COLLATERAL CONTROL SERVICES FOR BANKS, TRADERS & SUPPLIERS EUROPE | MENA | EURASIA | WEST AFRICA | EAST AFRICA | SOUTHERN AFRICA | SOUTH ASIA | FAR EAST | LATAM www.aceglobaldepository. COLLATERAL CONTROL SERVICES CONTENT ACE Global Introduction and Services3-12 Transactional Finance Risk & Mitigants13-20 Business Process and Overview21-24 E5C- IT System.....25-29 Legal Appraisal and Definitions..30-32 Group Contact Details..33-34 2 COLLATERAL CONTROL SERVICES Structured trade finance and supplier credit requires effective monitoring, control and protection of title to goods, receivables and documents at all times during the transaction cycle. ACE GLOBAL DEPOSITORY and its affiliates have developed strategic partnerships with banks and vendors since 1996 to deliver on-site trading asset management services worldwide through our offices in 46 countries. Today we deliver bonded, cost-effective services appropriately designed to optimize our clients business objectives to either enhance their market share, reduce costs while mitigating client and suppliers risks along their supply chain ACE GLOBAL DEPOSITORY (ACE GLOBAL) is a leading Collateral Control organisation and provides sophisticated collateral control services using adequate credit support tools relevant in respect of field warehousing, collateral management, secured distribution, certified inventory control services and certified accounts receivable services, as well as field audits, inspection, monitoring, all to an international clientele. Our team comprises of operational experts , bankers, credit support personnel, legal advisors, financial officers and chartered accountants supported by the physical presence and field expertise of a worldwide network of trained inspectors, providing unique service in the field of international collateral risk management. Through its world-class systems and staff, ACE GLOBAL is able to identify and secure the weak links in value chains or design whole and entirely secured value chains for the account of its partners in any location. 3 COLLATERAL CONTROL SERVICES ACE GLOBAL A Snapshot FACTS Present in 46 countries worldwide Have provided Collateral Control and asset Management to 172 financial institutions Total assets in custody in excess of US$ 9 billion More than 4,800 employees HISTORY ACE GLOBAL, an international Collateral Control Company created in 1996 to assist : Banks, Financial Institutions to mitigate their
transactional risks inherent in local, regional and international trade. Emergent Countries to make safe the revenues from taxes and special taxation ACE GLOBAL commenced its operations in Uganda in 1996. By end of the year, ACE GLOBAL was present in 5 countries in Southern and East Africa. From 1999 to 2008, ACE GLOBAL extended its activities in 17 countries. Since 2009, ACE GLOBAL has expanded its network for another 26 countries. ACE GLOBALs near term target is to establish its presence in Eastern Europe and Central Asia. Currently own laboratories in 5 countries and is investing in new laboratories. International Certification : ISO 17020:2011 and ISO 9001: 2008. Grain and Feed Trade Association (GAFTA) & The Federation of Oils, Seeds and Fats Association (FOSFA) members. 4 COLLATERAL CONTROL SERVICES ACE GLOBAL - Operations Operation through ACE subsidiaries, affiliates and associates 1. 2. 3. Angola Albania Argentina 4. 5. 6. Benin Brazil Burkina Faso 7. Burundi 8. 9. 10. 11.
