Standard Form Bank Debentures

Solicitors acting for borrowers are frequently presented with forms of debenture or mortgage debenture which are intended to secure their clients’ liabilities to the lending bank. The solicitors should advise the client on the nature of the commitment to follow from the client’s execution of the debenture.

In many cases these debentures are pre-printed and include provisions which are not appropriate to the particular loan.

In considering whether the debenture is in an appropriate form, the solicitor should have sight of the bank’s loan offer to the client. The debenture should not do any more that enable the bank to take security in the form agreed to by the client. In certain forms of debenture the bank in addition to taking a floating charge will also seek to take a fixed charge over future acquired assets. Apart from the consideration of the validity of such specific provisions, particularly relating to future acquired registered land, the facility offered to the client by the bank may not in the first instance have provided for such a charge. The solicitor should protect his client from executing a debenture which reserves to the bank security over and above what was provided for by the bank in the loan offer letter and accepted by the client.