Security Sharing Agreement Template for England and Wales

A Security Sharing Agreement is a critical legal document that governs how multiple creditors coordinate their security interests over the same assets. When you have multiple lenders or creditors taking security over shared collateral, this agreement ensures each party understands their rights, priorities, and enforcement procedures under England and Wales law.

When do you need this document?

You need a Security Sharing Agreement when multiple creditors hold or will hold security interests over the same assets. This commonly occurs in syndicated loan facilities where several banks provide funding secured against the borrower's assets, project finance arrangements involving multiple funders, restructuring scenarios where new creditors join existing security arrangements, and acquisition finance where different tranches of debt require coordinated security. The agreement becomes essential when creditors need to establish clear priority rankings and avoid conflicts during enforcement.

Key legal considerations

The agreement must clearly define the ranking and priority of each security interest to comply with legal principles governing competing charges. You need to specify enforcement procedures, including who can trigger enforcement and under what circumstances, to prevent conflicting actions that could prejudice recovery. Distribution provisions must detail how proceeds from asset disposal will be allocated between creditors according to their agreed priority. The document should address inter-creditor restrictions, such as limitations on individual enforcement rights and requirements for collective decision-making. Security sharing arrangements must also consider anti-deprivation rules under the Insolvency Act 1986 and ensure provisions remain enforceable in insolvency scenarios.

Legal requirements in England and Wales

Under the Companies Act 2006, security interests over company assets must be registered at Companies House within 21 days of creation. The Law of Property Act 1925 governs the creation and priority of security interests, requiring proper documentation and, where applicable, registration at the Land Registry for real property. The Financial Collateral Arrangements (No.2) Regulations 2003 provide specific requirements for financial collateral arrangements and may affect perfection requirements. The agreement must comply with the Insolvency Act 1986 provisions regarding creditor priorities and avoid creating arrangements that could be challenged as preferences or transactions at undervalue. For regulated entities, compliance with Financial Services and Markets Act 2000 requirements may be necessary. The agreement should also address corporate authority requirements, ensuring all parties have proper authorisation to enter into and perform their obligations under the security sharing arrangement.