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Security Interests (Jersey) Law 2012 – suggested amendmentsThis table combines the proposed amendments to the Security Interests (Jersey) Law 2012 received from four law firms:

1. Submission of Carey Olsen (Peter German & Nicholas Crocker) of 23 October 2015 (‘priority’ amendments marked with the [Priority] assignation)2. Submission of Mourant Ozannes (John Rainer) of 28 September 2015, as updated on 1 October 2015; 3. Submission from Ogier (Bruce McNeil & Matthew Swan) of 22 October 2015 (with comments on John Rainer’s document); and4. Submission from Bedell Cristin (Mark Dunlop) of 2 November 2015.

Subsequent cross-comments received are noted in blue text, with ‘priority’ amendments identified by pink shading.

Provision Carey Olsen Bedell Cristin Mourant Ozannes Ogier CommentsArticle 1: Interpretation

[“after acquire property”]

This is defined in 19(4), but could we have a cross-reference in Article 1 to this definition? It is also used in Art. 29 and para 3 of Sch. 2.

Neutral Agreed Agree

[“assignment”] Is not itself defined: to the extent Article 2(c) of the Interpretation (Jersey) Law 1954 does not address this, could we add to the definition of "assign" wording to ensure that cognates of assign shall have corresponding meanings.

Agreed. Would this include novation (which includes an assignment)?

Agreed Agree

“Cash proceeds”

[Priority] Please see Art.24(b) including introducing definition of ‘cash’

Not sure follow the concern It is not clear what amendment CO are proposing

[priority] Agree

“collateral” [Priority] Could we expressly define collateral so that it does not include proceeds? Art. 42 expressly addresses this point but Art. 25's references to 'original collateral' suggest that proceeds can – without more – be collateral.

Neutral Neutral – the suggestion is logical but we need to check with Professor Goode that there would be no unintended consequences to making this change. Most security agreements are drafted so that proceeds fall in the definition of

[priority] Agree

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Provision Carey Olsen Bedell Cristin Mourant Ozannes Ogier Comments

original collateral – the proposed amendment would seem to preclude this.

“deposit account”

In ordinary usage we understand a deposit account is a savings account as opposed to a current account. The definition captures (and we wish it to capture) any sort of bank account, albeit also with other deposit-taking institutions: could we make the definition 'bank account'?

Neutral Neutral – this suggested amendment replaces one definitional issue with another, namely that the “bank account” implies that an account must be held with a bank and not another type of deposit taking institution.

Agree

“intangible moveable property”

[priority] 'Cash' is not defined but 'cash proceeds' is – from the latter we infer the meaning of the former but it would we think be helpful to have a definition of cash.

Agree. Please see our original comment under Art 24(b)

There is confusion concerning the meaning of "include cash (being cash that is not money)."

Agree – but note that tangible property is outside the scope of SIL.

"money (being money that is not physical currency)" is clearer

[priority] Agreed

“intermediary” Since in (b) the 'an intermediary' referred to in line 2 is presumably a person other than the person referred to in line 1, can we insert 'other' before 'intermediary' in that 2nd line (or otherwise make it clear that the intermediary referred to in line 2 does not include the person referred to in line 1)?

Neutral Agreed [priority] Agree (and define intermediary to include custodian)

“investment security held with an intermediary”

We note what this definition does and does not say. The expression used in Art. 20 is slightly different, "a person's investment securities held with the intermediary" and must have a different meaning, meaning


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that the intermediary who is a secured party under Art. 20 has a security interest in property wider than that referred to in Art. 6(b). I.e. we understand that the language is intentionally different – but if our understanding is not correct could the wording be conformed?

[“perfected by attachment”]

Neutral Agreed [Priority] No definition of “perfected by attachment” for the purposes of Article 29(1)(j)

Agreed

“proceeds” [priority] On the question of what constitutes 'proceeds' in the context of shares security, Professor Goode has earlier advised that "Buy-back [i.e. the repurchase of outstanding shares by a company in order to reduce the number of shares] is clearly a dealing and redemption of capital [a redemption of shares pursuant to Article 55 of the Companies (Jersey) Law 1991] is a form of buy-back. Distribution of capital on a members’ voluntary winding-up [a summary winding up pursuant to Part 21 of the Companies (Jersey) Law 1991] is less clear, and it may be desirable to broaden the definition of "proceeds" to cover what is received in exchange for collateral but does not result from a dealing." We think it would be worth considering broadening the definition of proceeds to include distribution of

Agreed [priority] Definition of proceeds does not capture what is received in exchange for collateral but which does not result from a dealing (e.g. distribution of capital on a winding up)

[priority] NZ Law does not have a definition of dealing, and the text books go into some detail. I would suggest a definition that includes examples without limiting. (i.e. “Dealing shall include distribution etc.”)

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capital on a summary winding-up, and exchange situations, such as convertible securities that convert automatically.

Proceeds as contemplated by this definition will not include proceeds of realisation. A subordinate secured party is protected by Art. 49 'Distribution of surplus', so a secured party does not need security in the proceeds of realisation – but would it be worth expressly providing in the definition of proceeds that proceeds does not include proceeds of security realisation While ordinarily collateral will on realisation be sold for money or appropriated, the sale might be for other than money.

Agree – our comment is inline

Agreed – perhaps make it clear that proceeds arise from a dealing by the grantor.

“purchase” "acquisition" is to be understood by the last words of this definition. However, the creation of an interest in intangible movable property does not mean that the said property is acquired, only that such an interest is 'acquired' or created. Could we re-cast this definition to make it clear that it is intended to capture the creation, for value, of an interest in intangible movable property, whether by sale or otherwise.

Presumably cognates have corresponding meanings, so in the heading to Art. 38 'purchaser' will

Agree that this could be tidied up but think that the concept of acquisition could be usefully retained.

Neutral Neutral

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include a secured party: as with 'assign', to the extent the Interpretation (Jersey) Law 1954 does not cover the point, would it be useful to make the express point about cognates? The word 'purchaser' is used also in 15(3) and 53, though in these cases the ordinary sense is dominant.

“purchase money security interest”

This definition is used only in Art. 34, but does limb (b) of the definition overlap with the scope of Article 20? Paragraph 3.4 of the Report speaks of the price being advanced by the intermediary, which would give us the repayment element. Would there be value in tying these provisions together?

Paragraph (b) of the definition could be taken to mean that security in a securities account gives security in the individual investment securities credited to it, but this is true only in a limited sense. Could this be clarified, rather than relying on the opening rubric to Art. 1?

Definition to include credit and interest charges.

Agree re credit and interest point.

Agree with exclusion of sale and leaseback. Such (more particularly sale and HP-back) can be disguised loan and mortgage loan and

Carey Olsen comment – further discussion needed – is Article 10 intended to be a purchase money security interest?

Agree with Mourant Ozannes that sale and leaseback ought to be excluded. A refinancing of a PMSI ought to be excluded as well.

The Australian PPSA looks overcomplicated. Discussion required.

Definition of “purchase money security interest” does not extend to credit and interest charges.

In Canada and NZ, sale and leaseback are excluded from the definition of PMSI. Should we follow suit?

Should we include an equivalent to s.14(6) of the Australian PPSA?

"In any transaction, if the extent to which a security interest is a purchase money security interest depends on the application of a payment to a particular obligation, the payment must be applied:

(a) in accordance with any method of application to which the parties agree; or

(b) if the parties do not agree on a method—in accordance with any intention of the debtor manifested at or before the time of the payment; or

(c) if neither paragraph (a) nor (b)

I don’t see this as key and would not want to overcomplicate.

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mortgage transactions and should be documented as such.

Agree re s.14(6) PPSA.

applies—in the following order:

(i) to obligations that are not secured, in the order in which those obligations were incurred;

(ii) to obligations that are secured, but not by purchase money security interests, in the order in which those obligations were incurred;

(iii) to obligations that are secured by purchase money security interests, in the order in which those obligations were incurred."

Amend accordingly.

“securities account”

[priority] Paragraph (b) of the definition could be taken to mean that security in a securities account gives security in the individual investment securities credited to it, but this is true only in a limited sense. Could this be clarified, rather than relying on the opening rubric to Art. 1?

Agree. A securities account will always have a cash element.

Clarify - still a securities account if both cash and securities are credited to the securities account.

It would be beneficial to state what rights a customer has when investment securities are credited to a securities account and therefore what is available as security.

[Priority] Agreed [priority] Agree

“security agreement”

Is there is a circularity in the definitions of 'security agreement' and 'security interest'? A security agreement is one that creates or

Neutral Neutral Neutral

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makes provision for a security interest, and a security interest is an interest under a security agreement (to abbreviate the definitions).

“security interest”/

Article 1A

The references to 'mortgage' and 'pledge' in 1A(3) seem awkward: in the law of Jersey the only forms of mortgage known to the law are ship and aircraft mortgages (and the latter has some ambiguous(?) deemed hypothecary status); and pledge is properly only applied to tangible movables, or chattels. The intention is to capture mortgages and pledges of intangible movables under foreign law, but does the drafting achieve this without more, such as a reference to applicable foreign law?

Neutral Agreed Neutral

Article 3 Re BC comments: Neutral. We think not necessary as each says what it says in different terms for different purposes.

Re MO comments: Agree

Clarify the relationship with Article 18(3). Freedom to deal does not detract from control.

Agree with the comments of Mourant Ozannes.

[priority] This creates rules for taking control of cash or securities accounts. It is silent as regards mixed cash and securities accounts which are commonly encountered.

Add a rule to clarify that mixed accounts can be controlled by transfer, tripartite agreement or charge back.

There is no rule making it possible to take control of uncertificated investment securities by registration

Amend accordingly

Agreed

Article 3(3)(b) Agree Statutory confirmation of the previously confirmed position would

Agreed [Priority] Agree

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be useful (i.e. that an agreement will satisfy Article 3(3)(b) if instructions can only be given if there is an event of default).

Article 3(3)(d) Neutral Clarify the position where security is taken by a bank acting as security trustee over a deposit account maintained with that bank.

