number of ways, and the correct method for perfecting a particular security interest depends on: the nature of the security interest granted the nature of the entity granting the security, and the nature of the asset which is secured by the...

In many lending arrangements, financiers commonly obtain security to back a borrower's duties under a loan agreement. By taking security, they secure defined rights over the charged assets if the borrower fails to make repayment when due. This Practice Note outlines the core features and key characteristics of the four categories of security recognised under English law. It also clarifies what is meant by the distinction between legal and equitable security interests, and explains the differences between them. Practice Note: Introductory guide to security in a lending transaction offers a broader primer on security in lending and serves as a helpful starting point for those new to the subject or unfamiliar with it. Practice Note: Security—frequently asked questions provides links to answers for many of the most common security questions and issues. What is security? A security interest grants the secured party rights in the security...

The characteristics of social housing bodies and the regulatory frameworks governing them create extra considerations when taking security from, or enforcing security granted by, such organisations. This Practice Note sets out the principal points to assess when taking or enforcing security from social housing entities within a social housing finance setting. It concentrates solely on private not-for-profit providers of social housing registered in England, called ‘ RPs’ in this Practice Note, as they represent the overwhelming share of private debt finance raised by housing associations to date. It does not address providers registered in Wales... For further reading on social housing finance deals, see the following Practice Notes: Social housing entities entering into finance transactions Key deal structures in social housing finance The key financing terms in social housing finance For general guidance on taking and enforcing security, see: Taking...

This Practice Note signposts answers to many frequently asked questions on security matters and is chiefly aimed at readers new to security. For the complete catalogue of our materials, including Practice Notes and security precedents, visit the security topic under the Topics & Tasks tab on the Banking & Finance homepage, or see the following Overviews: Types of security—overview Taking security—overview Perfecting and registering security—overview Priority of security—overview Enforcing security—overview Releasing security—overview For the full set of Q& As in the Banking & Finance Q& A bank—many of which tackle more complex issues relating to security—refer to Banking & Finance Q& As—overview. Note that some of the content linked from this Practice Note is not maintained. Taking security This section highlights materials that may help with common queries on taking security and the different forms of security...

Security for Costs Under the Family Procedure Rules 2010 ( FPR 2010), SI 2010/2955, 20.6, a respondent to any application may seek security for the costs of the proceedings if one or more of the gateway conditions in FPR 2010, SI 2010/2955, 20.7 is met. On the same basis, and pursuant to FPR 2010, SI 2010/2955, 20.8, the court can also order security for costs against an appellant, or against a respondent who pursues an appeal. While these powers can be helpful in particular circumstances, their scope is often limited in family proceedings because there is no general rule that costs should follow the event. In MG v AR ( Security for Costs), Mostyn J noted that, unlike the civil case law, in family cases the merits of the application and the strength of the defence must be scrutinised carefully; only by...

The English court and security for costs during arbitral proceedings In England and Wales, the courts currently lack authority to order security for costs while an arbitration is underway; that competence lies exclusively with the tribunal. This was not always the position. In Coppée- Lavalin v Ken- Ren Chemicals and Fertilisers; Voest- Alpine v Ken- Ren Chemicals and Fertilisers, the House of Lords, considering section 12(6)(a) of the Arbitration Act 1950, confirmed that the court was not prevented from directing security for costs in an international arbitration, and endorsed the general framework for exercising that discretion as described by Lord Mustill. The House nevertheless divided on how the discretion should be applied on the facts, with a majority holding that security for costs ought to be ordered in an International Chamber of Commerce ( ICC) arbitration taking place in London. Lords Keith, Slynn and Woolf...

This Practice Note carefully reviews both the Civil Procedure Rules ( CPR) and relevant associated practice directions that offer orders for security for costs which mirror those obtainable under CPR 25. Further information and comprehensive guidance on security for costs can be found within a suite of Practice Notes, see: Security for costs—overview. What provisions are available to seek security for costs? When addressing an application for security for costs, the starting point is usually whether CPR 25 ( Interim Remedies and Security for Costs) provides assistance. That said, beyond CPR 25 there are also further additional Parts of the CPR and practice directions that permit orders equivalent to a security for costs order. As confirmed by the Court of Appeal in Olatawura v Abiloye (2002), such measures are in effect ‘tantamount’ to security for costs orders. They include: CPR...