25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. 38. 39. 40. 41. 42. 43. 44. 45. 46. 47. 48. Malawi Mali Mauritania Mozambique Morocco Niger Nigeria Pakistan Rwanda Senegal Sierra Leone Singapore Somalia South Africa Sudan Switzerland Tanzania Thailand Togo Turkey Uganda Vietnam Zambia Zimbabwe Cameroun
Central African Republic Cote dIvoire Democratic Republic Congo 12. Dubai (UAE) 13. Djibouti 14. El Salvador 15. Ethiopia 16. Egypt 17. Gambia 18. Ghana 19. Guinea-Bissau 20. Guinea Conakry 21. India 22. Indonesia 23. Kenyaincorporation under process Company 24. Liberia Bahrain, Saudi Arabia, Romania, Panama, Kingdom of Lesotho, Chad, El-Salvador, Tajikistan Operations through Agents 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. Australia Belgium Bulgaria Bangladesh Canada Estonia France Germany Greece Italy/Chypre Jordan Libya Lebanon
14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. Mexico Mauritius Madagascar Portugal Romania Saudi Arabia Spain Syria The Netherlands Tunisia Russia Ukraine USA Venezuela 5 COLLATERAL CONTROL SERVICES ACE GLOBAL Professional Liability Insurance Cover To indemnify the insured against legal liability, costs or expenses arising out of insureds operation Area covered: Worldwide Limit of liability: The highest Professional Indemnity Insurance (PI) in the industry, per event and per occurrence. No claims made on PI since inception (20 years) 6
COLLATERAL CONTROL SERVICES 7 COLLATERAL CONTROL SERVICES Financing and Structuring Opportunities ACE GLOBAL Services 8 COLLATERAL CONTROL SERVICES ACE GLOBAL - Collateral Control Services ACE GLOBAL provides a One-Stop Shop across the commodity value chain. ACCS Local/ Regional Producers Crop Finance Transport/ Logistics Tanks/Silos Shipping Rail Pipelines Transport/ Logistics Transformers Refiners Mills Crushers Factories Breweries
Tanks/Silos Shipping Rail Pipelines Exporters/ Importers Distribution End Users Traders Countries Tax and Duty collection Existing relationship 9 COLLATERAL CONTROL SERVICES ACE GLOBAL Solutions Financial Structuring services Commercial Engineering services Operational Risk Management services General Services Structured Trade and Commodity Financing KYCC services Commodity profile
Contract Farming Services Trade Flow Facilitation Commodity Pricing Supervising Aid management Field Warehousing Collateral Management Secured Distribution Certified Inventory Control Certified Accounts Receivable Services Monitoring Field Audit and Inspection Consultancy Advisory Legal Training 10 COLLATERAL CONTROL SERVICES Services ACE GLOBAL conducts its own legal due diligence in respect of bespoke services offered viz. Field Warehousing: is essentially a method whereby a borrowers trading assets are used as security at the borrowers own premises for a loan or financing. It is a security instrument which enables the borrower, to deliver to the Bank legally valid documents of title and to grant a possessory pledge over goods stored in the borrower's own plant, mill, refinery or warehouse via the legal principle of Bailment. In order for a field warehouse and the lien created thereby to be recognized as valid, the possession of the Collateral Controller must be exclusive, notorious and continuous. All the ACE GLOBAL operating procedures have been devised to comply with this standard.
Collateral Management: Under Collateral Management operations, the storage premises are owned and operated by an independent third party without the influence of the borrower. Field Warehousing and Collateral management agreements hence differ inter alia, on the basis of the ownership, control and release mechanism within storage facilities. Under collateral management it is therefore essential to devise a methodology for maintaining control, custody and possession and for effecting release, all of which binds the third party to the Collateral Controller as per the mechanism agreed by the Bank. In such Collateral Management Operations, it is this third party which is the original goods father in respect of such goods i.e. on behalf of the owner of the goods which first deposits the goods with the third party for storage. Secured Distribution Services: This a specialized type of Field Warehousing developed to service the needs of suppliers of commodities who wish to retain ownership of the inventory they supply, or to have a possessory lien on the goods till such time that payments are received in full 11 against such inventory, and to regulate the delivery of the inventory to the Buyer. This service has COLLATERAL CONTROL SERVICES Contd. Certified Inventory Control : This is a service used by companies who would like to avail financing from banks but not by pledging their stocks specifically for this financing. Under