Agreed Neutral

Article 3(4) Agree. That was surely the professor’s intention.

Develop securities account provisions so that there can be control relating to "part" only of a securities account

[Priority] Agreed [Priority] Agree and allow for assignment of securities accounts as for banks.

Delete provisions and priority rules for transferring accounts into secured party name as this is not done in practice.

Article 3(5) Disagree. On its face this would purport to extend ‘control’ perfection standing to property outside the Article 3 scope, and even to non-intangible movable property as defined. Better to cover by SIA drafting and registration (we understand what is in question here is not ‘proceeds’ as defined).

Disagree. Not necessary.

Extend perfection to cover moneys paid in respect of the investment security (i.e. if you have possession of the share certificate, you should have a perfected security interest as regards the applicable shares and all property which derives/has derived from the investment security).

Similar point in relation to interest on bank accounts.

[Priority] Agreed Disagree

Article 3(6) Agree both. Normally ICA will regulate (though a party might be in breach of). Please see our comment at Art. 29(3), that the Professor would consider this question.

Agree with Mourant comment. SP2 would have accepted control by SP1 but would expect to rank ahead of SP3.

This provision could be open to abuse in the following way. SP1 perfects security by possession of share certificates. SP2 perfects by registration. SP1 agrees to hold possession for itself and SP3. SP3 should not be able to leapfrog SP2.

I may be missing the point but an SP who holds registration security will always be vulnerable to control security. What if SP1 agrees to pass sole control to SP3? It seems to me to be more an issue for the drafting of the SIAs.

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Add a proviso to the effect that one SP cannot control for itself and subsequently agree to control for another SP if another SP has perfected by registration in the meantime.

Article 4(a) [priority] Opening words: it would we submit be clearer if the opening words referred to the creation of a security interest, and a security interest created, after Part 3 comes into force, so that it is expressly clear that the Law applies to the creation of a security interest as well as to that security interest once created (as of course it does).

4(a)(iii): securities account (maintained by an intermediary in Jersey): It seems that the Law as enacted doesn't quite fit the intention – in answers to questions Professor Goode said that "the aim is to permit securities to be taken in a whole securities account or in a given quantity of securities credited to the account as under the Geneva Convention. Amendments will be made to clarify this". It appears these amendments have not been made yet and we believe such amendments would be of assistance.

Agree. This connects with the Article 5 question.

The extension to "foreign situated property" is an outstanding item for discussion/development (i.e. the scope of Article 4(a)(viii) and 4(a)(ix)).

Neutral on the opening words comment.

Agree – it would assist to have the clear ability to take security in a given quantity.

Neutral re. CO comment.

Agree BC comment

Agree 4(a)(iii) CO comment.

Neutral

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Article 5 [priority] It is not clear to us from the drafting of Article 5(1)(c) to what security interest the Law would apply in the absence of Article 4, since Article 4(a) says what security interests the Law does apply to. Could this 5(1)(c) not refer to property, being property other than property in any of the categories set out in Article 4(a), for the intention is that Art. 5 contemplates creation of a security interest over property outside the categories set out in Art. 4(a)?

What can be achieved under Art. 5 is only security as between the parties to the (security) agreement – 'so applying' at the end of Article 5(1) refers back to "in their relations with each other", so the security will not be valid against third parties such as other creditors. This security is thus within the carve-out language at the start of Art. 15(3); and pre-emptively limits its value in a way that the 1983 Law did not (i.e. it prejudges the outcome of a PIL analysis in relevant jurisdictions).

Who is a 'third party' for this purpose, with particular reference to the categories of relevant persons set out in Art. 15(3), i.e. in particular the reference there to the Viscount and a liquidator? Professor Goode has

General tidy up. Remove the concept of "in their relations with each other". We should be able to take security over foreign property taking advice in the foreign jurisdiction as to the validity/perfection of the Jersey security.

Generally agree with Carey Olsen here – a key unresolved issue from SIL.


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advised that "Article 5 is not intended to affect the rights of third parties, or at least their property rights (see para. 2.2 of the Report), but a liquidator or the Viscount should not be a third party for these purposes, despite the separate categories in Article 15(3)", and that the way forward was to amend Article 4 to catch categories of Jersey situate intangible property not covered by Article 4 in its then current form. Article 4 was amended to extend the categories, but this still leaves the question of where exactly we stand if asked to take Jersey security over (essentially) non-Jersey situs property, and why the position should be pre-emptively more restrictive than under the 1983 Law.

In a Jersey insolvency, why should any possibility of validity against other creditors – Jersey creditors – be ruled out for security outside the bounds of Article 4, including proceeds of Article 4 security that are outside the Article 4 categories? If such security could stand against the Viscount or a liquidator, it could stand against other creditors.

The Law has largely not displaced rules of private international law, of conflicts of laws. Article 4(a) largely endorses customary law PIL rules,

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and it is significant that the extension of 4(a) to include categories of property that would not be taken under such rules to be fitted to Jersey law as the governing law gave rise to some potential stresses, resulting in the Exceptions Order. But in Article 5 the Law pre-empts the application of PIL by denying the possibility that any relevant foreign law might recognise the Jersey security as valid against third parties, in insolvency.

Can we find a form of words that allows the security, in insolvency, if perfected, to stand as between any Jersey persons, but provides that this is without prejudice to rights of third parties under any applicable foreign system of law (meaning such as the law of the situs of the security property in question).

To re-cap: we would request an amendment on the lines set out in the first paragraph of this section, and something as outlined in the last preceding paragraph. The situation we have in mind is Jersey grantor and Jersey secured party, where the secured party is looking for security over all assets, but mainly the Jersey assets, and the value of the transaction does not justify foreign lawyers' fees.

Agree with BC. In line with our

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comment.

Article 6 [priority] Are the categories specified to be construed as exclusive of other own-obligation categories? We would prefer it if not so, but if so, it would be worth clarifying this – that no other categories are permitted.

Agree with BC and MO (assuming that the existing wording is exclusive or that it is not certain that it isn’t).

Extend to cover any contract (e.g. a bank taking security over its own bank guarantee or letter of credit).

[Priority] This provision does not extend to charge backs of mixed cash and securities accounts or partnership interests.

Amend accordingly

[priority] Agreed

Article 8 [priority] The point is or must be that the interests specified are not only outside the scope of the Law but are not prejudiced by it (Cf Art. 11 of the 1983 Law). Can we 'unpack' what is meant by '[not] affect' as meaning that any security interest under this Law is subject to any interest as referred to in this Article?

E.g. (1)(b): the lien referred to, one created by the articles of association of a company, is by implication endorsed by this provision, but it remains an odd thing: it is really a security interest in shares, but one outside the scope of this Law, and presumably with a privileged priority status.

Also:(1)(c): the wording of Article 8 was not adjusted when Articles 30A and 30B were introduced – this Law does apply to and affect the set-off rights referred to in those Articles.

Agree that set-off, flawed assets and negative pledges (individually or collective) should not be a security interest).

Not sure I follow the Carey Olsen observation.

Agree to this extension of liens.

Agree cross-referencing could be improved.

[Priority] Caisse Populaire Desjardins de L'Est de Drummond v Canada [2009] 2 SCR 94 held that the combination of a right of set-off, a flawed asset arrangement and a negative pledge together constituted a security interest even though none of these devices individually create a proprietary interest.

Provide that flawed asset arrangements and negative pledges are also excluded interests in addition to set off

The exclusion of liens is limited to those arising under articles of association and does not extend to liens arising under partnership agreements or liens granted to investment managers.

Extend the exclusion to liens arising under partnership agreements and investment management agreements. (Public policy arguments

Agreed

[priority] re CO comment

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We submit that there should be an express cross-reference to those Articles. We would suggest that a precise cross-reference would be much preferable to a general formula of the type of 'except as otherwise provided in this Law'.

Disagree re flawed asset etc: Why should such have the double privileges conferred by Art. 8, when indeed they are not proprietary interests? A party who wants security is free to require it. Flawed assets etc would not be registerable.

Disagree (again, would be to extend privileged status). Investment manager is free to take securities a/c security. If the assets are removed from circulation no such special protection would be called for – but may not a client want to grant security over such assets? General principle that secret liens should be discouraged.

for registration do not apply in the context of investment management since assets under management will be, in effect, removed from circulation so no-one should be misled into believing that they are unencumbered. Alternatively, liens taken by investment managers should be exempt from registration.)

Agreed as regards CO comments.

Article 9 Disagree: Article 9 contains a list of transactions creating or providing for an interest, which surely a flawed asset arrangement doesn’t do; and, as above, we doubt that flawed asset arrangements should be privileged as against security, it shouldn’t be excepted from the operation of the Law.

Exclude flawed asset arrangements.

It is not clear how this is intended to operate and why certain transactions are excluded. For example, there are a number of references to assignment of receivables. Is this only carving out these assignments from the assignment regime under SIL or do they also mean that no security interest can be created over such

Agreed Agree

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receivables?

Article 9(1)(d) Agree with Ogier point, so disagree with MO point.

Agree with the Mourant Ozannes comment.

Commercial tort claims can be collateral under UCC s9-109(d)(12) – see Widdup paragraph 4.4

Exclude personal injury and death claims only?

I am not sure the SIJL should get involved in security over court-based claims, and whether they constitute assets for this purpose.

Article 9(1)(j) Although such a transaction could be re-characterised as secured lending – does 'repurchase' stand for 'right of repurchase'?

Neutral Agree

Article 9(1)(k) Such 'lending' in the securities/capital markets is documented as sale and repurchase and perhaps this could be explained here.

Agree – it may be helpful to clarify. Neutral Agree

Article 10 Agree Extend the nature of the trust property (e.g. turnover provisions in subordination agreements may be expressed to be wider than just cash received - such as the benefit of any security taken).

Agreed Agree

Article 12 Disagree: We don’t see advantage in trying to open up this question again. The professor has said clearly what he considers it to mean.

Clarify the relationship with foreign law governed security interests.

