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PPSA - Asset Specific Rules and Perfection, Lecture No. 2
PPSA - Asset Specific Rules and Perfection, Lecture No. 2
ASSET-SPECIFIC RULES
i. Future property
ii. Rights to proceeds and commingled funds
iii. Tangible assets commingled in a mass
iv. Accounts receivables
ASSET-SPECIFIC RULES: FUTURE PROPERTY
property received in
exchange of original
collateral
SEC. 3 • upon sale, lease
(F) PROCEEDS
• collected on or distributed
with respect to collateral,
• claims arising out of the loss
or damage, right to insurance
payment or other
compensation
ASSET-SPECIFIC RULES: TANGIBLE
ASSET COMMINGLED IN MASS
Proportion is 50-50
30,000 18,000
Supplier A has supplied P10,000 of grain, Supplier A (2/6) P6,000 of grain,
Supplier B has supplied P15,000 of grain, and Supplier B (3/6) P9,000 of grain, and
Supplier C has supplied P5,000 of grain. Supplier C (1/6) P3,000 of grain.
ASSET-SPECIFIC RULES: ACCOUNT RECEIVABLE
CONTRACTUA
L LIMITATION
Agreement limiting
ON THE grantor’s right to create a
CREATION OF security interest:
A SECURITY
INTEREST IN
ACCOUNT
RECEIVABLE VOID
(ON ACCOUNT
RECEIVABLE). Security Interest still
No effect on
obligation or liability
effective
— of the grantor
ASSET-SPECIFIC RULES: ACCOUNT RECEIVABLE
accounts receivable
ASSET- arising from:
SPECIFIC • (1) A contract for the supply or
RULES- lease of goods or services other
ACCOUNT than financial services;
• (2) A construction contract or a
RECEIVAB contract for the sale or lease of
LE real property; and
• (3) A contract for the sale, lease
or license of intellectual
property.
ASSET-SPECIFIC RULES: ACCOUNT RECEIVABLE
SECTION 12.
MEANS OF PERFECTION.—
SECTION
Security — shares, participation or interests in a corporation or in a
commercial enterprise or profit-making venture and evidenced by a
certificate, contract, instruments, whether written or electronic in
character. It includes but is not limited to:
IRR
(ii) Investment contracts, certificates of interest or participation in
a profit=sharing agreement, certificates of deposit for a future
subscription;
(iii)Fractional undivided interests in oil, gas or other mineral
SECURITI rights;
(iv)Derivatives like options and warrants;
(v)Certificates of assignments, certificates of participation, trust
DERIVATIVES
Derivatives – financial investment, including options and warrants
whose value depends on the interest in or performance of an
underlying security, but which does not require any investment of
principal in the underlying security.
PERFECTION OF SECURITY INTEREST
SECURITIES
Warrants – are rights to subscribe or
purchase new shares or existing shares
in a company, on or before a
predetermined date, called the expiry
date, which can only be extended in
accordance with Exchange rules.
Warrants generally have a longer
exercise period than options.
PERFECTION OF SECURITY INTEREST
OPTIONS
Options – are contracts that give the buyer the right, but not the
obligation, to buy or sell an underlying security at a predetermined price,
called the exercise or strike price, on or before a predetermined date, called
the expiry date, which can only be extended in accordance with Exchange
rules.
Call options – are rights to buy.
Put options – are rights to sell.
PERFECTION OF SECURITY INTEREST
PERFECTION OF SECURITY INTEREST
COMMODITY
CONTRACT, IRR SEC
1.05 (a)
— a commodity futures contract, an option on a
commodity futures contract, a commodity option,
or another contract if the contract or option is:
(i) Traded on or subject to the rules of a board of
trade that has been designated as a contract
market for such a contract; or
(ii) Traded on a foreign commodity board of Commodity – means any goods, articles,
trade, exchange, or market, and is carried services, rights and interests, including any group or
on the books of a commodity index of any of the foregoing, in which commodity
intermediary for a commodity customer; interests contracts are presently or in the future dealt
in.
PERFECTION OF SECURITY INTEREST
SEC. 12 A SECURITY
INTEREST IN ANY
TANGIBLE ASSET MAY
BE PERFECTED BY
REGISTRATION OR
POSSESSION.
PERFECTION OF SECURITY INTEREST
A security interest in tangible
assets may be perfected by
either:
• Registration
Section 4.02, • Possession, whether actual or
constructive, of the tangible asset either
IRR by the secured creditor or a depositary
Means of acting for the secured creditor. Provided,
Perfection — that the debtor or the grantor cannot
possess the collateral on behalf of the
Tangible secured creditor for purposes of
Assets — perfecting and maintaining the security
interest over such collateral.
PERFECTION OF SECURITY INTEREST The priority of security interests and liens on the
same collateral
Time of
Perfection except
Perfection by Control
1.Automatic – Banks and Intermediaries are the secured creditors
2.By execution of Control Agreement – investment property that are not electronic security whether
or not held by intermediaries; investment property are electronic security held by intermediary
3.Notation of the security interest in the books - for an investment property that is an electronic
security not held with an intermediary
PERFECTION OF SECURITY INTEREST
Perfection by Control
Perfection
Control Agreement
by Control
Notation-Electronic Securities without
Intermediary
Intermediated
Intermediary Securities account
securities
Sec. 1.05, (o) Sec. 1.05, (p)
Sec. 1.05, (p)
PERFECTION OF SECURITY INTEREST
POSSESSION
OF SECURITY security interest in negotiable document
OF
CERTIFICATE:
PRIORITY Priority and Right of Retention by
over Orientation of Law
REGISTRATION
PERFECTION OF SECURITY INTEREST
Person who:
(c) by the conclusion of control agreements is determined on the basis of the time
of conclusion of the control agreements.
PERFECTION OF SECURITY INTEREST
PARTIES AGREEMENT
(1) securities issuer or the intermediary, issuer or the intermediary
the grantor and the secured follow instructions from
Section 3 creditor, the secured creditor
(b) Control
agreement – (2) deposit account
deposit-taking institution,
the grantor and secured
deposit-taking institution
to follow instructions from
creditor, the secured creditor
commodity intermediary
will apply any value
grantor, secured creditor, distributed on account of
(3) commodity contracts
and intermediary the commodity contract as
directed by the secured
creditor
PERFECTION OF SECURITY INTEREST (b)
(a) disposition of the
disposition of collateral collateral and
Section 14. and proceeds are in the proceeds are in a
form of form different from
1. money, money, accounts
Perfection in 2. accounts receivable, receivable,
negotiable
3. negotiable
Proceeds.— instruments or instruments or
deposit disposition
4. deposit accounts.
of the collateral
security interest in
security proceeds must be
interest shall perfected by means
extend to applicable within
proceeds 15 days after
grantor receives
proceeds
PERFECTION OF SECURITY INTEREST
SECTION 16.
ASSIGNMENT OF SECURITY INTEREST.—