Cap. 16 Art. 2095FAgreement establishing security.

(1) Security by title transfer is a contract whereby the debtor, or a third party for the debtor, transfers or assigns movable things, whether by nature of by operation of law, so as to secure a present or future obligation, to:

(a) a creditor or creditors, present or future; or

(b) to a third party, who shall thereby be considered to be a trustee for the benefit of a creditor or creditors, present and, or future and subordinately for the debtor in accordance with article 2095E. In this title:

(i) the term "creditor" shall include both the creditor and a third party security trustee for the creditor; and

(ii) the terms "debtor" and "transferor" may refer to the same person or to different persons depending on the circumstances and the term "debtor" shall include the transferor unless the context requires otherwise.

(2) Subject to the observance of such formalities as may be required in case of particular types of movable property, ownership of the property is acquired by the creditor as soon as the debtor and, or the transferor and the creditor enter into an agreement in writing designating:

(a) the property being transferred;

(b) the secured obligations, which may be existing or future obligations; and

(c) the rights of the transferee in case of default as stipulated in the agreement.

(3) For the purposes of the preceding sub-article -

(a) when the property being transferred consists of debts and other monetary obligations the inclusion in the agreement of a list of debts arising from a written or legally equivalent instrument shall be sufficient;

(b) when the transfer of property refers to a large amount of debts or to a class or classes of debts, present or future, the provisions of articles 9 to 14 of the Securitisation Act shall apply with mutatis mutandis such amendments as are required paying regard to the fact that in lieu of a transfer for the purposes of a securitisation, the parties may agree to a transfer of the same assets for the purpose of security.

(4) Such agreement may also designate:

(a) the rights of the transferee in the event of a breach of the secured obligations; and

(b) the rights of the transferor in case of payment or other extinction of the secured obligations; and

(c) the manner in which the property is to be valued when rights of sale or set-off are exercised by the creditor, and such agreement shall take effect in accordance with its terms. In the absence of terms of agreement on the matters stated in this sub-article, the provisions of this title shall apply.

(5) Where the property being transferred by way of security is of a kind which may be transferred by mere delivery, an agreement in writing as provided for in sub-article (2) shall be required for the transfer of such property. Without prejudice to the rights of third parties acting in good faith, the creditor may agree that the debtor use the property so transferred.

(6) A transfer by way of security of debts and other rights shall be operate between the parties from the moment when the agreement referred to in sub-article (2) is made.

(7) A transfer by way of security shall operate as a transfer with regard to third parties:

(a) in the case of debts and rights against an obligor, when notice is given in accordance with the article 1471 or the obligor of the assigned right has acknowledged the assignment; or

(b) in the case where the rights consist of property, where there is no obligor and where the title to which is registered in a public registry, the effects of the transfer shall arise when the transfer is registered in the relevant register. For the purposes of article 1471, notice in writing may be given by any means, including by electronic means, and it shall not be required that notice be made by judicial act.

(8) Apart from the case contemplated in article 1472(b), when a further assignment of a debt or other right is made by way of security and is notified to the debtor or registered in accordance with sub-article (7), the effects of the subsequent assignment shall arise only on the termination of the effects of the prior assignment and the rights of the subsequent assignee are conditional thereon. Except where the subsequent assignment is made with the written consent of the prior assignee and subject to the terms of such consent, the prior assignee shall have no obligations towards any subsequent assignee.

(9) The consideration for a transfer by way of security shall be the grant and acceptance of security, and the provisions of Title VI of Part II of Book Second as to "price" shall not apply to such transfers.

(10) For all effects and purposes, the creditor to whom the property has been transferred shall be considered to be the absolute owner of the property so transferred and such property shall not form part of the patrimony of the debtor.

(11) A transfer made in accordance with the provisions of this title:

(a) shall not be subject to re-characterisation as any other contract and shall take effect in accordance with its terms; and

(b) shall be enforceable in accordance with the terms of an agreement made in accordance with sub-article (2) and the provisions of this title notwithstanding the bankruptcy or insolvency of the debtor of the debt or the grantor of security by title transfer or the commencement or continuation of any insolvency or winding up proceedings or re-organisation measures.

(12) The fruits of the property transferred by way of security shall be deemed to form a part of the property and shall be subject to all the rights of the creditor as stated in this Title.