Certified Inventory control, the company, ACE GLOBAL and the bank enter into a tripartite agreement. Since no lease is taken under Certified Inventory Control (as compared with field warehousing), the agreement provides that ACE GLOBAL shall have full right of ingress and egress to premises where inventory is stored, and that ACE GLOBAL shall have access to any of the companys inventory records which are necessary to render its service. The banker has ACE GLOBALs certificate to the extent that its reports are accurate and that the assets being controlled will not fall below an agreed minimum level. ACE GLOBAL will deliver to the Bank periodic reports and inventory certificates as and when required by the Bank. Certified Accounts Receivable Services : A companys book debts may be worth as much or even more than the stocks so any monitoring ACE GLOBAL provides would be enhanced by their inclusion. This can be done by employing many of the same techniques used in Certified Inventory Control. ACE GLOBALs survey for example, would include the handling of book debts as well as stocks. ACE GLOBAL then examines the companys books, verifies the balance if necessary, prepares an ageing analysis and includes its findings on the first Collateral Control Certificate and all changes on the subsequent Certificates Stock Monitoring and Inspection Services : Under this Arrangement, the Bank appoints ACE GLOBAL to monitor and inspect the physical and where required, the documentary handling of the Goods. ACE GLOBAL provides these services for the account of the Bank and the role of ACE Global is solely one of logistical monitoring and inspection. In order for ACE GLOBAL to be
responsible or liable for the condition, quality, management or control of the Goods, ACE GLOBAL 12 will adopt the more appropriate Collateral Control Agreements and not a Stock Monitoring COLLATERAL CONTROL SERVICES TRANSACTIONAL FINANCE RISK & MITIGANTS 13 COLLATERAL CONTROL SERVICES Structured Commodity Finance Fundamentals Transactional financing structures necessitate either full ownership with stock carried on the Lenders balance sheet or registered possessory pledge over collateralized stock (dependent on Legal requirements per country) Ownership evidenced by stock confirmations in form of a Warehouse Receipt A thorough understanding of demand or supply dynamics in each operating country. Commodity Risk: Storage dynamics, Price, Quality , Weight and Quantity SCF Product Solutions covers the entire supply chain from Off taker, Transport to destination, Processor, Producer (foreign and/or local) Comprehensive All risks Cargo Insurance covers risk of ownership in storage and transit Plus Misappropriation plus FOG and FOQ Comprehensive PI and Fraud from the Collateral Controller Adequate Middle Office to ensure accurate monitoring of market prices, portfolio management in
stocks and 14 COLLATERAL CONTROL SERVICES Transaction Performance Risks These commodity markets have their own peculiar features, including: Seasonal fluctuations in prices; Differential in prices of different grades, weight and quality of a given kind of commodity; "Differential" of the same grade, weight and qualities in different marketing centres; Hazards of deterioration in value during storage due to time, quality and weight; Unpredictability timing of deliveries due to inland transport and port congestion; Risk of deterioration in the quality of the commodity to which the sales contracts are related; Risk of volatility of the price of the commodity even when the desired quality is unchanged; Disparities in the quantity and weight of the commodity; Adequacy of insurance to cover the goods whilst in storage and in transit and which can be claimed in convertible currencies offshore; Legal risks involving inadequate commercial law legislation and insufficient legal systems to ensure collateral controls during the value chain;
Risks arising from logistical problems from transport system failures, poor storage facilities, etc 15 COLLATERAL CONTROL SERVICES Risk Mitigation approach Risk Area 1. Commodity Risk 1. Grade/Quality inferior 2. Moisture 3. Insect infestation Likely Cause 1. 2. 3. 4. Misrepresentation Incorrect assessment Inadequate handling procedures Weighbridge not calibrated accurately 1. 2. 3. 4. 5. 1. 2. 3. 4. 5. 6. Inspected incorrectly 1. Measured incorrectly Exposure to elements prior to loading 2. Climatic conditions 3. Inferior Storage construction 4. Misrepresentation
1. Incorrect inspection 2. Infiltration 3. Inferior Storage construction 4. cross contamination Proximity of infested lots 1. Fraud by Supplier/Storer 2. Commodity stolen 3. Dispute over ownership of 4. commodity 5. 1. 4. Defective 2. title/counterfeit title 3. documents/ Borrowers reputation 5. weight shortage 6. heating & self combustion 7. damage to the goods Preventative action 1. 2. 3. 4. 5. Inadequate equipment fraud/storer deviating goods weightscale not calibrated Silo scales not calibrated Bad handling favoring spillage 1. Defective lightning on board vessel
