IN AN economic client where the acquisition of loans has become popular and in some cases a necessity, bankers and members of Jamaica's business community attended Myers, Fletcher & Gordon (MF&G) and the Jamaica Chamber of Commerce's (JCC) recent Wednesday Morning Seminar where the focus was 'Giving and Taking Security Made SimpleThere are three basic questions to consider when giving or taking security, said presenter Hilary Reid, a partner of MF&G.
These are: who is the borrower?, what assets are available for collateral?, and what is the extent of the collateral required?
This information helps determine not only the type of security which will be appropriate, but also how best to ensure that it stands up as protection for the lender against default.
Reid also shed light on common clauses to assist participants in better framing security documents.
She looked at the recitals, which set out the intention of parties, explains the background to the transactions and assist in providing an overall understanding of the document, in addition to enforcement provisions, which expressly indicate when security will become enforceable, detailing what will amount to events of default, as a few of the clauses that could lend to creating a more sound and comprehensive security document.
For lenders trying to determine what to use as security, common types of security mentioned in Reid's presentation included promissory notes, guarantees, bills of sale, debentures, mortgages, charges over accounts and hypothecation where she highlighted some of the pitfalls and points to note in relation to these common types of security.