When a lender provides a loan to a borrower, a security interest lets lenders sell secured assets to repay debts, thereby the lender becomes a secured creditor. In insolvency, secured creditors are prioritised over unsecured ones for sale proceeds. Those with registered security interests gain priority over other creditors for property they financed.

A Specific Security Agreement is a legal document that details the terms under which a lender secures an interest in borrower’s assets as collateral for a loan (details of a loan are covered by a Loan Agreement). It documents important details such as the parties, the asset description, and default and indemnity provisions, and if there are any restrictions on the borrower from selling or transferring the secured assets.

Different types of collateral can be used to grant a security under a Specific Security Agreement. This can include both tangible and intangible assets. Examples include shares, business inventory, intellectual property, motor vehicle, equipment, book debts and deposit accounts.

A specific security agreement provides clarity by securing a lender’s interest in particular assets. It helps to establish priority over unsecured creditors and simplifies enforcement in case of default. Clear terms protect both parties, streamline asset recovery, and enhance the lender’s position during insolvency or disputes with competing creditors.

If the lender wishes to secure the loan against all present and future assets of the borrower, then a General Security Agreement may be appropriate. Speak to our commercial lawyers to determine the type of document you require for your loan.

Loan Agreement

A Loan Agreement documents key information on a loan. This includes loan amount, term of the loan, purpose of the loan, interest rate, and repayment schedule. The terms to a loan are separate to a Specific Security Agreement. Our commercial lawyers can provide advice on best way to document your transaction and prepare tailored agreements that are suitable for your situation.

Registering Security Interest

Timing rules under the Personal Property Securities Register provides statutory time frames on when to register security interests and when you need to discharge registrations. They need to be followed for the lender to have a security interest under the register.