Agreed Neutral

Article 15(3) Agree Extend the exception language to cover customary law contract law principles (e.g. capacity, duress etc.).

s.35 of the NZ PPSA provides that "Except as otherwise provided by this Act or any other Act or rule of law or equity, a security agreement is effective according to its terms."

Amend to include equivalent text so contract law also applies to security

Agreed

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agreements.

Article 15(3)(d)

As things stand this term 'administrator' does not have a Jersey reference in a Jersey insolvency context, while recognising that administrators of Jersey companies may be appointed in English insolvency proceedings – better to delete?


Article 15(4) There was discussion between practitioners on this paragraph in April. We believe that the option 'by release of the collateral' clearly refers to a unilateral act by the secured party, but perhaps to pre-empt doubt the words "by the secured party" could be added after 'collateral' or it could otherwise be specifically provided that this release of the collateral is done by a unilateral act of the secured party .

Agree with BC comment (presumably in line with our comment).

MO comment: Neutral. The provision should not be capable of supporting such an interpretation.

Clarify - what is a "release" here?

How is collateral released – by surrendering possession or control?

This provision could be understood to mean that a partial release of collateral would release an entire security interest. Amend to clarify that a release of part of the collateral subject to a security interest only extinguishes the security interest in the collateral released.

Agree

Article 16 We submit that "Except as otherwise provided by this Law" obscures the point that there is different treatment under Art. 25 according as the security agreement does or does not contain a description of the proceeds: enforceability includes

Disagree – Articles 25 and 26 deal with narrow perfection points – other aspects of the Law may affect enforceability.

Neutral Neutral

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questions of priority and perfection. Could we replace this general formula by providing that the provisions of Article 16 shall apply except as otherwise provided by Articles 25 and 26 of this Law.

Article 17 We submit that this would be clearer if the reference to enforceability was to enforceability subject to and in accordance with this Law which should be what is intended. The purpose is presumably to make it clear there is an in rem right (i.e. a right against the world) – but in our view that is clear from the rest of the Law. Is "with respect to" the best compound preposition? Or simply, "against"? – this seems a more direct word.

Neutral Agreed Agree and state effect of perfection on third parties

Article 18 Neutral re BC first point and MO point. This should not be necessary (and it would be awkward if a borrower could defeat value by not fulfilling its own CPs). The Professor has expressed a view on this.

Disagree re BC second point. This should not be necessary.

Value - clarify that a conditional agreement to lend constitutes value.

Where there is a security trust, clarify that value can be given by the syndicate members.

One of the conditions for attachment of a security interest is that value is given in respect of the security. In Agricultural Credit Corp of Saskatchewan v Pettyjohn (1991) 1 PPSAC (2d) 273 it was held that a binding commitment to lend is sufficient to fulfil the requirement to give value. However, it is not clear whether value has been given if the conditions precedent to the drawdown of a loan have not been fulfilled.

For the purposes of giving legal opinions, it would be helpful to have

Agreed

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statutory clarification that it would.

Article 18(1)(b)

Agree What is meant by "or the power to grant rights in the collateral?"

Neutral

Article 18(1)(c) In (1)(c) would it be useful to add a stipulation of sufficient identification (in (ii) this evidence is by description) also to an oral agreement under which possession or control is given? A secured party might have control or possession of more of the grantor's property than the grantor intends be collateral. We recognise that evidencing the scope of the collateral is difficult in the absence of writing.

Neutral re BC comment. The opening words of (c) presupposes there may be overlap between the sub-paragraphs.

(i) should this only be applicable where there is an oral security agreement?

Disagree with Carey Olsen observation – this has to be possession/control of “collateral”

Agreed Neutral

Article 18(2) Query why in (c) and (d) the words 'of the grantor' do not follow the words "present and future collateral". The intention is that these provisions should only apply to present and future collateral of the grantor.

Agree re both (c) and (d)

(c) This should refer to all present and "after-acquired property".

This should refer to all present and future intangible movable property of the grantor

Article 18(3) [priority] Would it save doubt if the opening words read “this Law” and not “this Article”?

Agree – in line with our comment

Neutral re Carey Olsen comment. Agree with the Mourant Ozannes comment.

[Priority] The application of this provision is limited to Article 18 and to attachment.

Consider amending so it reads “for the purposes of this Law, the attachment and perfection of a security interest…” or adopting

[priority] Agreed

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something along the lines of s9-205.

Article 20 [priority] Query whether anything turns on the different terminology :"a person's investment securities held with the intermediary" at the beginning and "the buyer's securities account" in (1)(b). If not, should the same terminology be used?

Note Art. 22(4) on registration not achieving perfection for such collateral – would a cross-reference in Art. 20 be useful?

Agree with Ogier point 20(2) ref. to Article 15 etc.

Neutral re MO point. Although the terms of Article 15(1) as Ogier rightly refer to, together with Article 1A(1), on their face deny this, we think tha the Article was intended automatically to create security, without an agreement specifically to do so. (is there a real distinction between creation and attachment? A security interest is a proprietary interest and it cannot be that without it biting on some property or other).

Absent any such automatic effect, we agree that Art. 20 would be of limited use.

Agree: Ogier’s comment about short form charging clauses, which might

Agree with Mourant Ozannes comment – this could be deleted as overcomplicates the Law.

Is this provision necessary because it constitutes nothing more than a charge-back perfected by control? The Article does not purport to automatically create security, only to automatically attach and perfect it if created, so how does this put a secured party into any better position than a secured party who takes a charge back of a securities account perfected by control?

Possibly delete Article 20 and the words "except investment securities" to the end of the sentence in Article 22(4).

[priority] There is a distinction in that article 20(2) sets out the secured obligations. An agreement is needed (art 15), but if that agreement fails to set out the secured obligations, it could cause difficulties for the event of default definition for the purposes of art 43. Art 20 helps in that intermediaries may have very short form charging clauses in the service agreement. However, not a big point, as the alternative would be for the intermediary to take advice.

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not be in terms of security over a securities account.

If the intention is that security be automatically created, then the nexus of Art. 15(1) and the opening words of 18(1) with Article 1A(1) (Article 1A(3) doesn’t seem to help) would need to be worked over for Art. 20.

Article 21 Neutral (surely you can) Clarify that it is possible to have simultaneous perfection by different methods (e.g. control and registration at the same time).

Agreed Agree

Article 22 We submit that Art. 22(3) may not be a good fit with Art. 3(7), which is saying that control by another on behalf of the secured party is control by the secured party itself. And 3(7) has the express reference to a trustee. A further cross-reference to Art. 20 security – before the para (4) reference - would be fair, as belonging in this select group of nothing further being needed for perfection

It would be helpful to tidy up the linkage between Article 22(3) and 3(7).

Agreed Neutral

Article 23 Cf Art. 29(2): would it be useful to have a cross-reference here?

Neutral Agreed Neutral

Article 24 [priority] The opening words, "Except as otherwise provided… " must mainly refer to Part 5, 'Taking Free' – it would be helpful if this phrase were re-worded, "Except as provided in Part 5 and elsewhere in this Law" – if this is what is meant.

Unsure – Article 24(b) may still apply even if taking free provisions apply to the collateral.

"Deal" is imprecise – define.

Agreed

See comments re Article 20


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Is it clear what the relation is between 'Except' in line 1 and 'unless' in (a)? Is there a case where the secured party authorised the dealing and the security interest continues? In Art. 27 the dealing hasn't happened yet.

Given the definition of "proceeds", with its references to 'dealing', the word "otherwise" in line 2 seems to serve no purpose. On the other hand if the definition of 'proceeds' is amended to go beyond the results of dealings, this word would serve.

Disagree with MO comment: the word needs to be wide – looking at this from the angle of a secured party. Is not the difficulty with this clause rather with its other drafting as referred to in our comment?

It is a double exception.

Neutral

Article 24(b) [priority] Does "extends to" mean the same as "attaches to"?

The late inclusion of the idea of 'cash proceeds' in Art. 25 has not been accommodated by any amendment to Art. 24: to have continuous perfection of a security interest in proceeds it is necessary first to have a continuation of a security interest in proceeds, and Art 24(b) by its reference to Part 2 (which itself refers to 'intangible movable property' as defined) would seem to deny the possibility of a security interest in

Does the security interest extend to proceeds even if the secured party authorized the dealing?

It would be useful to discuss the Carey Olsen comments to better understand the concerns. It would seem that the Law should only apply to intangible property – so this would cover cash credited to an account – but not in its physical form.

Agreed

[As regards, the second and subsequent points made by CO, I am neutral as I do not entirely follow the points being made although I accept that there is a problem with the money/cash distinction].

Neutral

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cash proceeds that is money, for 'intangible movable property' is defined to include cash that is not money, and "proceeds" is intangible movable property. Article 4: "This Law applies only to the following – " (and Art. 5 only applies to 'intangible movable property').

We submit that it is uncomfortable to lean on the opening words of 24, "Except as otherwise provided ...", or the opening words of Art. 1 re the meaning of defined terms being subject to context, and that some express recognition of the intention that, while (a) one cannot at the outset take a security interest in money, but (b) one can have a security interest in proceeds of the collateral of that original security interest that are money, would be very useful.

We suggest that this point be tackled first at the root and that the definition of intangible movable property be amended to refer to cash that, except in the case of proceeds, is not money. But this does not obviate the need to make any amendment to Part 2 (Article 4): Art. 4(a)(xii) could perhaps be amended to state that in the case of money, that paragraph is only applicable in respect of money that is proceeds".

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'Cash' is not defined but 'cash proceeds' is – from the latter we infer the meaning of the former but it would we think be helpful to have a definition of cash.

Disagree with the implied point: the security interest does, and is meant to, so extend, without prejudice to the secured party’s ability to release the security when it gets the money to discharge the secured obligations.

Article 25 [priority] If amendments are made that regularise the use of 'cash proceeds', as suggested above or otherwise, the reference to 'cash proceeds' in 25(b) (iii) , which overlaps in part with para (ii) in any case, could be dropped.

Ditto Neutral

Article 25(b)(ii) [priority] 25(b)(ii) seems odd – that is, the latter part, after 'applies', is hard to understand (eg what is the referent of 'them' at the end?) and can we propose be dispensed with. The first part serves a clear purpose.

