Legal Aspects of Bank Securities

Having a solid understanding of collateral and under what circumstances banks take collateral from clients is essential to all bankers working in a credit environment, especially those working directly with clients (Business Bankers and Relationship Managers). 

This programme will deal with the LEGAL ISSUES relating to bank security, and thus combines an academic understanding with a practical application. However, it is not essential that all learners have a background to law, as the necessary academic references will be explained.

On completion of this programme, the students will be able to :

• Understand their role and responsibilities when taking security
• Understand the contractual capacities of individual and business entities
• Understand the legal implications related to security documents
• Understand the security documents and supporting documents required for individuals
• Understand the security documents and supporting documents required for business entities
• Have acquired practical experience after completing the case studies

Part 1 : General

After completion of the learning process the students will be able to :

• Define the meaning of Security
• Define the role of security in a banking context
• Explain the functions of security
• List the characteristics of good security versus unacceptable security
• Understand the problems associated with the realisation of securities
• Distinguish between basic types of security
• Describe the different types of security documents : Cessions, pledges, suretyships, mortgage bonds and notarial bonds
• Explain the requirements with regard to the completion of security documents including the dating and signing of the documents.
• Understand and explain the importance of the correct witnessing of security and related documents.
• Explain the requirements for the signing of securities under general and special power of attorney. 
• Describe the security management process
• Explain how the bank calculates the value of security
• Discuss the factors that affect the legality of securities in general
• Understand their vital role in ensuring the correctness of security documents
• Understand the Impeachable Transactions in the Insolvency Act and the effect they have on security documentation

Part 2 : Security Documents

After completion of this learning process the delegate will be able to :

• Understand and describe how and when the following documents are used :
  • Suretyships
  • Cessions
  • Pledges
  • Mortgage Bonds
  • Notarial bonds – General and Special notarial bonds

Part 3 : Individuals

• Define the concept of contractual capacity for individuals
• Identify how to establish the contractual capacity of various types of individual borrowers with regard to amongst others:
  • Minors
  • Insolvents
  • Rehabilitated insolvents
  • Under judicial management
  • Mentally incapacitated
  • Illiterate
  • Under debt counselling
• Explain the legalities around the different types of marriages
• Explain the contractual capacity of married persons with regard to all the many different types of marriages in South Africa including :
  • Married in Community of Property
  • Married by ante nuptial contract 
  • Married by Muslim and Hindu rites
  • Married in a country outside of South Africa
  • Married by tribal custom
• Describe the characteristics of different types of security that can be obtained from individuals
• Explain how to collect the required supporting documents
• Discuss the factors that affect the legality of the security
• Apply the principles learnt to the workplace by use of case studies

Part 4 : Business Entities

• Describe the concept of a legal entity
• Explain the following in detail around the different business entities :
  • Nature of the entity
  • Contractual/ legal capacity
  • Who is it owned by/ who is it managed by ?
  • Advantages and disadvantages of such an entity
  • Country laws around the business entity
  • Accounting requirements and Tax laws
  • Characteristics of the specific type of security that can be taken from entity concerned
  • Who signs the security and how do they sign it
  • All supporting documents required to be taken with the security
• The business entities are as follows :
  • Sole proprietors
  • Partnerships
  • Informal bodies
  • Trusts
  • Private Companies
  • Public companies
  • Body corporates
• Apply the principles with regard to contractual capacity of business entities
• Discuss the factors that affect the legality of the security
• ply the principles learnt to the workplace by use of case studies