Main changes
Effect on existing security interests
Tangible movables


The creation of security over intangible movables under Jersey law is now governed by the Security Interests (Jersey) Law 2012, which came fully into force on January 2 2014. The new law replaces the Security Interests (Jersey) Law 1983.

Main changes

More flexible methods of creation
The new law provides for the creation of security by control, possession or description and registration. The creation of security by control occurs when:

  • in the case of a bank account:
    • the account is transferred into the name of the secured party;
    • the account bank agrees to act on the secured party's instructions;
    • title to the account is assigned to the secured party; or
    • the secured party is the account bank;
  • in the case of a custody or securities account:
    • the account is transferred into the name of the secured party;
    • the intermediary maintaining the account agrees to act on the secured party's instructions; or
    • the secured party is the intermediary; and
  • in the case of a certificated investment security, the secured party is registered as the holder or takes possession of the certificate representing such investment security.

The creation of security by possession occurs when, in the case of a negotiable instrument or negotiable investment security, the secured party takes possession of the instrument or relevant certificate. Finally, security can also be created through description of the collateral without the requirement for any title transfer, provided that the security interest is registered at the Jersey security interests register.

Online register
The new law introduces a centrally maintained online register, accessible to the public. Registration will be an integral step for perfection where security is taken by the collateral being described in the security agreement (rather than by possession or control). Searching the register will also become relevant for new lenders. An important carve-out from the registration regime also exists where the grantor is the trustee of a private trust.

Clearer priority between competing secure parties
The new law sets out clear principles on priority, including that control security interests will have priority over security interests created by description and by registration. This gives comfort to secured parties on enforcement.

Charge back
The new law expressly provides that an account bank can take security over a deposit account held at the bank by the grantor, and that a custodian can take security over its obligation to redeliver securities and money to the holder of the securities account.

Power to take security over after-acquired collateral
The old law did not permit an equivalent to the English floating charge. Rather than permitting a floating charge as such, the new law allows a security interest to attach to all intangible movables acquired from time to time by the debtor.

Clarification as to creation of third-party security
The old law was unclear as to the validity of third-party security, leading to the market practice of requiring a third-party security provider to enter into a limited recourse guarantee in respect of the primary debtor's obligations. The new law makes it clear that third-party security is permitted without the need for a guarantee.

Clarification as to level of control ceded to grantor
Some concerns about the old law had been raised as to whether the grantor being given a right to deal with the collateral could impact on the validity of security. The new law makes it clear that the grantor can retain the right to deal with the collateral without the validity of the security interest being affected.

Wider powers of enforcement
Under the old law, a secured party's rights on enforcement were limited to a power of sale. The new law permits a power of appropriation and step-in rights, as well as making it clear that the secured party may take wider ancillary actions in support of enforcement.

Removal of 14-day statutory grace period on enforcement
The old law provided that where the event of default complained of is 'capable of remedy', the power of sale was exercisable only after the expiry of a 14-day period after notice had been served on the grantor. The new law allows this period to be excluded by agreement with the grantor, although it will be necessary to check the security interests register for interests of third parties and to confirm no notices of such interests have been directly received.

Effect on existing security interests

Transitional provisions apply – although the new law is now in force, an existing security interest will continue to be effective as a valid security interest under the old law. However, if new collateral beyond that envisaged in the original agreement is added to the old security interest, it will be deemed a security interest created under and subject to the new law.

Therefore, a secured lender should be aware of the consequences of any such amendments and should:

  • make sure that any amendments to the security agreement include any provisions necessary to take advantage of the new law; and
  • check whether, depending on the nature of the collateral, any registration of the security is necessary in order to ensure continued perfection.

Tangible movables

The old law applied only to security over intangible movables. This will not be changed by the new law in its initial form. However, the second stage of the process of updating the new law will be extended to tangible movables.

For further information on this topic please contact Matthew Swan at Ogier by telephone (+44 1534 504 000), fax (+44 1534 504 444) or email (matthew.swan@ogier.com). The Ogier website can be accessed at www.ogier.com.