Background The EU introduced a directive setting a 20% renewable energy supply goal by 2020, and the UK set an equivalent 20% renewable output objective for the same date. These measures, together with later climate change commitments adopted by the UK and other states (for more detail, see Practice Note: Climate change—emissions targets, carbon budgets and net zero), have created a rising worldwide demand for capital in the renewables sector. In the current era of budget reductions, the government is unlikely to commit substantial additional funding or uplift tariffs. At the same time, banks have sharply curtailed the provision of affordable debt. Consequently, fresh approaches are needed to preserve and expand investment in the renewable energy market alongside traditional bank finance. See Practice Note: Introduction to UK energy projects for construction lawyers. Banks have been compelled to reassess their renewables portfolios and, in some cases, to...

Cash-generating asset types Overview In essence, any asset that produces cash can be turned into a securitisation. Even an art collection could be used on the premise it can be sold for proceeds (the city of Detroit, for example, weighed this option for the Detroit Institute of Arts’ holdings). In practice, securitisations usually reference pools of more standardised assets that carry repayment obligations (for instance, loans) and/or deliver steady, predictable cash flows (such as a mature, stable enterprise). Put differently, securitisations are commonly supported by financial assets... Residential mortgage loans Commercial mortgage loans Credit cards and other unsecured consumer loans Auto loans Trade receivables Illustrative “esoteric” securitisations have included: F1 ( Formula One) rights Cinema revenue Royalty payments Weather risk EU and UK Securitisation Regulations EU Securitisation Regulation In September 2015, the European Commission released the Action Plan on...

This Practice Note outlines the principal features of the EU Regulation on reporting and transparency of securities financing transactions ( Regulation ( EU) 2015/2365) ( EU SFTR), together with the Assimilated Regulation ( EU) 2015/2365 ( UK SFTR). What is the purpose of the EU SFTR and UK SFTR? As at IP completion day (31 December 2020), the onshored UK SFTR (and the corresponding onshored technical standards) applies in the United Kingdom. The EU SFTR and UK SFTR frameworks are designed to bolster transparency in securities financing transactions ( SFTs) and their reuse. They place duties on counterparties to report SFTs to trade repositories. They also require advance risk disclosures and written consent before assets are reused under a collateral arrangement. Any divergences between the EU and UK regimes are identified in the relevant sections of this Practice Note. Key requirements of the EU SFTR and the UK...

This Practice Note outlines the key issues that arise on a takeover carried out through a securities exchange offer. It sets out when a securities exchange offer is required under the City Code on Takeovers and Mergers ( Code), why parties might select this structure, and the principal legal and regulatory matters to address. When is a securities exchange offer required? In certain cases, the Code requires an offeror to structure its takeover as a securities exchange offer. Rule 11.2 states that where an offeror, together with anyone acting in concert, acquires by securities exchange interests in shares of any class carrying 10% or more of that class in issue either: during an offer period, or in the three months prior to the commencement of an offer period, such securities will normally have to be offered to all other holders of that class. The...

Introduction Recording interests can significantly affect the priority ranking of competing security interests. This Practice Note summarises the effect on priority of making registrations at the relevant IP registry for: a UK patent a UK registered trade mark, or a UK registered design For information on how registration against other classes of asset influences the priority of security interests, see the following Practice Notes: Effect of registering security at the HM Land Registry/ Land Charges Department on priority of security interests Effect of registering security on the UK Ship Register on priority of security interests Effect of registering security on the UK Register of Aircraft Mortgages on priority of security interests In addition, most security interests created by a company formed and registered under the Companies Act 2006 must be registered at Companies House to be effective. For more detail on the...

This Practice Note outlines how to engage effectively with your professional indemnity insurance ( PII) brokers and underwriters, covering: questions to ask your broker meeting insurers what insurers like to see in firms they are insuring other steps you can take to impress insurers The material here informs rather than exhausts the topic; you may wish to ask your broker or insurer about their preferred approach. Approaches can differ between providers. Questions to ask your broker The questions you ought to put to your PII broker include: insurers’ financial strength—rating and capitalisation benchmarking aggregation meeting with insurers Insurers’ financial strength: rating and capitalisation One of the clearest markers of financial robustness is a positive rating from an independent agency. The SRA list of participating insurers provides rating details; use these when comparing PII quotations. Your broker will also hold...

