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Perfection by control under the Personal Property Security Act

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Perfection by control under the Personal Property Security Act

 

AT A GLANCE:

Security Interest is a property right in collateral that secures payment or other performance of an obligation, regardless of whether the parties have denominated it as a security interest, and regardless of the type of asset, the status of the grantor or secured creditor, or the nature of the secured obligation; including the right of a buyer of accounts receivable and a lessor under an operating lease for not less than one (1) year. Section 3 (j) of the Personal Property Security Act.

 

A security interest shall be perfected when it has been created and the secured creditor has taken one of the actions in Section 12. On perfection, a security interest becomes effective against third parties. (Section 11, R.A. 11057)

How can a security interest be perfected by control?

A security interest in a deposit account or investment property may be perfected by control through:

  1. The creation of the security interest in favor of the deposit-taking institution of the intermediary;
  2. The conclusion of a control agreement; or 
  3. For an investment property that is an electronic security not held with an intermediary, the notation of the security interest in the books maintained by or on behalf of the issuer for the purpose of recording the name of the holder of the securities. 

Nothing in this Act shall require a deposit-taking institution or an intermediary to enter into a control agreement, even if the grantor so requests. A deposit-taking institution or an intermediary that has entered into such an agreement shall not be required to confirm the existence of the agreement to another person unless requested to do so by the grantor. 

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Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding legal services, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/ 09175772207/ 09778050020.

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