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General & Legal Form of Securities

Explaination of different forms of securities used by financial institutions

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Faik Ahmed
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42 views29 pages

General & Legal Form of Securities

Explaination of different forms of securities used by financial institutions

Uploaded by

Faik Ahmed
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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By

Rana Mubasher
 General Forms of Securities
 Legal Forms of Securities
 Personal or Intangible securities
 Tangible securities
 Prime securities
 Collateral Securities
 Movable Securities
 Immovable Securities
 Mortage
 Banker’s Lien
 Charge
 Pledge
 Hypothecation
 Guarantees
 Indemnity
By
Rana Mubasher
“ These are the securities provided as an
additional cover where a security is not very
suitable in value”
 Adequate
 Readily en cashable realizable
 Sufficient.
Value of security must be adequate to enable
the bank to secure the outstanding amount
of principal and mark-up (interest). Proper
margins to be retained while accepting a
security
Collateral held by the bank should be readily
encashable/realizable, in case the borrower
defaults without legal complications either
by bank itself or through speedy legal
process.
The collateral offered by the borrower must
be sufficient to recover the amount of
principal/markup and any other liabilities
accruing to the bank.
 Transfer of Property Act, 1882 defines
mortgage as under:
 “The transfer of an interest in specific
immoveable Property for the purpose of
securing the payment of money advanced
or to be advanced by way of loan, an
existing or future debt or performance of an
engagement which may give rise to a
pecuniary liability”.
 The mortgagee is vested with the following
rights
 To sell the mortgaged property in case of

default by mortgagor.
 Right to fore-closure.
 Right to file suit.
 Registered or Legal Mortgage.
 This is created through a formal document

called mortgage deed.


 Mortgage deed is registered with the

Registrar of titles.
 It is comparatively expensive, involves

stamp duty and registration


 Equitable Mortgage:
 This is created by deposit of title deed by

the mortgagor.
 Memorandum regarding deposit of title

deed is also signed by respective parties.


 Clear title of the deed must be ascertained

by the bank/mortgagee
According to section 172 of the Contract Act,
the pledge is defined as under:
“Pledge is the bailment of goods as security
for payment of a debt or performance of a
promise”.
According to Section 148 of a Contract Act
1872, bailment is defined as under:
“A bailment is the delivery of goods by one
person to another for some purpose upon a
contract that they shall, when the purpose
is accomplished be returned or otherwise
disposed of according to the directions of
the person delivering them”.
 The pledgee (Bank) has actual control of
pledged stocks/Goods.
 Pledgee can sell pledged stocks by giving

reasonable notice to the borrower.


“Hypothecation is a legal transaction,
whereby goods may be made available as
security for a debt without transferring
possession to the lender”.
 To inspect Godowns.
 To demand stock reports from the borrower.
 To get the stocks insured.
“Lien is a charge given by the customer
(borrower) to a bank over some
securities”.
Letter of lien must be obtained from the
borrower (customer). It can be over stocks
(shares), fixed deposits, bank accounts
etc.
In case the security offered is issued by the
third party the notice may be issued to the
respective party regarding the same.
According to companies Act 2017 “every
charge created by a limited company must
be registered with the Registrar of
Companies.
A contract, by which one party promises to
save the other from loss caused to him by
the conduct of the Promisor himself, or by
the conduct of any other person, is called a
“contract of indemnity”.
All Contracts of Insurance are contracts
of indemnity except life insurance
In such contracts an insurance company
(insurer) undertakes to indemnify the
respective party (assured), of the
losses suffered by the assured in the
manner and to the extent agreed in the
contract.
 He can recover all damages incurred /Paid
by him.
 He can recover costs incurred.
 He can recover sums paid under

compromise, if any.
Settled principle of law : it is a settled
principle of law that after compensating the
loss to indemnity holder, indemnifier is
entitled to all the ways and means by which
person indemnified might have protected
himself for the loss.
this commences when indemnity holder
incurs an absolute liability though not
actual loss.
It has been defined in section 126 of
the Contract Act 1872 which is
reproduced below:
“A contract of guarantee is a contract to
perform the promise or discharge the
liability of a third person in case of his
default”. The person who gives the
guarantee is called the “surety”; the
person in respect of whose default the
guarantee is given is called the “principal
debtor”, and the person to whom the
guarantee is given is called the “creditor”.
A guarantee may be either oral or written
Specific Guarantee or (Ordinary
Guarantee)
This guarantee is restricted to a specific
transaction or engagement. For example
availing a loan from a bank.
Continuing Guarantee:
Such guarantee covers a series of
transactions. For example guarantee
furnished to a supplier for making supplies
during the next one year.
Thank You

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