Agree with BC point: delete that part in line with our comment.

Disagree with MO and Ogier point: it’s only the latter part of the provision that is otiose/doesn’t serve: while (ii) overlaps with (i) it goes further and can capture proceeds not captured under the other 3 heads.

Why is there a 30 day period? A security interest will automatically attach to proceeds.

Agree with Mourant Ozannes and Ogier.

This provision is otiose - delete Agreed

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Article 25 (b)(iii)

Agreed – and this is the only place where the definition of ‘cash proceeds’ is used – but the question around the definition of ‘intangible movable property’ remains.

Cash – change to money Agreed

Article 25(b)(iv)

[priority] Category (iv): could we insert "original" before 'collateral' twice in this paragraph?

More generally, should the use of 'original' be revisited? The above suggestion is to achieve consistency within Art. 25, but the terms of (iv) are consistent with the definition of "proceeds". If collateral does not, without more, include proceeds, should not the word 'original' be dropped? – it is not used in the definition of "proceeds".

Neutral Agreed [priority] Agree

Article 27 References to 'investment security' must be references to 'negotiable investment security': it would save misunderstanding if 'negotiable' could be added before 'investment security' wherever that expression is used in this Article.

How does Art. 27 work for priority purposes? It could get you in the right place under 29(1)(d), but Art. 29 is subject, by the effect of its opening words, to Art. 30. Art 34 re PMSIs is also subject to Art. 30.

Disagree – the provision applies to any investment security.

It would seem that you can utilise Article 29(2) – you would be able to assert priority based on possession/control during the period of temporary perfection.

Disagree

Agreed

Agree

Article 28 [priority] Cf Art. 4: ie this Law applies I think the intention is that you do It is not clear whether it is necessary Isn’t this more of an issue for SIL2 and Page | 24


to the (foreign) security interest (earlier) created in an asset that (now) has Jersey situs. Cf Art. 12: the security interest has already been created under foreign law. Does more need to be said on the 'status' of this foreign security interest? This Article 28 speaks of perfection, but what if the creation of the foreign security interest would not have satisfied the requirements of Article 18 had the security property been within the scope of Art. 4 – should that be expressly dealt with and deemed to be a non-issue? Ie essentially should we not have express language recognising that foreign security interest as continuing for the purposes of this Law?

Disagree with MO comment. We think it is clear that it is not necessary to repaper (it is a separate question whether it should be; but presumably the existing secured party will as a condition of its consent require a Jersey SIA).

Disagree with Ogier comment. As well as documentary intangibles, this provision captures shares in a company that continues in Jersey, having migrated from elsewhere.

not need to repaper. An issue for SIL2.

to repaper the security once collateral is moved to Jersey – clarify that it is.

Neutral on the CO point.

tangible moveables?


Article 28(2) [priority] 28(2) presupposes that the foreign jurisdiction has the concept of perfection, but it may not. Is

Agree – the concept of perfection in a foreign country may be unclear/underdeveloped.

Neutral Neutral

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perfection then to be construed as if Jersey law applied? We would suggest adding something to say this.

An example case could be shares in a foreign company that continues in Jersey, where the shares are subject to a foreign security interest.

If conceivably there were competing foreign security interests, is their priority amongst themselves something that SIL should speak to?

Article 29(d) (ii) does this mean that possession (as referred to here) could be possession other than (a) possession of documentary intangibles, or (b) possession that is control? If so, it would be odd that priority status could be achieved by possession that would not give perfection.

It should be made clear that possession/control have the same meanings as used for perfection.

[Neutral – I don’t understand the point made by CO]

Neutral

Article 29(1)(g) Neutral: surely equal Address the situation where there may be simultaneous attachment.

Agreed Neutral

Article 29(2) Cf Art. 23: please see comment in the section on Article 23.

Neutral

Article 29(3) Presumably one can contract out of this, by a subordination agreement, but would it be worth expressly providing for this?

On Arts 29 and 30 the question has been raised whether a secured party with control security, in the circumstance where there is also a secured party with second security,

Agree with Mourant Ozannes suggestion. It would be useful to say that all priority rules can be varied by agreement.

The Articles 29 and 30 point has been addressed above – comments about SP1 agreeing to establish control for SP3.

This rule should also apply to Article 1(g).

Amend 29(3) to read "For the purposes of paragraph 1(g) and paragraph 1(j)"

Agreed

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registered and having second priority, could agree to hold e.g. certificates of title also for a third secured party, thus giving the third secured party control security and priority over the second secured party. Professor Goode responded that he would consider whether the Law should be amended to clarify that this cannot be done.

Agree with MO/Ogier comment.

Article 30(1)(a) Agree with MO comment that clarification would be helpful to pull these provisions together to save doing the work of what they must mean to be consistent.

Agree with Mourant Ozannes – clarification would be helpful.

It is not clear whether the reference to "investment security represented by a certificate" extends to bearer securities. On the one hand, the right to a bearer investment security is "embodied" in a certificate, not "represented" by one (Article 22(2)) which suggests that Article 30 cannot apply to bearer securities. On the other hand, (a) the reference in Article 3(5) to an investment security that is represented by a certificate expressly excludes bearer securities, whereas the reference in Article 30(1) does not and (b) the use of the term "possession" in Article 30(5), which is a term that specifically applies to negotiable instruments and negotiable investment securities (Article 22(1)), suggest that Article 30 does apply to bearer securities. On balance, it would appear that Article 30 does apply to bearer securities

My reading is that art 30 does apply to bearer investment securities. The language used therein is ‘possession or control’. Control is as specified in art 3 and which excludes bearer investment securities, but possession as a separate manner of creation of security would cover bearer shares. I don’t think amendment is needed.

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despite the inconsistent use of terminology.

Clarify that Article 30 does apply to bearer securities.

Article 30(3) Would it serve if "Subject to (2) preceding" were inserted at the beginning?

Unlike the treatment in the preceding paragraph 3(3)(d) is not expressly referenced: should it be, at least for consistency?

The provisions seem to work as drafted.

Neutral Neutral

Article 30(5) Would it serve if "Subject to (2) – (4) preceding, and (8)" were inserted at the beginning?

Disagree with MO comment (does it fit point on 30(1)?)

Agree with Ogier comment.

Agree with Ogier comment – retain for bearer shares.

Not sure Carey Olsen suggestions are needed.

The words "possession or" are superfluous since control covers possession of certificated investment securities. Delete accordingly.

Neutral as to the CO point.

For reasons above, I think possession is retained.

Article 30(6) Would it serve if "Subject to (2) – (4) preceding, and (8)" were inserted at the beginning?

Not sure if these amendments are needed.

Neutral Agree

Article 30(7) Would it serve if "Subject to (8)" were inserted at the beginning?


Neutral Agree

Article 30(8) Would it serve if "Subject to (4) preceding" were inserted at the beginning

Neutral


This sub-paragraph is not in its logical place in this Article. Make it sub-para 5.

Neutral as to the CO point.

Agreed

Article 30A [priority] 30A: please see comment on Article 8 above. Does the opening wording mean, "Nothing …right of set-off…may have in respect of a

Do the "unless" provisions make sense

It would be useful to provide that this provision can be varied by private

[Priority] Is the drafting of this Article defective? Paragraphs (a) and (b) should be read disjunctively and the word "unless" should not apply to

I don’t disagree that the above drafting is clearer than the current language. However, what is the effect of art 3(3)(a) security on set-

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deposit account that is subject to a security interest [in favour of a secured party]? (Are not rights of set-off against things not people?)

We suggest adding express reference to the ability to contract out of this Article, as in the case of other forms of bank account security. Otherwise we think that what is agreed with the account bank at the time of creating the security will need not just temporarily to waive or postpone or subordinate the set-off right, but to negative it.

BC comment: Disagree with the implied point that they don’t, but agree that they could be (much) more sweetly drafted.

MO comment: Disagree re the reading disjunctively and the first MO re-draft: Both conditions must be satisfied for the set-off right, despite Article 8, to be overridden, the thrust if the second condition being that only the set-off relating to persons involved in the security can fairly be displaced by the security. The second condition is alluding to other potential set-off relating to as it were ‘third parties’ to the security.

The second MO re-draft would, we think, be syntactically more complex and be contrary to the intention of the existing wording i.e. if the ‘unless’

agreement.

I do not think that this is intended to work disjunctively. This would then say a security interest trumps a right of set-off unless the set-off relates to a claim against the grantor/obligor which I don’t think can be the intention. The idea behind the provision was to preserve the rights of an account bank.

I think the intention behind (a) and (b) may simply be to say that where the account is transferred into the name of the secured party, any set-off rights in respect of the account that may otherwise continue as regards the grantor/obligor “die a death” – so in this situation, the security interest trumps the rights of the account bank. It is, however, difficult to envisage how set-off rights against the grantor/obligor may continue in this situation as there is no mutuality. Presumably, however, claims against the secured party should be permitted.

paragraph (b).

Is it not intended to read as follows?:

"Nothing in this Part affects any right of set-off that a bank, or other deposit-taking institution, may have against a person that is a secured party in respect of a security interest in a deposit account maintained at the bank or other institution–

(a) unless the security interest is perfected by control in the circumstances referred to in Article 3(3)(a); or

(b) provided that the set-off is based on a claim against a person that is the grantor or obligor in respect of the security interest."

The Article would be better reformulated along the following lines:

Unless a security interest is perfected by control in the circumstances referred to in Article 3(3)(a), nothing in this Part affects any right of set-off that a bank, or other deposit-taking institution, may have against a person that is a secured party in respect of the security interest in a deposit account maintained at the bank or other institution provided that the set-off is based on a claim against a person that is the grantor or obligor

off? Should there be a provision that art 3(3)(a) security trumps the bank’s set-off rights?

Page | 29


condition were not satisfied, then something in this Part could affect a right of set off if the set off related to such a third party: which can’t be right.

To re-cap, as mentioned above, we agree Art. 30A could be expressed more clearly but we don’t agree with either of MO new version.

