The following Banking & Finance guidance note provides comprehensive and up to date legal information covering:

  • Pledges
  • What is a pledge?
  • Meaning of 'special property' or 'special interest'
  • What type of assets can be pledged?
  • The need for possession to constitute a pledge
  • Issues relating to possession when taking a pledge
  • Perfecting a pledge
  • Pledges and priority
  • Enforcement of pledges

A pledge is one of the four types of security recognised under English law; the types of security are described in Practice Note: Types of security.

This Practice Note explains:

  1. what a pledge is

  2. the type of interest created by a pledge

  3. the type of assets which can be pledged

  4. how to perfect a pledge

  5. priority issues in relation to pledges, and

  6. how to enforce a pledge

For ease of reference, in this Practice Note:

  1. the 'pledgor' refers to the party providing the pledge (which may in practice be the borrower or a third party security provider)

  2. the 'pledgee' refers to the party to which the pledge is granted (which, in practice, is likely to be the lender or possibly a security agent), and

  3. the 'secured obligations' refers to the obligations expressed to be secured by the pledge (eg the obligations of a borrower to a lender under a facility agreement)

For an explanation of some of the key reasons why a lender might want to take security for a borrower's obligations under a loan, see Why do lenders take security?

What is a pledge?

A pledge is a type of security interest created:

  1. by transferring the possession of an asset

  2. by way of security for a debt or the discharge of obligations

  3. with an intent to pledge

A pledge