An essential requirement for lenders taking security from companies is registration of that security at Companies House. This must be done within 21 days of the date the security is created otherwise it will be void against a liquidator, administrator or creditor of the company. But what if security documentation is already in place and you have a new group company you want to bring into the security net? Who does an accession deed need to be registered against – just the acceding obligor company or all obligor companies?
Importance of the guaranteed obligations
More often than not, cross-group security will be created by way of a cross guarantee backed up by a debenture from each of the obligors in the group. This may be created by way of a single document or several separate documents. What is important to consider where you have a new obligor acceding is the definition of secured/guarantees liabilities (or equivalent). That is: what is actually secured and guaranteed?
Where “all monies” group security is taken, the guarantee element will usually involve each company guaranteeing money owed by each other company from time to time (whether owed at the time the guarantee is taken or in the future). This may already contemplate changes to the guarantors to take into account future changes in the group, or it may need to be amended to ensure that the sums guaranteed by the existing companies include anything owed by the new guarantor. But standard guarantees are not charges and do not require registration.
Each guarantor then also grants a debenture (whether in one document or separate documents) securing sums owed by each of them under the guarantee. So any change as a result of the accession is to sums that may be owed under the guarantee which should automatically be caught by the security itself. This removes the need for re-registration of the security against each group company when a new company accedes. The security must, however, still be registered against the new obligor. The accession deed may not include the full terms of the security itself so it can be useful to include it as an appendix so that it is clearly available on a Companies House search against that new obligor.
A note of caution – case-by-case
As with any transaction the position depends heavily on the actual drafting of the documentation. It is therefore important that, in any event, the existing guarantee and security documents be reviewed prior to any accession to ensure the accession can take place as envisaged, that security continues to be effective and whether or not re-registration is prudent in the circumstances.
There are also other matters to consider when a company accedes to group security, such as commercial benefit and your solicitor can advise you about these when reviewing the documents.
If you don’t have a guarantee and have direct third party security then the situation can also be different and should be considered in detail by reference to the documents before a decision whether or not to register against all companies or just the acceding company should be taken.
Finally, there are also scenarios (particularly with less common types of security) where lenders prefer to re-register against all companies anyway. For example, so that it is clear from a search of the public register against any of the companies who all the obligors involved are.