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Collas Crill explains… Taking security over Guernsey contract rights

This is part of a series of guides in which we examine areas of Guernsey law that frequently arise in practice. Further guides will be released weekly; click here to subscribe to receive these by email.

Where a company borrows money or participates in a group financing, the lender's security package will frequently involve taking security over certain Guernsey contract rights.

This guide looks at the key things you need to know about taking security over Guernsey contract rights. For example, if a borrower has provided an intra-group loan to its subsidiary company (and that loan is governed by Guernsey law) then the borrower can grant a security interest over its rights to the receivables (amounts) due on that loan (principal and/or interest).

Words in bold text are defined at the end of this guide. 

Preliminary steps

A security taker should take the following preliminary steps before taking security over Guernsey contract rights:

  • Review the Contract to determine whether there are any terms that will restrict its ability to create a security interest over the Guernsey contract rights (e.g. any prohibition on the security giver assigning those rights) that may require the counterparty to give consent or waive any restriction.
  • Agree a form of security notice and security acknowledgement with the other parties to the Contract.
  • If the security giver is a Guernsey company, to ensure that there is no publicly filed evidence that the security giver is insolvent or subject to any insolvency or similar proceedings, carry out:
  • a company search at the Guernsey Companies Registry; and
  • a litigation search at the Greffe (the registry office of the Guernsey courts).

Security basics

The Law sets out a statutory framework for creating security interests over Guernsey intangible movable assets, like Guernsey contract rights.

Under the Law, a security interest is any interest in Guernsey contract rights created under a security agreement which secures the payment or performance of an obligation.

A security interest over Guernsey contract rights may only be created by a security agreement between the security giver and security taker. Under the Law, such security agreement must specify events of default.

Under the Law, security may be granted over Guernsey contract rights by the security giver assigning its rights and title to certain Guernsey contract rights to the security taker.

Security deliverables

The security giver will normally be required by the security agreement to deliver the following documents to the security taker:

  • a certified copy of the Contract;
  • a security notice addressed to each other party to the Contract from the security giver and security taker; and
  • a security acknowledgement addressed to the security taker from each other party to the Contract.

Where the Contract has terms that may adversely impact the security taker's security interest over the Guernsey contract rights, these will need to be amended, waived or disapplied. If this is done in the security acknowledgement (which would be usual practice unless any prior waiver or consent needs to be provided), it is vital that each of the security notice and security acknowledgment are agreed in advance and signed on the same day as the security agreement.


There is no public register of security interests in Guernsey.  


Subject to any agreement of a secured party for the postponement of its rights, priority between security interests in the same Guernsey contract rights is determined by the order of creation of those security interests.



If a security interest over Guernsey contract rights becomes enforceable, the security taker will use its power of sale and application under the Law to apply its rights in order to satisfy the secured obligations set out in the security agreement. For example, a security taker or its nominee may 'step into the shoes' of the receiver of certain receivables under an intra-group loan agreement to receive payments under such Contract.


The Law allows the security taker to enforce its security interest if:

  • an event of default under the security agreement occurs; and
  • it gives a notice to the security giver specifying the event of default.

There is no specified timeframe under the Law in which notice needs to be given prior to an enforcement.

Insolvency of security giver

The Law states that the power of the security taker to apply or otherwise act in relation to Guernsey contract rights is not affected by:

  • the security giver becoming insolvent; or
  • its property becoming subject to insolvency proceedings in Guernsey or elsewhere.

In addition, if the security giver goes into administration, there is a specific exemption from having to obtain the leave of the Guernsey court for the enforcement of any rights in respect of security interests.

Neither administration nor liquidation creates an automatic moratorium over the enforcement of a security interest under the Law.

Terms used

Contract - any contract entered into by the security giver which is governed by Guernsey law

Guernsey contract rights - all rights of the security giver under a contract (including any payment owed to, or claim or cause of action of, the security giver) over which the security giver creates a security interest

Law - The Security Interests (Guernsey) Law, 1993

Security giver - the person who creates a security interest over the Guernsey contract rights

Security taker - the person in whose favour a security interest is created over the Guernsey contract rights


About Collas Crill

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About this guide

This guide gives a general overview of this topic. It is not legal advice and you may not rely on it.  If you would like legal advice on this topic, please get in touch with one of the authors or your usual Collas Crill contacts. 

This note is a summary of the subject and is provided for information only. It does not purport to give specific legal advice, and before acting, further advice should always be sought. Whilst every care has been taken in producing this note neither the author nor Collas Crill shall be liable for any errors, misprint or misinterpretation of any of the matters set out in it. All copyright in this material belongs to Collas Crill.