TURKS & CAICOS Law and Practice Contributed by: Oliver Chapman and Chris Smith, Griffiths & Partners Attorneys
ment, and the other security instruments can be described as “collateral” , “auxiliary” , “additional” or “substituted” , attracting a fixed rate of duty of USD10. Most other instruments and documents are sub - ject to a fixed rate of stamp duty in compara - tively nominal amounts. Registrable instruments (such as legal charges over real estate) are also subject to relatively immaterial registration fees. It is customary for stamp duty and registration fees to be paid by the borrower. 3.5 Legal Requirements Before an Entity Can Give Valid Security There are no legal rules or requirements that must be complied with before an entity can give valid security. They must, however, be empow - ered to do so or not restricted from doing so by their constitutional documents. Often, only board approval is necessary although the entity’s constitutional documents should be checked for any further requirements or approvals. It would be prudent to obtain shareholder approval in any case where an entity is guaranteeing or pledging assets as security for another party’s liabilities. 3.6 Formalities When a Borrower Is in Default In terms of charges registered against Turks and Caicos real estate, the security is enforceable pursuant to its terms in conjunction with the pro - visions of the Registered Land Ordinance. The Registered Land Ordinance provides a stat - utory power of sale by public auction, power to lease and power to appoint receivers. Common - ly, a legal charge will vary and extend the statu - tory provisions to give the lender wider powers. To the extent that the powers contained in the legal charge vary or are in addition to those cre -
ated by the Registered Land Ordinance, they may not be acted on without the order of the court, and a court order is required to exercise a power of sale by private treaty. If a court order is required, this can typically take up to three months to obtain. Where a lender has entered into a facility with a company, as opposed to an individual borrow - er, a separate fixed and floating charge, known as a debenture, is taken over all assets of the borrower company and contains wide-ranging powers, including the appointment of a receiver. This provides a lender with a quicker route to gaining control in the event of default. A share pledge agreement entered into between the par - ties so that if the borrower defaults, the lender can enforce the provisions of the share pledge agreement and have the shares in the borrower company transferred to it, is also typically seen. The lender then becomes the legal holder of the shares in the company that owns the property and circumvents the need to obtain a court- ordered power of sale if they wish to sell the property by private treaty. This route is seldom used as a transfer duty of 8% of the market val - ue of the underlying real estate assets would be payable on the transfer of the shares. Priority of legal land charges is determined by registration at the Land Registry. The lender’s ability to foreclose or realise on col - lateral on real estate lending is not recognised under local law. A foreclosure can be achieved in effect where the debt equals or exceeds the market value of the underlying assets, but as with a share transfer, the transfer of real estate attracts a duty (of 10%) and is rarely used as it is not an efficient route to enforcement.
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