Appropriation of financial collateral: relief available
The Privy Council recently considered whether a security provider whose collateral had been appropriated as allowed by the Financial Collateral Arrangements (No.2) Regulations 2003 was entitled to relief from forfeiture.
Back in 2009 the Privy Council considered whether Alfa Telecom, which had taken a charge over shares in two Cukurova companies to secure liabilities under a loan agreement, could appropriate those shares under the security without first becoming registered holder of them in the books of the relevant companies.
On that occasion Alfa Telecom succeeded in persuading the Privy Council that appropriation of shares under security to which the Regulations applied only required some “overt act” on the part of the security holder, such as issuing notices telling the relevant chargor the shares were to be taken. The Privy Council decided that appropriation did not require the secured creditor to persuade potentially hostile directors to actually register the secured creditor as the holder of the relevant shares…
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