Slavenburg

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Proof that the kids of today are lucky.

Much of the practice of modern financial law may be inane, tedious and confusing, but at least you don’t get sent to the companies office to file something with the express intent of having it thrown back in your face because you didn’t need to file it. This was a work-a-day experience for a young clerk in the last century.

Successive UK Companies Acts had required security interests granted by UK companies to be registered at companies house. Entertainingly, you had exactly 30 days from the date of the deed creating the charge to do it, on pain of your security being rendered finally, fatally, and irrevocably void and, should you have been the one so lacking in the fastidious qualities all solicitors must have as to forget, your own sorry hide being summarily executed by the staff partner after a brief show-trial. All excellent fun.

Now before about 2011, you also had to register charges against foreign business with a UK “place of business”. Since no one knew what that meant and, by any lights, it could change over time, stripling clerks were dispatched to companies house to register charges against any foreign company, including those without a hint of a UK dimension, and indeed those (UK tax-sheltering espievies for example) that owed their utter, abject existence to not, in their weakest moment, having the merest fleeting conception that they might one day have a place of business in the UK.

This was also a tremendous jolly, and articled clerks would come home gleefully clutching a letter from matron politely explaining that the charge wasn’t needed, wasn’t wanted, but nonetheless acknowledging young sir had made this foolhardy attempt to register it all the same, and had been rebuffed at the door. Companies House would, in fact, run an ad hoc register of these failed charges, just in case anyone later should challenge such a charge as being unregistered without good cause. The vibe was this: I TRIED TO REGISTER THE DAMN THING. WHAT ELSE WAS I SUPPOSED TO DO?

Sadly all now defunct — the Slavenburg met its Waterloo in the UK Overseas Companies (Execution of Documents and Registration of Charges) (Amendment) Regulations 2011 and, if that didn’t do it, for we financial markets folk, the Financial Collateral Regulations had, since 2003, rendered it a dead letter anyway.

Registering charges of securities and cash in Ireland

You are having commercial relations with an Irish espievie. It grants you security. Do you need to register your charge?

Your starting point would be well, since Ireland is still a member of the EU and, as far as north-Atlantic states go, an enthusiastic one at that, and as such is obliged to implement the Financial Collateral Directive into domestic law. Since that happy directive has done away with the tiresome yet strangely exhilarating business of having to register charges with the domestic agency responsible for monitoring those things things in your member state, the answer, on a commonsense application of principles of European Law, ought to be “no”.

And, indeed the Irish Financial Collateral Arrangement Regulations, as incorporated into Part 7 of the Irish Companies Act 2014 provide that certain types of charges do not actually count as “charges” for the purposes of Section 408(1) of the Irish Companies Act 2014 and therefore do not need to be registered under Section 409.

These include mortgages and charges created over an “interest” in the following assets (let’s call them FCR-eligible assets):

(a) cash;

(b) deposits and money credited to bank accounts;

(c) shares, bonds or debt instruments;

(d) money market funds or collective investment scheme units; or

(e) claims and rights (such as dividends or interest) over any of the above.

But.

That isn’t necessarily how the Central Bank of Ireland sees it. Matheson warns that the registrar tends to take a conservative approach to excluding charges from the registration requirement on account of the Financial Collateral Arrangement Regulations — by which it means if you have a general charging clause that mainly concerns financial collateral, but includes non-FCR-eligible assets as well you still have to register the whole thing — so you may still find local counsel for Irish espievies insisting that you register charges with the CBI, notwithstanding the Emerald Isle’s continued membership of the European Union.

In fairness to the CBI, they are implementing the statute literally.. Section 408(3) goes on to say a charge created over both the excluded FCR-eligible assets and other, ordinary property will “other than to the extent to which it is created over an interest in FCR-eligible assets” be regarded as a registrable charge.

Here is where the lawyer’s yen for over-particularity can be a self-snooker. A prime broker or a custodian will like to take a general charge over not just securities, but the fund’s claim against the custodian in whose accounts they sit (even though that will usually be itself), and all the fund’s rights against its counterparties under market transactions (even though they will (largely) be itself). It is a moot point whether claims under a swap transaction referencing a bond or share count as “claims and rights over any of the above” so the path of least resistance, paved with good intentions though it is, is just to register the charge and be done with it.

That said, Section 408(3), in language that is no model of the deft use of the English language, acknowledges that an unregistered charge will still be effective to the extent it covers FCR-eligible assets, even if it won’t work for other assets. Since the “other assets” part of a prime broker’s security, if it bites on anything at all, is basically thrown in for good measure, one might be inclined to take a bit of a view. Not that we would recommend anything quite so cavalier, of course. but if you were stuck in a corner.

Nobody puts baby in a corner.

See also

• Slavenburg’s Bank N.V. v International Natural Resources Ltd [1980] 1AllER 955