Promissory Note With Collateral for the United Kingdom

Promissory Note With Collateral Template for England and Wales

A Promissory Note With Collateral under English and Welsh law is a legally binding document that combines a written promise to pay a specific sum with security over specified assets. It provides the lender with both a clear payment obligation and the right to claim specific assets if the borrower defaults. The document must comply with English law requirements for both promissory notes and security interests, including registration requirements where applicable.

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What is a Promissory Note With Collateral?

A Promissory Note With Collateral is commonly used in England and Wales when parties need to document a debt obligation with additional security. The document serves dual purposes: it evidences the debt and creates a security interest in specific assets. This type of agreement is particularly useful in business lending, asset financing, and structured debt arrangements where the lender requires more protection than a simple promise to pay. The document must comply with both the Bills of Exchange Act 1882 and the Law of Property Act 1925, among other relevant legislation.

What sections should be included in a Promissory Note With Collateral?

1. Date and Parties: Identification of the promissory note date and all parties involved (maker/promisor and payee/promisee)

2. Promise to Pay: Clear statement of the unconditional promise to pay, including the principal amount, currency, and payment terms

3. Interest Rate: Specification of applicable interest rate, calculation method, and payment frequency

4. Collateral Description: Detailed description of assets serving as security, including location, identification numbers, and value

5. Security Interest: Creation and terms of the security interest over the collateral

6. Default Provisions: Definition of events of default and consequences, including enforcement rights and remedies

7. Representations and Warranties: Standard representations regarding ownership of collateral, authority to enter agreement, and legal compliance

8. Governing Law: Specification of English and Welsh law as governing law and jurisdiction

What sections are optional to include in a Promissory Note With Collateral?

1. Prepayment Terms: Optional terms for early repayment, including any prepayment penalties or notice requirements

2. Assignment Rights: Terms governing the right to assign or transfer the note, included when transferability is relevant

3. Insurance Requirements: Obligations to maintain insurance on collateral, used particularly for physical assets

4. Guarantor Provisions: Terms applicable to any third-party guarantors of the obligation

5. Further Assurance: Obligations to execute additional documents or take further steps to perfect security

What schedules should be included in a Promissory Note With Collateral?

1. Schedule 1 - Collateral Description: Detailed inventory and description of all collateral assets including specifications, serial numbers, and locations

2. Schedule 2 - Payment Schedule: Amortization table or payment timeline showing all payment dates, amounts, and interest calculations

3. Schedule 3 - Form of Notice: Standard forms for any notices required under the agreement, including default notices

4. Appendix A - Title Documents: Copies of relevant title documents, certificates, or registrations for collateral assets

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

England and Wales

Publisher

Genie AI

Document Type

Promissory Note

Sector

Banking

Cost

Free to use
Industries

Law of Property Act 1925: Primary legislation governing how security interests in property are created and enforced. Essential for the collateral aspects of the promissory note.

Bills of Exchange Act 1882: Contains fundamental principles for negotiable instruments including promissory notes. Defines core legal requirements and framework for such instruments.

Consumer Credit Act 1974: Regulates credit agreements and provides consumer protections. Applicable if the promissory note involves a consumer rather than being a business-to-business transaction.

Financial Collateral Arrangements (No.2) Regulations 2003: Specific regulations governing financial collateral arrangements. Particularly relevant if financial assets are being used as collateral.

Companies Act 2006: Corporate law framework relevant when either party is a company, especially regarding the registration of charges and corporate authority.

Contract Law Principles: Common law principles including offer, acceptance, consideration, intention to create legal relations, and capacity to contract.

Financial Services and Markets Act 2000: Regulatory framework for financial services. Relevant if the arrangement could be considered a regulated activity.

Money Laundering Regulations 2017: Regulations ensuring compliance with anti-money laundering requirements in financial transactions.

Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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