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Secured Loans Notes

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Core Module: BLP Paper A

Company Law - Private Limited Companies Debt Finance - Entering into a Secured Loan Arrangement

Company checks before entering into a secured loan arrangement:

1. QUESTION: Are there any relevant restrictions under Company's constitution?
a) Does the company have capacity to enter into the secured loan?
Unrestricted objects (s31 CA 2006)
Implied power to pursue its objects

b) Who can exercise the power on behalf of the company?
Model Articles, art. 3
Special Article? Are there any restrictions on the exercise of the power - consider any Special Ar

c) Can it meet its obligations under the loan?

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Representations and warranties - are they factually correct?

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Consider further facts - is there a breach of the undertakings - causing an "event of defaul facility letter. Procedure steps to enter into a secured loan arrangement and borrow the money:

1. Directors to approve the terms of the loan and security in a board meeting.

2. Shareholder approval of the loan required [pursuant to any special articles] by special resolution

3. Directors to authorise persons to execute the Facility Letter and the Debenture on behalf of the company.

4. Debenture to be executed as a Deed.

5. Registration of security at Companies House

Forms of Security 4 different forms of security

1. Pledge
-Requires actual or constructive delivery possession of the secured asset, by way of security.
-Therefore, assets must e capable of bein delivered [wither the goods itself or the relevant title document [e.g. a bearer share NOT a registered share]
-If pledgor defaults - the pledgee has the right to retain and sell the asset.

2. Contractual Lien
-Possession of the secured asset

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