When a lender makes a loan to a borrower the lender will also want some form of security in exchange for giving the loan, which is designed to protect the lender's position in the event the borrower fails to repay the loan. If the lender wants to have security for the sum that has been borrowed there will generally be two different agreements: 

1. a Loan Agreement which covers the borrowing (also called a “Credit Agreement” or “Facility Agreement”); and
2. a security document such as a Debenture which sets out the terms of the security given to the lender in return.

A Debenture secures a loan using the borrower's assets and all terms and conditions and warranties are recorded in the Debenture.

Companies borrow finance from a range of sources and there are different types of charges that a lender may take in order to have security for the sum borrowed. Security over the company's assets is usually in the form of an 'all-monies' Debenture, secured with fixed and floating charges over all the company's assets. Thus, a Debenture is a written agreement between a lender and a borrower that records the details of the parties to the loan and sets out the charges the lender will have i.e. "fixed" and/or "floating" charges over the assets of the company.

Security created by a company needs to be registered at Companies House; if the charge affects land it may also need to be registered at the Land Registry or in the case of unregistered land with the registrar of land charges.

Every type of charge on a company's assets must be registered at Companies House within 21 days of the creation of the charge. Failure to do so renders the charge void against the company's administrator or liquidator, or any creditor of the company. This means that the debt for which the charge was given will remain payable, but it will be unsecured. It is important to note that as security is taken as protection against insolvency, the fact that a charge is not valid as against a liquidator or administrator means that the security will effectively be worthless if not registered.

N.B. Failure to register any charge at Companies House within 21 days of the creation of the charge renders the charge void against an administrator, liquidator or another creditor, however, the charge remains valid against the company.

The statutory duty to register the charge rests on the company and its officers, but the lender is entitled to register the charge on the company’s behalf so as to ensure that the priority of the charge is not lost.

N.B. If a registrable charge is not registered in time, then the company that created the charge and every officer of the company who is in default are liable to a fine.

In order to register the Debenture the following documents must be filed with Companies House within 21 days of the date of creation of the charge: 

• The Debenture
• The Loan Agreement
• The relevant Form (Form MG01 for a charge created before 6 April 2013 & Form MR01 for a charge created on or after 6 April 2013),
• The required Fee

N.B. When a charge has been created the company also has a duty to update its register of charges however failure to do so will not affect the validity of the security.

Please note that even if the company does not need to inform Companies House that it has fully or partly paid off a charge, generally when a charge is released it is in the interest of the company to lodge with Companies House a memorandum of satisfaction using Form MR04 (regardless of whether the charge was originally created before, on or after 6 April 2013).

Finally, it is clear that a Debenture over a borrower’s assets is an invaluable document as it gives the holder priority rights for repayment should the company become insolvent. Furthermore this Debenture also contains a clause giving the lender the right to appoint a receiver.

This Debenture template contains the following clauses:

1. Definitions and Interpretation
2. Borrower's Obligations
3. Security
4. Crystallisation
5. Borrower's Representations and Warranties
6. Borrower's Undertakings and Covenants
7. Borrower's Liability
8. Enforcement
9. Receivers
10. Powers of Sale
11. Accounts
12. Attorney
13. Sums Received
14. Indemnities
15. Release
16. Confidential Information
17. Variation
18. Severance
19. Waiver
20. Rights of Third Parties
21. Assignment and Subcontracting
22. Entire Agreement
23. Succession
24. Notices
25. Governing Law and Jurisdiction

SCHEDULE 1

SCHEDULE 2

SCHEDULE 3

This Debenture is in Microsoft Word format, written in plain English, easy to use and edit.