Security Sharing Agreement Template for New Zealand

A Security Sharing Agreement is a critical legal document that governs how multiple parties share and coordinate security interests over the same assets. When you're involved in complex financing arrangements with multiple lenders or creditors, this agreement ensures that all parties understand their respective rights, priorities, and obligations regarding the shared security.

When do you need this document?

You'll need a Security Sharing Agreement in various commercial financing scenarios. Syndicated loan arrangements commonly require these agreements when multiple banks participate in a single facility secured by the same assets. Project financing deals often involve several financiers who need to share security over project assets and revenues. During corporate restructuring or refinancing, existing and new lenders must coordinate their security positions. Mezzanine financing arrangements frequently require security sharing between senior and subordinated lenders. Additionally, when a borrower has multiple facilities from different lenders secured by overlapping collateral, a security sharing agreement prevents conflicts and establishes clear procedures for enforcement and distribution of proceeds.

Key legal considerations

The agreement must clearly establish security priority rankings among all parties, as this determines who gets paid first from enforcement proceeds. Enforcement procedures require careful drafting to specify when and how security can be enforced, including notification requirements and coordination between security holders. Decision-making mechanisms need to address how major decisions are made, including enforcement timing, asset disposal, and waiver of defaults. The agreement should include detailed proceeds distribution waterfalls that specify how sale proceeds are allocated among different classes of creditors. Intercreditor provisions must address payment restrictions, information sharing obligations, and modification procedures. You must also consider subordination arrangements if some creditors agree to rank behind others, and include provisions for new parties joining the arrangement or existing parties exiting.

Legal requirements in New Zealand

Under New Zealand law, your Security Sharing Agreement must comply with the Personal Property Securities Act 1999 (PPSA), which governs the creation, registration, and enforcement of security interests in personal property. All security interests must be properly registered on the Personal Property Securities Register to maintain priority against third parties. The Financial Markets Conduct Act 2013 applies if the arrangement involves financial products or securities, requiring compliance with disclosure and conduct obligations. The Contract and Commercial Law Act 2017 provides the foundational framework ensuring your agreement is legally binding and enforceable. Privacy Act 2020 requirements apply when the agreement involves sharing personal information between parties. You must also ensure compliance with the Anti-Money Laundering and Countering Financing of Terrorism Act when dealing with financial institutions. The agreement should specify which New Zealand court has jurisdiction and that New Zealand law governs the arrangement, providing certainty for enforcement and dispute resolution.