Disagree with Ogier comment, meaning that surely his 30A is that provision – provided that condition (b) is also satisfied.

in respect of the security interest.

Article 30B [priority] As above with 30A As above with 30A [Priority] As above with 30A As above with 30A

Article 31 If the possession referred to need not be possession of documentary intangibles, or possession that is control, is it right that priority status can be achieved by possession that would not give perfection?

Possession/control should have the same meaning as used for perfection.

Transfer includes novation. Is it really intended that a novated security agreement should have the same priority? Is a novated security agreement not new security?

[Neutral – I don’t understand the point made by CO]

Neutral

Article 31(2)(b)

Surely you do not register a financing statement (as opposed to a financing change statement) in relation to a transfer, but in relation to the security interest that is the subject of the transfer – but noting the elastic definition of 'financing statement'.

Agreed – the language could be tidied up.

Agreed Neutral

Article 32(1) Would it be better to refer to a subordination agreement, which has been defined earlier, rather than a security agreement. Subordination is

Agreed Neutral Agree

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not ordinarily found in security agreements.

Article 33 Agree with BC comment and MO first comment.

Neutral re MO second comment (it must be so that there is a difference of degree not kind between the two things) – further advances is much more relevant to the bulk of our financing work than all monies.

Disagree with Ogier comment. Disagree that this is what happens as often not fitted to club financings.

Clarify the scope and meaning of further advances.

[Priority] Arguably, this concept only sits well with true “all monies” security.

Where the secured obligations arise under specific documents, it would seem a different issue as to whether the obligations can be amended/extended and still confer the same priority.

Further discussion is need.

[Priority] There is little case law in PPS jurisdictions on the interpretation of provisions equivalent to Article 33. It would be helpful to make Article 33 as robust as possible to avoid arguments being made that might undermine its effectiveness.

Article 33(1) could be amended to read "A security agreement may provide that the obligations secured under it may include obligations as to unlimited further advances whether or not they are in the contemplation of the secured party, the grantor or any obligor on the date of the security agreement".

Query whether a statement to the effect that all monies security will be deemed to secure further advances is worthwhile.

Agreed, but practitioners need to be aware that including boilerplate language as per art 33 effectively creates all monies security, often beyond the commercial intention.

Article 34 [priority] Query whether the denial of priority to a PMSI in an Article 30 case should apply only where there is a possession or control security.

The current provisions seem sensible. Neutral Neutral as we do not really see PMSIs in practice

Article 35 We note that (cf Art. 38) the word 'acquires', not 'purchases' is used – are we correct to take it that the difference is intentional and significant?

There should be drafting consistency. Neutral

Article 36 This Article introduces the idea that knowledge and collusion are different

Neutral on knowledge and collusion. Gedye, Cuming & Wood in Personal Property Securities in New Zealand

Agreed.

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things. There is nothing to say that knowledge puts the onus of proof of no collusion on to the knowing person: we suggest that it would be worth providing expressly for this.

Disagree with MO proposed deletion: for the reason that this would be adverse to the secured party, whose interests, rather than those of the (other) creditor) are our concern.

MO point re crossed cheque: surely it’s not negotiable, but agree worth saying what it is or isn’t. Disagree with saying it’s negotiable, for again, would that not privilege (other) creditor over ‘our’ secured party?

On the debtor payment point, shouldn’t the account bank have this ability? This is in effect set-off and set-off rights should trump a security interest. However, if this does not cut across Article 30, the changes seem appropriate.

observe (at p 334) that a payment in the form of a debit, transfer order or authorisation to a person indebted to a obligor (eg a bank) is an obligor-initiated payment only if the debit, transfer order or authorisation is executed when the payment is made. Thus, if the debit, transfer order or authorisation is contained in a bank's terms and conditions or a blanket authorisation executed by an obligor when a loan is made, it cannot be the basis for a bank to pay itself and gain the benefit of Article 36.

We should consider deleting "when the payment was made".

It is not clear whether a crossed cheque would constitute a negotiable instrument (see Gedye et al at p 334 who are of the view that is does).

We should clarify that a crossed cheque is negotiable instrument for the purposes of this Article.

Not sure we need to do this [clarify that a crossed cheque is a negotiable instrument]. Isn’t this outside scope of SIJL in any event?

Article 38(1) Agree Reconsider the policy of this clause. It is common to take security over certificated investment securities and this is a detrimental provision to secured parties.

Neutral [Priority] Agree

Article 38(3) [priority] What is the meaning of "In a case to which Article 30 does not apply"? This was raised with Professor Goode, and his response was that,

Is the language reading "[i]n a case to which Article 30 does not apply" clear?

Reconsider the policy of this clause – so that the security interest is

Agreed [priority] Agree

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"Articles 30 and 38(3) are dealing with different situations. Article 30 is concerned with cases where the account //remains in the name of the debtor// (please see below on this wording between obliques) but is subject to competing security interests in the account. …. Article 38(3) deals with the case where intermediated securities are transferred out of the account into a new account in the name of the secured party or other person giving value. The new account constitutes //a new root of title//, so that the rules in Article 30 do not apply and the transferee for value is protected."

The Professor's words in his answer, "remains in the name of the debtor" seem to unnecessarily restrict the application of Art. 30, given that one form of control security of a securities account (which account by definition of course includes investment securities credited to that account – please see separate comment on these definitions -) is the transfer of title under Art. 3(4)(a). In fact I believe that the reference to Art. 30 is aimed precisely at the Art. 3(4)(a) situation, for otherwise what application would the carve-out have? Similarly, query the Professor's emphasis on new root of title – a new

preserved.

Page | 33


root of title only arises after the operation of 38(3), and clearing the 38(4) hurdle. If the rules in Art. 30 do not apply the carve-out is not needed (and is self-contrary). Surely the point of this opening carve-out is to deal with a potentially overlapping situation that otherwise would fall within 30 and 38(3).

As I understand it: the person giving value referred to in 38(3) could indeed be a secured party, but Article 30 would capture, to the exclusion of 38(3), a transfer to a secured party that was for control security (see Art. 3(4)(a) and the preceding paragraph of this comment), where there was another security interest. Presumably the carve-out for Art. 30 has no application where a secured party has taken title under an enforcement by way of appropriation, or sale to self, for then he no longer has a security interest. But an enforcement appropriation or sale to self, where there was another security interest would be policed by 38(4) – which perhaps should also refer to a subordination agreement as another and often more closely relevant fetter.

This provision at 38(3) does seem to be entirely about investment securities credited to a securities

Page | 34


account, though that reference is only present in (b) and not in (a) – i.e. an investment security held with an intermediary couldn't be held with it other than on an account (or a register – see the definition of an intermediary - ) maintained by the intermediary.

The Report states at paragraph 5.5: "A competition between security interests in a securities account given successively to 2 creditors who leave the account in the grantor’s name is governed by Article 30. By contrast the transfer of securities to a new account in the name of one such creditor has the effect that the transferee’s account constitutes different collateral, taking the case outside Article 30 and giving the transferee the protection of Article 38."

Query whether this question is entirely resolved, and whether some detailed adjustment would not be useful.

Agree with BC. In line with our comment.

Article 39 [priority] Is it right that this as it stands is of no help to a secured party re purported bank account security by way of assignment (ie an assignment in breach of the account bank's terms and conditions),

Extend this to cover any contract - and not just receivables.

Agree that this should apply to any security interest and not just an assignment by way of security.

Disagree with BC – parties should be free to restrict assignment outside the context of receivables

[priority] Agree

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because the depositor's bank account property is not a 'receivable' as defined?

The Professor has previously said that "Art. 39 is to be amended to refer to security interests rather than assignments by way of security", i.e. to save such security interests generally: but this will presumably apply to receivables only, Art. 39 being within Part 6.

Agree with BC. In line with our comment i.e. for the purposes of this Law.

Article 39(1)(c) [priority] "does not affect the validity of the assignment": this must mean that the obligor under the receivable must accept the validity of it – when given notice of it, under Art. 40 – although that Article only applies to non-security assignments. Pending such notice, that validity is presumably only fully so as between the assignor and the assignee. Given the validity of the assignment, does it follow that payment to the assignor will cause a trust in the funds paid to arise in favour of the assignee? Would it be worth making amendments on these points?

Agreed. Neutral Neutral

Article 40(1)(b)

Should 40(1)(b) refer to the 'account assigned' and not the 'receivable assigned'?

Agreed Agreed Agree

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Also query why this Article is limited to non-security assignments. The law on security assignments will not be much different. Perhaps the provisions here are more prescriptively detailed than they need be for a security assignment – please see the 2nd element of 40(1)(b). Do we need this limitation?

Neutral

Article 41(2) Leaves open with whom the enforceable agreement can be made. Although (2) refers back to (1)(a) only, it is surely possible to contract out of the set-off rights in (1)(b) also: we suggest that (2) be amended to recognise this.

Agreed – should be made clear that can contract out of set-off rights.

Neutral Agree

Part 7 [priority] Question for this Part – will a secured party exercising relevant rights have mortgagee in possession-type duties?

In answer to a question on this, the Professor replied that, "SIJL does not expressly deal with this but I have no doubt that a court would hold that the secured party in possession had at least the duty of reasonable care. This is expressly provided for in UCC [United States Uniform Commercial Code] § 9-207. It is for consideration whether SIJL2 ought not to be modified to introduce an amendment to this effect. A duty of reasonable care is all that is required from a

Some care is needed here – we do not want onerous duties placed on a secured party.


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https://www.law.cornell.edu/ucc

https://www.law.cornell.edu/ucc


mortgagee in possession."

We would suggest, given the extent of the statutory provision otherwise contained in this Law, some express provision on secured party duties of this kind, should be included.

Article 43(1) Agree Make this subject to any contrary agreement (e.g. an event of default that is continuing).

Neutral Disagree

Article 43(2) [priority] 'proceeds' in 3rd line - we understand this to mean proceeds subject to a security interest: should this not be stated?

Agree

Neutral on Carey Olsen comment – think this is clear.

Agree that delete “ancililary”. Point made below.