holds too high moisture fresh goods poor ventilation lack of follow up malicious Force majeur leakage/water infiltration bad storage conditions 2. 3. 4. 5. 1. 2. 3. 4. 1. 2. 3. 4. 5. 1. 2. 3. 4. 5. 1. 2. 3. 4. 5. 6. 1. 2. 3. Inspection by Collateral Manager Analysis by independent laboratory Calibration of equipment by Collateral Controller International standards used for analysis Certificate of weight and Analysis issued by Collateral Controller Collateral Control Engineers issue Certificate on Storage structure Storage Agreement defines responsibility Insurance Cover Certificate of Analysis issued by Collateral Controller Storage Agreement defines responsibility
Insurance Cover Inspection by Collateral Controller on fortnightly basis Fumigation on recommendation from Collateral Controller Bank holds original documents of title Storage agreements with storers Supplier warrants full title Supplier is also storer in majority of cases Country Manager through KYCC will determine the Crediblity of the borrower updated calibration certificate Country Manager will check for possible by-passes Country Manager will request regular test weighing weighing under surveillance of Local Collateral Manager on behalf of ACE GLOBAL Country Manager to issue protest letter check on vessel electic devices moisture testing on arrival regular temperature testing proper and adequate ventilation Country Manager regular monitoring Insurance cover permanent presence of Local Collateral Manager on behalf of ACE GLOBAL proper inspection of warehouse 16 Insurance cover COLLATERAL CONTROL SERVICES Risk Mitigation approach Risk Area Risk Likely Cause 1. 2. 3. 2. Commodity Storage 4. 5. 6. Lack of controls Incompetent personnel Collusion between Collateral Manager & Storer Force Majeure Weight recording incorrect Stored too long - commodity spoiled
2. Damage to Commodity 1. 2. 3. 4. 5. Storage facilities sub standard Manpower requirements inadequate Theft or Misappropriation Force Majeure Spontaneous Combustion 3. Stored commodity infected/contaminated with disease - Bank sells to end user with subsequent claim for damages 1. 2. 3. 4. 1. 2. 3. 4. 1. warehouse insurance not properly checked premium not paid insured value to low Deductible to high 1. Loss of commodity 4.warehouse not covered by 2. insurance 3. 4. Insect infestation Fungi contamination mould Proximity of infested lots
Preventative action 1. 4. Collateral Controller independent controls verification The Lender Insurance cover Collateral Controller quantity & quality certificates retain as proof of value and exsistance Storage period limited to 12 months 1. 2. 3. 4. Collateral Control Engineers Report Storage agreement defines responsibility Insurance cover Collateral Controller regular inspections 1. Bank has taken out insurance (Public Liability ) Country Manager regular inspections Refuse proximity / Proper separations 2. 3. 2. 3. 1. 2. Proper check of insurance Policy Confirmation from underwriter that premium has bee paid 17 COLLATERAL CONTROL SERVICES Risk Mitigation approach Risk Risk Area
3. Storer 1. Non performance to maintain and store the commodity Likely Cause 1. 2. 3. 4. Financial failure Storage facilities sub-standard Manpower not qualified to manage storage Changes in statutory limitations Preventative action 1. 2. 3. 1. 4. Credit 1. Non-performance of payment 1. 2. 3. 4. 5. Commodity Value (Sale) 1. Drop in price of commodity 6. Commodity Value (Purchase) 1. Incorrect calculation of cost by client 2. Incorrect calculation of purchase price by Bank 1. 2. Unacceptable return on Capital Changing interest rates
1. 2. 3. 4. 5. 6. Fraud / Misappropriation Inadequate controls Statutory Documentation Administration Information Technology 7. Pricing 8. Operational (Bank) Client unable to pay / insolvency 2. Economic downturn Cash flow difficulties/financial 3. distress 4. Cheque not cleared 1. 2. Collateral Controller leases Storage/warehouse Storage agreement with storer states that the Lender is the owner of the commodity Full commodity insurance cover taken by the Lender Credit approval on off-taker, annual credit review Commodity held at discount to market value for Intrinsic Value The Lender owns commodities None Lender accepted clients must first either present bank guaranteed cheques or payment to be cleared Back to Back Sale and Purchase agreement. Hedge purchase price or use appropriate discounting model Use appropriate discounting model, institute triger price levels 1. 2.
