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Debentures

If you require assistance with a Debenture then Blacks Solicitors’ experienced Corporate team can help.

A Debenture is a document which is most commonly used to secure a loan to an incorporated business. For example, if a bank is lending to a company then the bank will usually insist on a Debenture, but they are used in many types of financing where it is desirable to take security over the assets of a particular entity (usually, but not always, a limited company). Debentures are a form of umbrella security document, incorporating many types of security over a broad range of assets.

Debentures often create a charge over all of the assets and the undertakings of a company, but can also create a charge over a specific asset only, for example a piece of land. They can be used to secure:

  • All monies—this means all indebtedness owed by the borrower to a lender at any time and on any account
  • Specific monies—this means indebtedness of a borrower which is limited to a particular context (typically under a specific Loan or Facility Agreement or set of finance documents)

Frequently Asked Questions

When are Debentures used?

Debentures are used where a lender wants to take security over the assets of a particular entity (usually but not always a limited company).

Debentures can be used to secure debt obligations of the company itself, those of a third-party borrower, or those of any other companies in the borrower’s group.

Can I use a Debenture to secure my loan to the company?

Yes and it is often a good idea, as such security will ensure that repayment of your loan by the company will rank ahead of unsecured creditors if the company enters into Liquidation or Administration.

However, if your bank or finance company has a Debenture in place then you will need their consent, which, if there are still outstanding borrowings or facilities (such as overdrafts or invoice discounting facilities), will generally only be given if you sign a Deed of Priority or Deed of Subordination in the bank’s favour. Such a Deed will ensure that the bank’s security ranks ahead of your Debenture, so that the bank will obtain the money owed to them it by the company before any outstanding amount owed to you can be paid.

 

For more information about Debentures, or for a no obligation discussion, please contact Blacks’ Corporate team today via email or call 0113 207 0000.

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