Neutral

Article 43(2)(c) [priority] (c)(iii): query this language, "an obligation in relation to the collateral", whether what it intends is an obligation of which the corresponding right is the collateral – the compound preposition of the words 'in relation to' suggests not identity but something else, in which case the wording seems implausibly wide. Cf the original form of 4(a)(v), which spoke of, "… an obligation relating to the intangible movable property…", where (again?) the intention must in our view have been that the obligation was, in the form of the corresponding right, the intangible movable property. When Art. 4(a) was revamped, this language was replaced by (4)(a)(ix) and (x).

Clarify the meaning of "ancillary".

Not sure I understand the concerns.

[Priority] It is not clear what the effect of the word "ancillary" is.

Delete "ancillary" to make it clear that paragraphs (a) to (d) are to be read disjunctively.

Neutral as regards the CO point

Agreed

Neutral

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Would it mean what is intended to write the wording here in terms of an obligation the right corresponding to which constitutes the collateral?

Agree with BC

Article 43(2)(d)

[priority] what is this driving at? It must be that this disallows a remedy that would seek to evade stipulations of the Law that protect the interests of the grantor and other persons with an interest: would it be worth stating this, in non-exclusive terms?

The Professor has said that, "Article 43 will be amended to include the power to run the grantor's business as an enforcement power where security is given over all present and after-acquired property." - this in answer to a question whether the security agreement should in such a case give a secured party all the powers of an English fixed charge receiver. We would request proceeding with such an amendment.

Agree – in line with our comment.

Clarify the intended scope.

The ability to appoint a receiver to enforce would be beneficial. However, I doubt whether we can appoint a receiver to continue business in all situations – the Law will not cover immovable property and does not yet extend to chattels.

Agreed [priority] Agree

Article 43(4) [priority] This paragraph (4) refers to collateral and not to proceeds. Is this because the Law contemplates action in respect of proceeds only in an enforcement context. On the footing that the limitation is intended, then we are not suggesting amendment. The phrase “not in conflict of this

Confusion arising from "and is not in conflict with this Law."

Agreed Neutral

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Law”: please see on (2)(d) above)

Agree with BC

Article 44 Agree with first 3 BC points – Article 53 not enough re 2nd point? But presumably any clarification would be subject to the good faith test.

Neutral re last 2 points.

Confusion and difficulties arising from the 21 day provisions. General development needed.

Secured party being in breach of duties - clarify that any action will be against the secured party in damages only for any loss (and will not affect the validity of the enforcement).

Clarify who has an interest - for example, we would not want this to catch limited partners in a limited partnership.

Clarity that notices are only required concerning sale/appropriation and not in relation to other enforcement methods.

Can we clarify how appropriation is actually effected? Case law has suggested that an "overt act" is needed: see the Privy Council's decision in Cukurova .

[priority] Agree and we should simply (simplify?) the notice provisions as suggested by MO below.

Article 44 (1) & (2)

Agreed that the timing mechanics require discussion and development.

[Priority] The 21 day before appropriation or sale language contains a trap for the unwary.

The requirement is to look back 21 days from the time of appropriation or sale, not the giving of notice of appropriation or sale. If the secured party only gives notice of appropriation or sale to secured and

Agreed

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https://www.jcpc.uk/cases/docs/jcpc-2012-0016-judgment.pdf

https://www.jcpc.uk/cases/docs/jcpc-2012-0016-judgment.pdf


interested parties existing 21 days before appropriation or sale, it runs the risk that if it does not enforce on the day of the expiry of the 14 day notice period, if anyone else has registered a security interest or notified the secured party of an interest in the six days before notice of appropriation or sale was given, it will have to serve notice of appropriation or sale again. This would delay enforcement by another 14 days.

It would be better to provide that notice of appropriation or sale has to be given to secured and interested parties existing at the time notice of appropriation or sale is given. Upon the expiry of the 14 day notice period, the secured party should then have, say, 60 days to appropriate or sell without having to concern itself about giving notice to anyone who registers a security interest or who notifies the secured party of an interest subsequent to the giving of notice but before the expiry of the 60 day enforcement period. If enforcement does not take place in the 60 days, notice of appropriation or sale must be served again. (Consequential amendments would also need to be made to Article 46(3).)

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Article 44(1)(c) [priority] (1)(c) and (2)(c): the Professor has confirmed that a person who has an interest means a person who has a proprietary interest: could an amendment be made to introduce a definition, or otherwise make this clear?

There is no stipulation of the contents of the notice – i.e. there is evidently no need to say anything about the terms of the appropriation or sale – and what can follow on the giving on the notice. Presumably the secured party has no duty to answer enquiries from other interested parties. Is it right that notice has to be given to a person with an interest even if that person has that interest in breach of the terms of the security interest agreement?

Disagree that guarantors have an interest.

Agree that ‘interest’ should be clarified (as we have proposed in our comment).

Agreed – we should restrict interested persons to those who have a proprietary interest in the collateral and consider excluding limited partners in a limited partnership.

Perhaps have statutory forms of notice.

Are guarantors interested persons? Clarify.

Agreed

Article 46 Agree Simplify the duties so as to focus on price/value.

The wider duties are too vague and deserve negative comment (e.g. a duty to enter into an agreement on commercially reasonable terms).

The duty to take "all" commercially reasonable steps would appear

[Priority] (1)(a) and (2)(a) Inclusion of the word "all" makes this obligation unclear and too burdensome. Delete the word “all”

Agreed, although a degree of uncertainty will remain.

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unduly onerous.

Article 48 The phrase 'after an event of default' in the first line implies the possibility of appropriation or sale 'before an event of default', presumably consensually. Is this the intention?

This Article could we suggest usefully in its terms allow for the possibility that a sale price would be payable in instalments, or even a full credit sale. A future receivable would not come entirely easily within 'gross proceeds of sale'. More important is (e): how can a surplus be 'owing' if it has not yet been received? (But we note that Art. 49 does not work off the statement of account in Art. 48.)

Disagree with BC comment: if a secured party took his security in breach of negative undertaking in first security – in which case there won’t be an ICA – it would be unfair on the first secured party to allow this right (and an unlikely scenario).

A subordinated secured party should have the power of sale (accounting to the senior secured party) subject to any contrary agreement.

Agree that instalments/full credit ought to be accommodated.

As regards the owning point, Article 49 suggests receipt of the surplus – the obligation is to pay the amount of any resulting surplus.

Neutral [priority] Agree – and state how secured party is obliged to apply proceeds of enforcement as under SIJL 1983

Article 48(b) Neutral: could result in unfairness Article 48(b) refers to reasonable costs. The parties should be able to agree costs on an indemnity basis.

Agreed Agree

Article 49 [priority] Article 49(3) can't work to say that for the purposes of 49(1) the extinction under Art. 47 somehow didn't happen. Query whether the use of the present tense form of 'has' in the first line of (1)(a) is right – the

Suspense accounts should be allowed pending distribution.

Agree – use of past tense would be better.

Neutral [priority] Agree

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wording should we submit be on the refer to any person who had, at the time of such appropriation or sale, a subordinate security interest in the collateral"

This Article does not say when surplus is to be distributed. Nor does it speak to the possibility of the secured party receiving payment by instalments. Should it not address these questions?

Nor does it say in what capacity the secured party who has realised holds the proceeds. Presumably it holds as (bare) trustee for the other interests, as satisfying the requirements of Article 2 ("Existence of a trust") of TJL – again it would do no harm to state this. Any such trust would, without more, carry the statutory obligations of a trustee under TJL

Query how this Article relates to suspense account provisions. Art. 49 says nothing about any ability to contract out of its provisions. Can something be said to permit suspense account retention as between secured party and grantor?

Agree: in line with our comment.

Agree – this should be specified.

Do we need to say this? A trust is likely to fail (co-mingling with other monies). So just a statutory duty to account.

Agree – suspense accounts should be allowed.

Agreed

Neutral

Agreed

Article 50 50(3) seems awkward re 49(1)(b): how will the Court apply the test of the secured party's satisfaction, the more so when difficulty in this regard

Agree Neutral Disagree

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may have been the occasion of the payment into court in the first place? Should not 50(3) be glossed to say that for the purposes of Art. 50 the second reference to 'secured party' in 49(1)(b) shall be taken as a reference to the Royal Court?

Article 51 Cf Art. 54(2)(b)'s reference to "any other reasonable expenses" and what these might be in addition and if so why they are allowed for in 54 and not 51 – beyond what is already provided for in 51.

The parties should be able to agree costs on a full indemnity basis. Agree – drafting should be consistent between Article 51(2) and 54(2)(b)

Agreed Agree

Article 51 [priority] The references to 'secured party' seem awkward where the secured party is security trustee for a syndicate or club. The debt will not be owed only to it, though it will help if the documentation provides that all sums are payable to it. While the intention cannot be that the surplus arises after the security trustee has been paid what it is beneficially entitled to, it would be better if, for example, the statute spoke of an excess over the amounts secured by the security agreement. The word 'debt' is also too limiting, for it excludes contingent amounts, which the documentation may provide that the secured party can retain against. We suggest amendments to take account of these points.

How will one work the references in

This refers to amounts owed to the secured party. Where the security is taken by a security trustee, the amounts will be owed to the finance parties.

Agree other points here.

Agreed Neutral

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1(a) and (b) to "monetary value of the obligation owed to the secured party" in the case of non-monetary obligations? The statute gives no assistance on what that monetary value might be: could it be amended to venture some guidance on this point? Will a reasonable formula agreed between the parties to the agreement for determining such 'monetary value' be upheld by the Law? Again could the Law say something on this?

Agree with BC comment.

Article 52 Query the exact difference between (b) "transferring collateral into the name of the secured party" and (c) "vesting title to the collateral in the secured party" (apart from the extra words in (c)) – is (b) as a step to enabling realisation, i.e. making the security into title security?

Agreed Neutral Neutral

Article 53 Query what (1)(b) has in mind. Would an interest of someone claiming in right of the Grantor's interest be such a subordinate interest?

Disagree with BC comment. If the appropriation and on-sale between SP and eg a connected ‘TP’ buyer, then the good faith condition should still be operative.

