The changes made by the STA and the PPSA have strengthened the security of the law with respect to the seizure of securities and will greatly facilitate and strengthen the use of book-based securities as collateral, which would add value to borrowers and lenders and the market as a whole. However, the new regime has posed new challenges: lenders need to reassess their approach to securities security transactions and borrowers/issuers need to understand how best to respond to new requirements and considerations. Therefore, in many situations, a separate share guarantee agreement in a lender`s guarantee package can have a number of benefits. We are pleased to welcome lawyer Bennett Cohen of the law firm Cohen, Salk and Huvard, P.C. as a guest blogger! In the coming weeks, Mr. Cohen will share his expertise on the control agreements for mortgaged title accounts. The new “control” method for developing security interests in investment properties and the adoption of new rules for prioritizing insured, controlled-sophisticated creditors and those who simply registered against the deposit dictate good securities collateral practices. Generally speaking, a lender that improves the interest of a title account through “control” must mean that negative collateral and indirect control of corporate restructuring – holding or controlling shares means that the borrower cannot attempt to offer the shares as collateral to another lender. In addition, the lender can ensure that it is aware of and participates in all restructurings within the group of borrowers, since the borrower`s lawyers must recover the mortgaged shares for the issuance of new or replacement certificates as part of the restructuring. Secondary Execution Option – With a credit-sharing agreement, a lender gives a second option regarding the application of its security in the event of a default. Instead of trying to appoint a judicial administrator who has transferred the borrower`s general assets, assets and business in connection with the sale of GSA, the lender can claim its shares solely under the stock deposit contract and attempt to sell the shares.
For tax reasons, some buyers may attempt to acquire only the shares of a subsidiary to obtain the accumulated tax losses within the subsidiary. Be sure to check next week, as Mr. Cohen continues to dive into the mortgaged title account control agreements. Looking for more educational resources? Visit the First Corporate Solutions resource library to download documents on business transactions, UCC submissions, pledge fees and more. Added Pacts – A pawning agreement generally gives the lender the benefit of a number of specific equity obligations, including specific rights to vote on shares before and after filing a default, processing and entitlement to dividends received before and after a default, as well as stock-specific insurance and guarantees.