Priority of security rights that are not effective against third parties

(a) A security right in an asset that is not effective against third parties is subordinate to a security right in the same asset that is effective against third parties, without regard to the order in which the security rights were created and

The law should provide that a security right that is effective against third parties has priority over the rights of unsecured creditors.

The law should provide that a secured creditor with a security right that is not effective against third parties has towards third parties no right other than as an unsecured creditor priority over unsecured creditors unless the unsecured creditor has taken steps to reduce its claim to a judgement or the grantor has become insolvent .

The law should provide that, if a security right has been effectively created in a negotiable instrument, the secured creditor also has a security right in accessory rights with respect to the negotiable instrument without a new act of transfer. Such accessory rights may include

Effectiveness of security rights in insolvency

Security rights in intangible property

In any event, conflict of laws rules would be useful in order, for example, to help secured creditors determine how to make their security rights effective against third parties.

In the insolvency of a non grantor debtor, the creditor is an unsecured creditor with an unsecured claim against the non grantor debtor.

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Effectiveness of the security right against third parties

(b) Priority among security rights that are not effective against third parties is determined by the order in which they were created.

Key objectives of an effective and efficient secured transactions regime

However, the security right is not effective against the depositary bank, the depositary bank has no duty to recognize the secured creditor and no obligations are otherwise imposed on the depositary bank with respect to the security right, without the depositary bank's consent.

(jj) Non possessory security right means a security right in (i) tangibles that are not in the actual possession of the secured creditor or another person holding the tangibles for the benefit of the secured creditor, or (ii) intangibles.

Effectiveness of acquisition security rights against third parties

(d) Automatically upon creation of a security right in the receivable supported by an independent undertaking.

A security right will also have little or no value to a creditor unless the creditor is able to enforce the security right in a predictable and efficient manner.

Only exceptionally could an invalid reservation be considered to be null and void.

(c) Obtain security rights in a simple and efficient manner

Such a reservation would simply be null and void.

Creation of the security right (effectiveness as between the parties)

Measures to ensure accountability and effective disciplinary action

An incompatible reservation would be null and void, irrespective of the reaction of other States parties.

The law should provide that, if a security right in encumbered assets is effective against third parties, the security right in the proceeds is effective against third parties as soon as the right in the proceeds is created provided that

Priority of security rights that are effective against third parties

The law should provide that a secured creditor with a security right in fixtures in immovables that has been made effective against third parties under real property law has priority over a secured creditor with a security right in those fixtures that has been made effective against third parties by one of the methods referred to in recommendation 55.

Thus, secured creditors seeking to achieve third party effectiveness by registration for security rights in the specified types of assets and in intangible property will need to comply with the registration system of only one State.

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(g) Security agreement means an agreement between a grantor and a creditor, in whatever form or terminology, that creates a security right.

If a security right is effective against third parties at the time when the encumbered assets become fixtures in movables, the security right in the encumbered assets remains effective against third parties.

An insurance contract is null and void if the applicant has no insurable interest in the subject matter of the insurance.

The Court may also release a convicted woman, not punishable with death or imprisonment for life, on probation of good conduct, by executing a bond, with or without sureties (Section 562 CrPC).

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(p) Assignment means the creation of a security right in a receivable or the transfer of a receivable, whether the transfer is for security purposes or is an absolute outright transfer.

If the State in which the grantor is located recognizes registration as a method of achieving effectiveness against third parties of a security right in any of the following types of encumbered assets, the law of that State determines whether the effectiveness against third parties of a security right in such encumbered assets has been achieved by registration under the laws of that State

To the extent that the value of the encumbered asset is insufficient to satisfy the secured creditor's claim, the secured creditor may participate as an ordinary unsecured creditor.

(b) Where a security right may be made effective against third parties by control, that security right has priority over a security right made effective against third parties by any other method.

The purpose of conflict of laws rules is to determine the law applicable to each of the following issues the creation of a security right the pre default rights and obligations between the secured creditor and the grantor the effectiveness of a security right against third parties the priority of a security right over the rights of competing claimants and the enforcement of a security right.

In that connection, a comparison was made between the position of a certification authority that guaranteed the correctness and the validity of a foreign certificate and that of a financial institution that guaranteed a letter of credit issued by a foreign bank.

The view was also expressed that the question of the validity of reservations should be considered together with the question of the legal consequences of invalid reservations.

(f) The possible repercussions for secured transactions and secured creditors in the way in which corporate groups are treated in insolvency.

He reiterates that diplomatic assurances are not legally binding and undermine existing obligations of States to prohibit torture, are ineffective and unreliable in ensuring the protection of returned persons, and therefore shall not be resorted to by States.

The law should provide that a security right in the proceeds from the drawing under an independent undertaking that has been made effective against third parties

Instead, such a reservation should be considered invalid and without legal effect.