What are security interests?

Security interests over intangible movables.  These are assets that cannot be touched and have no physical substance.  The best examples of intangible movables are bank accounts, shares in a company or rights in a contract or agreement.   There are certain intangible movables that, under Jersey law, cannot be secured.

Does not include

• Tangible movables such as cars, furniture etc.
• mortgages over houses or other real property known as immovables.

When a lender lends money to a borrower, it may require that security is given by the borrower over certain property.

The lender and the borrower will sign a security agreement setting out the terms of the security interest.

If an event of default occurs, the secured party can enforce its security by either:

• selling agreed collateral
• taking the collateral for itself.

When the secured party enforces the security interest by selling the collateral, it will deduct the reasonable costs of the sale and then use the remaining proceeds of sale to pay off the loan and any other monies owing, such as unpaid interest.  If there is any money left over, this may get repaid to the borrower.  If the proceeds of sale are not enough to repay all outstanding amounts, nothing is repaid and unpaid amounts remain owing to the lender.  The process is similar when the secured party enforces by taking the collateral.  When the secured party enforces, it is under a duty to act in a commercially reasonable way.

During the time that the loan has not yet been repaid and the security interest is in effect, the security agreement may restrict what the grantor can do with the collateral, even though it still belongs to the grantor.

It is possible that the secured party may want to register the security interest.  The registration is made on the Security Interests Register here. This register is available to the public and would show the name and address of the grantor.  This means that other people could find out about the existence of the security interest.