The below diagram highlights the importance of perfecting your security interests, particularly in the context of insolvency.
Perfecting your security interest ensures that you are better placed to recover your asset (or a percentage value of it) in the event of insolvency as you will be placed in the prior (higher) “secured creditors” category.
All creditors in a prior category will be paid out before distributions are made to the next category of creditors. Once the assets are insufficient to discharge all creditors’ debts in the current category a proportionate distribution will be made to those creditors.
Please contact Walker & George to discuss managing, perfecting and enforcing your security interests.