This deals with a purchaser of collateral that has been appropriated. This seems "one step removed" from the initial vesting - the secured party will take title on appropriation and therefore we should clarify that the secured party will obtain a "clean" title on appropriation.

Agreed concerning Article 53(1)(b)

Agreed Neutral

Article 54 The Professor confirmed in answer to Clarify the subrogation rights that Agreed Agree

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a question that redemption by a junior encumbrancer results in automatic subrogation to the senior security: would express statement of this be useful?

Please see comment on 54(2)(b) at Article 51 comments.

(4): "reinstate the security agreement" seems not the readiest way of conveying the idea of remedying a default, or reversing an enforcement process, under the agreement – 'reinstate' is ordinarily used of such as restoring a person to a job from which he had been sacked. In a default or an enforcement the agreement is still there. By analogy with recalling a declaration (of desastre) under the Desastre Law, could we instead refer to recalling enforcement under a security agreement?

This paragraph does not by its terms contemplate any third party remedying on behalf of the grantor. Should this not be allowed for?

Agree with first BC comment, in line with our comment.

Agree second BC point, subject to immovable clog principles (which in NZ, per the MO comment, are evidently seen as having much less weight in the case of third parties).

arise on redemption.

Clarify that a third party may waive the right of redemption.

How does reinstatement work if there has been an acceleration of the debt? The NZ provisions "suspend" acceleration. See section 133(1) of the New Zealand PPSA which excludes from amounts in arrears the amounts due by operation of an acceleration clause.

Agreed that it could be clarified that a third party may reinstate on behalf of the grantor.

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Art. 54(5), limited and limited to reinstatement, is evidently a deliberate choice.

Agree third BC point, there is a question here, though usually the reinstatement right will be written out under the SIA. Any such suspension of acceleration, under Jersey Law, for the purposes of SIL, would result in conflict with the eg. English law position under the facility agreement, and the latter should prevail – whereupon there would be a default by reason of non-payment, and reinstatement usually next to impossible. The suspension of acceleration is presumably retail-driven.

Article 54(2) MO comment: please see immediately above.

Disagree with Ogier comment because surely clog principles would rule this out.

Agree with Mourant Ozannes. This provision does not permit a junior encumbrancer to waive its right of redemption before or after an event of default and does not permit a grantor to waive its right of redemption after an event of default. S132 of the NZ PPSA permits waiver by grantors and junior encumbrancers after default.

Amend to permit a waiver by the grantor after default and by other secured parties before and after default.

Would we not want the ability of the grantor to waive before the default i.e. in the security agreement?

Agree

Article 56 The phrase that occurs elsewhere, "Except as otherwise provided in this

Disagree – the provisions in the Bankruptcy Law mentioned are not

Agreed Agree

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Law" is omitted at the beginning – but see 57(2), 58(2) and 59: we suggest adding express reference to these following Articles such that the provisions of Article 56 should be except as provided in those Articles.

directly relevant to the power of sale.

Article 57(2) Agree Agreed [Priority] There is no reference to Article 17C of the Bankruptcy Law (contrast with Article 58(2) which refers to Article 179 of the Companies Law). Amend accordingly

Agreed

Article 58(2) [priority] Should there not be a reference to 176B of CJL to correspond to the reference to 17B of the Desastre Law at Article 57?

Agree

There should be a reference to 176B. Also, the reference to Article 176A(2) should be a reference to Article 176A.

Also 176B

[Priority] It is not clear why the references to Articles 176(3), 176A(2) and 179(5) of the Companies Law are not to Articles 176, 176A and 179 respectively (contrast with Article 57(2) which refers to Article 17, 17A and 17B of the Bankruptcy Law). Amend accordingly

[priority] Agree

Agreed

Article 59 Agree Should we reconsider the policy in making unperfected assignments of receivables void on bankruptcy?

This seems to be a windfall for creditors.

The assignor has the benefit of i) the purchase price and ii) the benefit of the original receivable (as the transfer is void).

Should non-registration act purely as a priority tool between competing assignees and secured parties?

Agreed Disagree

Part 8 Agree Can we provide that no breach of Agreed. I think the point made in Neutral

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Registration confidentiality will arise from the making of a registration? And that no breach of data protection laws will arise from the making of a registration? The consents which are obtained in practice seem unnecessary "administration" and we would benefit from streamlining the process.

relation to confidentiality is optimistic. The point made in relation to the DP Law sensible, but I suspect that the DP Registrar won’t agree.

Article 62 [priority] (1): the Registration and Miscellaneous Order seems not to say directly what is to be registered, so we are within the Registrar's discretion under (2). But should not the registration system have a box for whether the security is security for 'further advances', that can be ticked? We raise this in case the Professor's 'general purview' opinion of mid-2014 presupposes in its last section that the financing statement can state that the security is security for further advances.

Agreed concerning Article 62(1).

There should be a discussion about what exactly further advances are intended to comprise.

Disagree. The books make clear that a prospective secured party who finds a registration in on notice that further advances may be secured and should therefore approach the secured party who registered the financing statement to negotiate a subordinate arrangement. In any event, security agreements will routinely secure further advances, so there is little to gain by having a box to tick to confirm this.

Disagree

Article 63 On the question of the confidentiality and DP issues arising on a registration made before a security agreement has been entered into (which agreement will contain the necessary consents), the Professor has suggested that this Article be amended to require the intending <grantor's> consent to a pre-agreement registration. This is of course the practice followed.

I think it would be useful to dis-apply confidentiality/data protection matters. The potential grantor can look to restrict pre-registrations by commercial agreement.

Agree Neutral

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Article 66 What is the position where there is a change of name by the grantor following registration of a financing statement? – see 66(2) on what is 'seriously misleading'. On the proposal that the registration regulations be written to say that a change of name would not render a financing statement 'seriously misleading', Professor Goode queried the vires of such a provision in the regulations. He commented that a change of name is likely to make the original financing statement seriously misleading; but revisited other comment to say that, "SIL to be amended so that a registration that was correct on the day it was filed, will not become seriously misleading by virtue of a subsequent change of name of the grantor. The onus should be on the third party searcher to check re prior names." – so we believe something to be covered in the upcoming amending process.

Disagree re BC first comment because the new owner is not the grantor. But agree that there is still an issue though in practice any transfer made with the consent of the secured party would include new security granted by the new owner.

Agree re BC second comment, at least if there is identification by

What happens where an asset is transferred subject to security and the financing statement is not updated to refer to the new owner? Clarify that the financing statement is not seriously misleading?

Also, clarify that a name change does not render a financing statement seriously misleading.

As regards nominees, is the point that if you take security from the nominees and the beneficial owners as well, you do not register against the nominees but do have to register against the beneficial owners, which is peculiar. Either register against both or not at all?

There is no provision dealing with registration against nominees and beneficial owners.

It would be helpful to make clear that where security is taken from nominees and the beneficial owner that it is sufficient to register the security interest against the nominees.

Isn’t the problem that no registration is allowed in respect of the assets held by nominee by virtue of their being trust property?

[Priority] Agree and widen definition of prescribed unit trust in Order to include all JPUTs

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number also.

MO/Ogier comments: agree with Ogier comments.

Article 69 Agree with MO comments. Not sure this is needed. If there is a new financing statement, this is not a renewal, just a different registration.

Renewal can only be effected by filing a financing change statement.

Permit renewal by filing another financing statement but provide that when the original financing statement lapses perfection will only date from the registration of the new financing statement.

Agreed

Article 69(2) Agree with MO comments. Art 69(2) appears contrary to actual registration practice.

Agree

See Article 31 for the priority rule.

This provision does not make sense. Presumably, a financing statement would have to be registered by the transferee in respect of the collateral transferred because the transferor would "retain" the financing statement it registered in respect of collateral not transferred.

Amend to read: "If a security interest in part, but not all, is transferred, the financing change statement that may be registered shall include a description of that part of the collateral that is not transferred."

Query whether there should be a rule that the priority of the security interest of the transferee would date back to the date of the transferor's financing statement in respect of the collateral transferred

Agreed

Article 72(2) Neutral. The point is taken but The purpose of a registration is to This provision does not work. When Agreed

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presumably it is important that subsequent assignments are tied to the original assignment on the SIR register record. If there have been two assignments by the original assignor, and the first of those assignees assigns on, the third assignee’s right should not be at risk from the second assignment.

show that the receivable is outside the “asset pool” of the assignor. Where the receivable is assigned and then assigned again, there are two assignments – so I think there should be two registrations.

the assignee of a receivable (the "first assignee") further assigns the receivable to another assignee (the "second assignee", the first assignee becomes the assignor and the second assignee is the assignee. This means that a financing change statement cannot be filed and a new financing statement has to be filed every time a receivable is assigned.

Paragraph 11.2(f)(i)(2) of the SIR Guidance Notes provide that where receivables the subject of an existing financing statement are assigned again (other than by way of security), the existing financing statement should be discharged and a new financing statement should be registered because the assignee under the discharged financing statement will be the assignor under the new one.

Delete or amend accordingly.

Article 73 This Article refers only to such registration by financing change statement, but in practice where there is subordination that is noted as part of the original financing statement registration – we suggest that amendment be made to reflect this actual practice (while still allowing for subordination after the event).

Agreed Agreed Agree

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Article 74(2) Does not seem to be a perfect fit with Art. 72 [Would it be useful to have something in 74(2) to clarify that we mean only the person named in the most recent financing (change) statement?– i.e would it be useful to make reference to the effect of any FCS?

The financing change statement is not a stand-alone statement – it amends the financing statement. So would appear to be no need to refer separately to the financing change statement.

Neutral Neutral

Article 75(1) This 'interest in property' again must be a proprietary interest, as in e.g. Art. 44: again, would it not be worth saying this, or adding a definition?

(a): this might be better if it referred to all the obligations secured by a security interest under the relevant security agreement: the existing wording should not mean that you have to have a covenant or undertaking to pay in the security agreement for this paragraph to 'bite'.

(b): again, cf Art. 72/Art. 74: would it be useful to make reference to the effect of any FCS?