Oversupply Economic Downturn 1. Inability of client to calculate and 1. include all costs accurately 2. Discount model flawed Bank to review all orders and calculations Generic Discounting Model - Any variations to be approved by Bank line management 1. Interest rate change 2. Change in statutory requirements Funding a short term advance 3. with long-term funds 4. 1. Inadequate internal controls 2. Breakdown in basic controls 3. Changes to Act and Regulations Documentation not legally 4. binding 5. Administrative burden too big for 6. administrative department Admin system incompatible Rate linked to Prime Funding to be determined by management on a case by case basis Attempt to lock in rate with a short term instrument Generic Discounting Model - 3% hedge Segregation of duties Audit functions (Internal & External) Approve documents through Lenders Legal department Review admin procedures Increase capacity to handle workload Structured Trade & Commodity Finance system designed to mitigate associated
risks 2. 1. 2. 3. 1. 2. 3. 4. 5. 6. 3. 18 COLLATERAL CONTROL SERVICES Risk Mitigation approach Risk Area 9. Insurance 10. Taxation Risk 1. Funding provided without adequate insurance on Bank owned commodity 2. Insurance Co unable to meet its obligations 3. Low class company Likely Cause 1. 2. 3. 4. 5. 6. Insurance inadequate Insurance not in place Insurer over extended wrong value insured too high deductible Insurance Company Not reliable Preventative action 1.
2. 3. 4. 5. Recognised insurance company to be used Bank to monitor insurance premiums Other Insurance Companies to be approved by Bank dedicated person to follow market dedicated person to review insurance 1. Not a tax based transaction 19 COLLATERAL CONTROL SERVICES ACE Key Processes Site Inspection Know Your Clients Customer and all stakeholders (including transporter, storer and processor) for each transaction Deal specific Commodity Profile Warehouse Inspection Each service is broken into three steps: Pre Deal and Deal Approval process Design sequence of events Identify risks and mitigants from Bank point of view Execution Maker /Checker concept with approvals by CSM Administration and Reporting Independent issuance of WHR and RO Independent reporting and tracking Loan justification Mandatory Credit Support approval 20 COLLATERAL CONTROL SERVICES BUSINESS PROCESS & OVERVIEW
21 COLLATERAL CONTROL SERVICES ACE GLOBAL & Lenders - Synergies ACTORS STEPS SUPPLIER Delivery of Raw Material TYPE OF FINANCING Raw Material Financing RISKS Supplier Performance Quality/Quantity/ Weight LOCAL AGENT Warehousing Processing PORT Warehousing Working Capital Financing (Tolling) Supplier/Processing Performance ACE SUPERVISON MONITORING Transit Warehousing EXPORTER OFF-TAKER
Export/ Shipment Receivables Loading Receivable Financing Export Product Financing Carrier Performance Terminal Performance Carrier Performance ACE COLLATERAL MANAGEMENT MITIGANTS Plant Management / Technical Assistance COLLATERA L RAW MATERIAL WARRANTS Exporter/Carrier Expertise, Reputation & Technical Support EXPORT GRADE PRODUCT WARRANTS PAYMENT 1st Class Offtaker or Secured Payment Instrument SHIPPING DOCUMENTS 22 COLLATERAL CONTROL SERVICES
ACE GLOBAL & Lenders - Synergies Lenders CONVENTIONAL SCOPE ACTORS STEPS TYPE OF FINANCIN G SUPPLIER Delivery of Raw Material Raw Material Financing LOCAL AGENT Warehousin g Processi ng PORT Warehousin g Warehousin g Transit Working Capital Financing (Tolling) Loading EXPORTE R OFF-TAKER Export/ Shipment Receivables Export Product Financing
Receivable Financing ACE GLOBALs SCOPE RISKS Supplier Performanc e Quality/Quantity/ Weight Supplier/Processing Performance ACE SUPERVISON MONITORING Carrier Performance Terminal Performance Carrier Performanc e ACE COLLATERAL MANAGEMENT MITIGANT S Plant Management / Technical Assistance COLLATER AL RAW MATERIAL WARRANTS Exporter/Carrier Expertise, Reputation & Technical Support EXPORT GRADE PRODUCT WARRANTS PAYMENT 1st Class Offtaker or Secured Payment Instrument