Requirement for remediation Enforcement authorities must ensure any land they deem to be contaminated under Part IIA of the Environmental Protection Act 1990 ( EPA 1990) is brought to the necessary standard through remediation. Remediation can be undertaken by: an appropriate person, following a remediation notice issued by the enforcing authority an appropriate person or another party, acting voluntarily or under another regime, provided the enforcing authority is satisfied that suitable remediation is being, or will be, undertaken without serving a remediation notice the enforcing authority itself, where it is the appropriate person or holds the power to carry out remediation work According to the Environment Agency’s ( EA) report Dealing with contaminated land in England, at most remediated sites (371/460) the responsibility for carrying out remediation rested with either the Local Authority ( LA) or the EA. At these sites,...

You can prompt business colleagues to engage with the legal team more consistently in four principal ways: boost their legal awareness so they can recognise issues early and request guidance promptly underline the value of right time – right information consultations through steady, routine interaction propose, where suitable, that referrals to the legal team are filtered or put through a screening step urge management to put guidance in place for using the legal team (with your drafting support) and to take responsibility for monitoring any self help, eg contract assembly All four can operate within the same organisation, but 1, 3 and 4 rely on management buy-in. As most organisations are unwilling to keep expanding the in-house head count, managers must accept their role in promoting coherent use of a finite resource. Raise legal...

This Practice Note This Practice Note outlines the early, practical key actions a trustee in bankruptcy (trustee) ought to take on appointment to safeguard their proprietary stake in the bankrupt’s assets—particularly real property such as the bankrupt’s family home. It does not cover which assets and interests vest in the trustee, the process by which they identify and realise that stake, or when equitable accounting or the equity of exoneration might arise as issues or disputes of concern. For more on these topics, consult the following Practice Notes: Property that vests in the trustee in bankruptcy on bankruptcy and how the trustee in bankruptcy determines the scope of their interest in it Equitable accounting—how it operates in practice The equity of exoneration and its practical application Possession and sale applications concerning a bankrupt’s family home This Practice Note likewise does not set out in detail what occurs...

Secure accommodation This Practice Note explains what is meant by secure accommodation and indicates which children a local authority may lawfully place there. It further considers human rights issues, placement outside the jurisdiction, unregulated provision, and the ‘mirror procedure’ employed under the High Court’s inherent jurisdiction, which has developed in response to the shortage of secure accommodation places. For practical, procedural guidance on secure accommodation orders, see Practice Note: Secure accommodation—procedure, particularly regarding: Use of secure accommodation without a court order Applying to the court The statutory criteria applied The effect of a secure accommodation order See also Practice Notes: Children, deprivation of liberty and the inherent jurisdiction; Children, consent and deprivation of liberty; Deprivation of liberty court procedure; and The deprivation of liberty safeguards. In Re JR ( Deprivation of Liberty: Care Order: Principles of Care), Lieven J...

Contracting-out on a salary-related basis (also known as defined benefit ( DB) contracting-out) was abolished on 6 April 2016. Before abolition, members of contracted-out salary-related ( COSR) schemes could have built up one of two forms of contracted-out entitlement. In this Practice Note, these are collectively described as ‘contracted-out salary-related rights’ or, in short, ‘ COSR rights’. Guaranteed minimum pensions ( GMPs), being contracted-out rights built up before 6 April 1997 Section 9(2B) rights (also called post-1997 contracted-out salary-related rights or post-1997 COSR rights), being contracted-out rights built up between 6 April 1997 and 5 April 2016 The framework for transferring COSR rights is prescribed by the Contracting-out ( Transfer and Transfer Payment) Regulations 1996, SI 1996/1462 (the Contracting-out Transfer Regulations). HMRC has issued guidance on transferring COSR rights. This Practice Note addresses transfers carried out after the end of DB...

Witness statements A witness statement is a written record of an individual’s evidence, signed by them to verify the truth of its contents. In criminal cases in England and Wales, such statements are typically taken in the form set out by section 9 of the Criminal Justice Act 1967 ( CJA 1967) and must meet the Criminal Procedure Rules 2025 ( Crim PR 2025), SI 2025/909, Pt 16. Where those statutory conditions are satisfied, the statement (a ‘section 9 statement’) can be read at trial with the other party’s consent. As a result, the witness need not attend court to give live evidence. They are used most often at trial, but also appear at bail hearings and on interim applications. A specific Crim PR form is prescribed for section 9 statements. For guidance on witness evidence in criminal proceedings, see Practice Note: Witness...