Last Updated October 08, 2019

Law and Practice

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Winston & Strawn London LLP provides a wide range of legal services through its banking and finance practice, to public and private companies, leading financial institutions, multilateral and development finance institutions, private equity and investment funds, alternative funding sources, investors and emerging companies, on investment grade, leveraged and mezzanine financings. The firm advises on high-profile transactions and matters ranging from cross-border transactions, initial public offerings (IPOs) and project finance matters, to distressed acquisitions and creative “first-of-their-kind” financings. Clients include leading international funding sources which provide senior, subordinated, secured and unsecured debt, and hybrid (equity/debt) products, as well as institutional investors who regularly participate in senior debt markets, equity sponsors, and borrowers in both developed and emerging economies. Additional thanks to partners Ed Denny and Dan Meagher and associate Shaheer Momeni, among others, for their contributions to this chapter.

The "self-help" principle applies in relation to the enforcement of security. The security holder may take steps (either itself, or by the appointment of an agent or receiver) to enforce its security over the asset encumbered in its favour by its borrower without recourse to the courts or the realisation of the asset by means of a public auction or other court-administered sale process. Although a court order is not required for enforcement, in the context of security over real property, in order to realise (eg, to sell) the property, it may be necessary to evict the chargor, which requires a court order.

Typically, the relevant security document will set out when and how a lender may enforce its security. The enforcement method to be used, once a lender’s entitlement to enforce security has arisen, will depend upon the nature and terms of the security package. The main methods of enforcing security in England are:

  • taking possession;
  • selling the collateral;
  • appointing a receiver who realises the collateral; and
  • foreclosure and appropriation. 

Where the security provider is solvent, the lender will normally be able to appoint a receiver to realise any assets subject to fixed security. Where a lender holds security over assets subject to a floating charge, the lender will be able to appoint a receiver once the charge has crystallised. The events which trigger crystallisation will be set out in the security agreement and will normally include the taking of steps in relation to enforcement, such as the appointment of a receiver. 

If the security was created prior to 15 September 2003, an administrative receiver may be appointed. The role of the receiver in this case is to identify the charged assets and realise them in the same way as with fixed security. However, if the security was created after 15 September 2003, the lender can only appoint an administrator who, in contrast to an administrative receiver, must act in the interests of all creditors to achieve the purposes of the administration.

Where the security provider is insolvent, it is still possible that enforcement can take place through the appointment of a receiver, but it is also possible, particularly where the security package is more comprehensive and includes more of the security provider’s assets, that the security provider could be subject to a formal insolvency procedure such as an administration.

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Authors



Winston & Strawn London LLP provides a wide range of legal services through its banking and finance practice, to public and private companies, leading financial institutions, multilateral and development finance institutions, private equity and investment funds, alternative funding sources, investors and emerging companies, on investment grade, leveraged and mezzanine financings. The firm advises on high-profile transactions and matters ranging from cross-border transactions, initial public offerings (IPOs) and project finance matters, to distressed acquisitions and creative “first-of-their-kind” financings. Clients include leading international funding sources which provide senior, subordinated, secured and unsecured debt, and hybrid (equity/debt) products, as well as institutional investors who regularly participate in senior debt markets, equity sponsors, and borrowers in both developed and emerging economies. Additional thanks to partners Ed Denny and Dan Meagher and associate Shaheer Momeni, among others, for their contributions to this chapter.

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