SHIPPING DOCUMENTS 23 COLLATERAL CONTROL SERVICES 24 COLLATERAL CONTROL SERVICES E5C Enhanced Collateral Commodity Credit Control Capacity 25 COLLATERAL CONTROL SERVICES E5C Enhanced Collateral Commodity Credit Control Capacity Spans the entire value chain beginning with the post harvest stage and encompasses the processing & movement of commodities with lenders. It gives lenders comfort through: Real time access to the location Weight, quality and quantity of commodities Single point of interface between the lender, the borrower and the value chain Enabling the lender to monitor asset based and asset conversion lending through market to market evaluation 26 COLLATERAL CONTROL SERVICES E5C - A Unique Solution to mitigate Performance Risk & Secure Transactions Its Core Functions:
Guarantees / Certifies the Collateral Facilitates end-to-end (Value Chain) Trade Finance Facilitates Collateral Transfer Risk Assessment Escrow Agent Facilities Facilitates Settlement on Exchanges guarantees delivery system Issues of Electronic Warehouse Receipts Mitigates Performance Risk Supports parastatal bodies revenue collection 27 COLLATERAL CONTROL SERVICES ACE GLOBAL: E5C and approval process RSM, TSSM, CSM, and LM: C prepare the specific check list FM: Receive Transaction Details and prepare cost sheet RSM: Receive Indicative Term Sheet/ Complete ACE Global Bank Questionnaire/Prepare KYCC TSSM: Conduct storage location inspection RSM: Prepares CPS and CSAR with CSM/TSSM LM: Prepare CPL, Legal Opinion and Draftcontract LM: Uploads draftcontract and related legal docs RSM: creates and Initiates deal in E3C, Upload CPS, CPL, KYCC, CSAR, Term Sheet and RSMR CM: Approval request Approved GCSM: Reviews & Analyses deal
Approved GTSSM: Reviews & Analyses deal Approved Refer back back to GTSSM Refer back Approved GRSM: Reviews and Approves CM: Allocate deal to CSM CSM: Assigns Deal to CSO and TSM, who in turn allocates deal to a supervisor and inspector Approved CM: Amends and send Refer back CM: Amends and send back to GCSM RCM: Approval request CM: Amends and send back to GLM GLM: Assess deal GHR: Approves and notifies CEO SO: Notifies CM of Deal Approval by allocating back the deal to the CM. GLM: Confirms final draftcontract, Local LM uploads docs. GFM: Reviews and Analyses
deal Approved CEO: Approves or Rejects deal Approved Refer back Refer back CM: Amends and send back to GFM CM: Amends and send back to CEO Deal is now active and in Execution LEGEND: RSM: Relationship Manager LM: Legal Manager CSM: Credit Support Manager CSO: Credit Support Offi cer TSSM: Technical Support Services Manager FM: Finance Manag er CM: Country Manager RCM: Regional Country Manager SO: Security Offi cer G: Group *Please note, deal can only be rejected at the group level 28 COLLATERAL CONTROL SERVICES ACE GLOBAL: E5C Deal Life Cycle 1. Deal Creation 2. RM Checklist 3. TSS Checklist 4. CSM Checklist 8. TSS Risk Matrix 7. RM Documentation 6. FM Costsheet 5. Legal Checklist
10. Legal Contract 11. CM Approval 12. Group Level Approvals and Checklist Finalization Execution TSS, CSM Allocations SO Allocation 9. CSM Deal Structuring 29 COLLATERAL CONTROL SERVICES LEGAL APPRAISAL AND DEFINITIONS 30 COLLATERAL CONTROL SERVICES Important Definitions: Bailment- The transfer of the possession of Goods by the owner (bailor) to another (the bailee) which shall thereafter maintain notorious, continuous and exclusive possession of all the Goods, for particular purposes such as hiring, financing, pledge of goods, and the delivery of Goods for carriage, safe custody or repair. Notorious possession is evidenced by numerous conspicuous signs placed by ACE GLOBAL at the storage premises.; Continuous and exclusive possession is assured by the fact that ACE GLOBAL has one of its employees or agents or representatives on duty at all times when the premises are unlocked and that anyone permitted to enter the premises does so only at the will of ACE GLOBAL or