Louisiana Possessory Collateral Security Agreement
Description
- Key Concepts & Definitions
- Possessory Collateral Security Agreement: This is a legal document where the secured party holds possession of the collateral that secures an obligation. This type of agreement gives the secured party a security interest in the collateral.
- Security Interest: A legal right or claim on collateral granted to a secured party, creditor, or collateral agent to secure repayment of a debt or performance of some obligation.
- Secured Party: The lender or entity that is granted a security interest in the collateral under a security agreement.
- Collateral Agent: An agent appointed by a secured party to hold or manage collateral, often used in syndicated loan arrangements.
- Lien Creditor: A creditor that has obtained a legal right or interest in another's property, pending the fulfillment of an obligation such as repayment of a loan.
- Step-by-Step Guide to Creating a Possessory Collateral Security Agreement
- Determine the Obligation: Identify the obligation that the collateral is securing, whether it's a loan, line of credit, or another financial obligation.
- Identify the Collateral: Clearly define what will be used as collateral (e.g., commercial instruments, property).
- Draft the Agreement: Include terms detailing the security interest, obligations, rights of the secured party, and duties regarding the care of the collateral.
- Execution of the Agreement: Both the debtor and the secured party must sign the agreement, potentially in the presence of witnesses or a notary.
- Possession of the Collateral: Transfer physical possession of the collateral to the secured party or collateral agent, as stipulated by the agreement.
- Risk Analysis
- Default Risk: The possibility that the debtor will be unable to meet the obligation secured by the collateral.
- Legal Compliance: Risks associated with non-compliance with state and federal laws which can lead to legal penalties or invalidation of the agreement.
- Collateral Value Fluctuation: Risk that the value of the collateral may decrease over time, insufficiently covering the secured obligation.
- Priority Fall: Risk associated with other lien creditors claiming priority over the collateral, especially concerning attachment security and specific statutory liens.
- Key Takeaways
- Possessory collateral security agreements provide secured parties with better control and security over collateral.
- Understanding legal requirements and ensuring proper documentation is crucial to enforceability.
- Regularly assess the value and condition of the collateral to maintain its priority as a secured interest.
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FAQ
It should be noted that UCC financing statements filed now generally do not contain a grant of the security interest and generally are not signed or otherwise authenticated by the Debtor and therefore would not satisfy the requirement of a security agreement.
Three things must be present in order for the secured party to obtain a protected security interest in the collateral: 1) the secured party must pay for or give something of value in exchange for receiving the security interest, 2) the debtor must own the collateral or have proper authority over the collateral in order
The UCC specifies what must be contained in a financing statement: the name of the debtor. the name of the secured party; and. an indication of the collateral.
Updated Jun 1, 2020. A UCC-Uniform Commercial Code-1 statement is a legal notice filed by creditors as a way to publicly declare their rights to potentially obtain the personal properties of debtors who default on business loans they extend.
UCC-1 Financing Statements do not have to be signed by either the Debtor or Secured Party; however, they must be authorized.Although the UCC-1 Financing Statement does not require signatures, any attachment such as the legal description or special terms and conditions may require the signature of the Debtor.
If a secured party to a conditional sale does not record or file the agreement, however, he may lose the security if the buyer sells the goods to a third party.If a security interest has not been perfected, the secured party's claim to the collateral property may be subordinate to any number of creditors.
Overview: The debtor typically represents and warrants to the secured party that: the debtor has suf- ficient rights in, or power to transfer rights in, the collateral for the secured party's security interest to attach (§9-203(b)(2)); the collateral is either not encumbered or, if encumbered, the encumbrances are
A security agreement is a document that provides a lender a security interest in a specified asset or property that is pledged as collateral. Security agreements often contain covenants that outline provisions for the advancement of funds, a repayment schedule, or insurance requirements.
Unperfected Security Interests: When one secured party has a perfected security interest in collateral and another secured party has an unperfected security interest in the same collateral, the perfected interest prevails.