(d): is the language in the latter part worth revisiting for ease of understanding? And it seems only a partial fit with 18(1)(a): while this para (d) needs to allow, as it implicitly does, for the circumstance where value has not yet been given, but there is an agreement that it will be, value may have been given without an agreement for it; and the last

Agreed – this should be a proprietary interest.

Agreed.

Don’t think necessary – if the financing change statement changes the identity of the secured party – the new person will be the person named in the fincing statement.

Agreed.

Neutral

Agreed

Neutral

Neutral

Neutral

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phrase, "an agreement that is to be secured … " is much narrower than the formula in 18(1)(a).

Article 75(3) (a): query what this means exactly and the reference to 'debt'. The definition of receivable refers to 'monetary entitlement'.

Agree with MO comment.

Agreed to all. The reference to grantor should be to assignor – amend accordingly.

Agreed

Article 80(1) Agree with MO comment. Agreed This should also provide for removing registrations with secured party or assignee consent which reflects current practice. Amend accordingly

Agreed

Article 80(3) Agree with MO comment. Neutral – no harm in retaining. The words “after the day when those steps are complete” are superfluous – delete accordingly

Agreed

Article 85 Agree with MO in part. A further secured party can ask for the amount of indebtedness and description of collateral under the first security agreement; but the first secured party’s security agreement and terms of payment should remain confidential to it. If a further secured party exists in breach of the first security agreement, he should have no such rights under Art. 85(1).

Would a secured party wish to disclose the security agreement to a third party? I can understand another secured creditor wishing to know the amount of the secured obligations and the collateral secured – but this should not go further that than.

The power is only exercisable by the grantor and not any other secured party with a security interest in the same collateral in which the grantor has granted a security interest.

Extend the power to other secured parties with a security interest in the same collateral.

Agreed

Article 88 We submit that, given the terms of Art. 15, 'extinguished' would be a better word than 'discharged'; or in any case the language should be conformed with Article 15. The word 'discharged' is used of financing

Agreed Agreed Agree

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statements or financing change statements and presumably this is not intended to be a reference to such discharge or only to such discharge.

Schedule 1 re Desastre Law

[priority] (b): this raises again the question of the 'status' in insolvency of a security interest created under Art. 5, on which please see discussion on that Article above, in particular the Professor's comment on the effect as against a liquidator or the Viscount. These paragraphs make no distinction between types of security agreement (whether under Art. 4 or 5), so presumably the analysis is that an Art. 5 security agreement can be asserted against the Viscount in a desastre of the grantor, including by way of enforcement, but any enforcement will be without prejudice to or subject to rights of (other) third parties, or at least their property rights – with which rights an enforcement could necessarily come into collision. We think there is a tension here that needs to be resolved: as above, we believe that this should be in the direction of giving fuller status to Art. 5 security agreements (as this Paragraph 2 appears to do).

(d): we believe the drafting needs to be adjusted so that the revised 32(7)

Agreed – Article 5 is a priority matter to resolve.

Agreed

[Priority] Agreed. These provisions also need to make it clear that no participation of the Viscount is required to enforce security (eg by signing transfers) even though collateral may have vested in the Viscount on a declaration of bankruptcy. In my discussions with staff at the Viscount’s department, it was made clear that the Viscount would seek court directions as to whether to sign transfers on enforcement.

[priority] Agree

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of the Desastre Law takes account also of appropriation under the 2012 Law and more generally of how the 2012 Law does not speak of applying proceeds but of treatment of, if it arises, surplus.

Schedule 2 re savings and transitional & consequential provisions

Para 4(2): the limitation 'in their relations with each other': please see – albeit the context is rather different – comment on Article 5 above.

Agreed Agree

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Additional Comments

Provision Carey Olsen Bedell Cristin Mourant Ozannes OgierConsider including an equivalent to (or amending the equivalent of) Articles 17(2) (and reconsider ability to charge back rights under contracts generally), 45(2), 81, 88, 93, 94 (if SIL extended to money), 100, 101, 103, 105(2), 109, 114(2) and 184-189 of the NZ PPSA.

Agree generic description point – but a SIL 2 point,

To consider with SIL2 Include an equivalent to Article 38 of the NZ PPSA. SIL 2 should make it clear that a generic description of collateral as inventory or equipment is adequate.

Neutral at this time – SIL 2 To consider with SIL2 Should the definition of lease for a term of more than 1 year include a bailment of goods for a term of more than 1 year as in New Zealand?

Agree To consider with SIL2. The power to run the business is awkward – there will be no security over immovable property nor effective security over overseas property.

Include the power to lease and, if security is taken over all present and after-acquired property, the power to run the grantor's business as an enforcement power. Should there also be a power to call uncalled capital?

Agree Agreed Define what a secured party's mortgagee in possession duties are.

Disagree: how could these be meaningfully and rightly appropriated or sold by the SP?

Regulatory consents are personal – so should not be collateral.

Should consideration be given to whether Jersey regulatory consents should be capable of being collateral?

Disagree that unclear, but agree that express provision would put this point away.

Agreed [Priority] It remains unclear whether it is possible to take security over rent arising under a contract lease. It

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should be clarified that it is possible as it reflects market practice.

SIL 2 point To consider with SIL2 Consider using a simplified version of the Australian definition of the "PPS lease" instead of lease of goods of more than 1 year.

Agree but is there a risk that this might come up against the preference provisions?

Discuss further – it does seem odd that a purchase money security interest can be refinanced – as the refinanced monies would not have been used to acquire the asset.

Include an equivalent of section 14(5) of the Australian PPSA: "A purchase money security interest does not lose its status as such only because the purchase money obligation is renewed, refinanced, consolidated or restructured (whether or not by the same secured party)."

Neutral: a large retrospective change in favour of secured parties.

Agreed – should be for consistency. Is there any reason why Article 10(5) of the Bankruptcy Law and Article 159(5) of the Companies Law cannot be extended to 1983 Law security interests?

First point: agree (provided the enforcement is in accordance with the Law).

Second point: this should not be necessary – if need be use security PoA.

Agreed Can Article 10(5) of the Bankruptcy Law and Article 159(5) of the Companies Law be amended to place a liquidator or the Viscount under an obligation to register a transfer on enforcement? It should also be made clear that, even where collateral has vested in the Viscount on a bankruptcy, it is not necessary for the Viscount to sign a transfer on enforcement.

Agree (and could be applied more widely, to other sorts of security property) – though this should only

Agreed It would be helpful to have a provision to the effect that the exercise of income and voting rights attaching to

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be as a confirmation of what the position is anyway.

investment securities and partnership interests in accordance with the terms of a security agreement before notice of event of default is given is permissible.

Neutral (would be grateful for fuller statement) – is this a situation outside the 30 days in Art. 27?

Further discussion needed Should we include a provision to the effect that security revives on the return of collateral?

SIL 2 point To discuss with SIL2 Article 34B of draft SIL2 (priority of PMSIs of sellers, suppliers on HP or consignors) does not contain a priority rule applicable where there are two competing vendor' PMSIs in the same collateral – see Garrow & Fenton paragraph 15.9.2. Include an equivalent to s34(8) of the Saskatchewan PPSA (a non-proceeds purchase-money security interest has priority over a purchase money security interest in the same collateral as proceeds).

SIL 2 point To discuss with SIL2 Should leases of goods of less than 1 year be precluded from being security interests even if they secure payment or performance of an obligation?

Agree – expansion of Art. 39 as above

Agree [Priority] It would be helpful to have statutory provisions regarding the effect of contractual restrictions on assignment and prohibitions on the grant of security on the attachment, perfection and enforceability of security interests. While it may be that a prohibition on assignment does

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not preclude the attachment of a security interest that does not take effect by way of assignment, there is no case law as to whether contractual prohibitions on the creation of security preclude attachment. It would be helpful to have clarity on these important points.

Disagree, because control is essentially a factual, practical thing and this is to deem control where in fact it is absent.

Second point (“similarly etc”) disagree for the same reason, and that potentially unfair to third parties, when registration is possible. While what is proposed is mostly consistent with the indivisible bundle of rights point, the debt constituted by a final dividend is not part of that bundle of rights.

Agreed [Priority] There should be a period of temporary perfection for a security interest in after-acquired investment securities pending the issue of certificates. It would then not be necessary to register in order to perfect a security interest in after-acquired investment securities provided certificates are delivered within the period of temporary perfection. Similarly, possession or control should not only be a method of perfecting a security interest in investment securities, but also of perfecting a security interest in the income, voting and other rights attaching to them. It should not be necessary to register in order to perfect a security interest in such other rights. This is more consistent with the spirit of the PPS regime that possession or control is an alternative to registration as a method of perfection.

First point: agree

Second point (i.e. conflicts rules):

Agreed – save for conflict comment which I would like to discuss for better

The contents of the Security Interests (Application of Law – Exceptions)

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Neutral. This would be a substantial new departure (and rarity?)

understanding (Jersey) Order 2013 and Article 2 of the Security Interests (Registration and Miscellaneous Provisions) (Jersey) Law 2013 should be transferred into the main body of the Law. In the former case, consideration should be given to including express conflict of laws rules.

Agree General comment: SIL 3 should be accelerated (to clarify the rights that arise in respect of a securities account).

SIL3 (intermediated securities) should be dealt with as part of SIL2.

Disagree: For insolvency legislation if politically agreed after separate due process.

General comment: incorporate provisions allowing a secured party to appoint a receiver.

Disagree: except on particular points

General comment: the "tipping point" issue remains to be addressed.

Agree General comment: incorporate deemed service provisions.

Agree, but surely this is at any relevant permissible time. S{P2 should be able to perfect at any time before a time at which he would be prejudiced by not having perfected (recognising the insolvency limit time)

General comment: clarify the point at which priority is determined. Is this when enforcement action is taken by any secured party? For example, SP1 is perfected, SP2 is unperfected, SP3 is perfected - SP1 commences enforcement action and SP2 then perfects its security - what is the status as between SP2 and SP3?

Helen Edwards

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7 March 2016

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