with its consent. The foregoing steps accomplish an effective change in the possession of the goods and premises. Thereafter, warehouse receipts may be issued at the borrowers premises in respect of Goods stored therein and the constructive possession of the Goods is maintained by ACE GLOBAL for and on behalf of the lender / Bank throughout the duration of the financing and till the goods are required to be released. Collateralized loans- Collateral is a synonym for security provided in order to secure an obligation. Bankers ask for collateral on a loan as a measure of added security. This is to give the Banks claim against the enterprise a preferred position with respect to repayment if the enterprise should fail to honour the loan.
Pledge- This is the act of depositing property of some sort with a lender with the intention that it be held by the lender as collateral to insure repayment of the loan. When a borrower furnishes the lender collateral to strengthen a loan and provides security for its obligations under the financing extended by the lender, the borrower, is said to have pledged the collateral to the lender. In that: The person depositing the property with the lender, (the borrower) is referred to as the pledgor, while the person in whose favor the pledge is executed is called the pledgee (the lender). There can be no pledge without obligation. The pledge is the agreement which relates a certain deposit property to a certain obligation, as a result of which that property becomes collateral to that obligation. In order to render the pledge effective and to perfect the lien thereunder, the borrower must place the goods into the constructive possession of the lender, whether directly or where agreed, with an independent third party (such as a collateral controller acting on behalf of the Bank) under and pursuant to the legal principles of Bailment. 31 COLLATERAL CONTROL SERVICES Important Definitions Contd. Lien The right to retain possession of a property until all charges against it are paid. Types of Liens: Possessory Lien - When one person holds the possession of anothers property and has to perform services upon it for which he is entitled to remuneration, the said person automatically obtains- by the general principles of law- the right to retain possession of the property until all charges against it are paid. This right is known as a lien. The lien does not give the creditor any rights other than that of retaining possession until the charges have been paid, (unless specifically provided by the agreement). However, some jurisdictions do provide a provision to creditors, or lienor, the right to sell property after a reasonable period in order to get funds with which to pay off the amount owed by the owner of the goods. Bank - Pledgees lien The pledge creates the collateral relationship between the deposit goods and the loan by creating lien upon the goods in favor of the lender a pledge. A Bank-Pledgees lien differs from a regular lien in that when a property has been pledged specifically for the purpose of securing an obligation the creditor has the legal right upon default of the debtor- to sell the property in order to obtain funds with which to retire the debt. Warehousemans lien/ Collateral Controllers lien The warehouseman/ collateral controller is automatically given a lien upon goods stored under a non-negotiable receipt for all lawful charges for the storage and preservation of the goods; and for the sale of the goods where default has been made in satisfying the warehousemans lien. Until his lien is satisfied the warehouseman/ collateral controller may refuse to deliver the goods. If he releases the goods he loses his lien upon them. The lien is limited to the charges arising in connection with the goods covered by a particular receipt.
Full Outturn Guarantee / FOG- The insurance coverage extended to differences and shortages in quantities of any Goods under specific terms and conditions. Full Outturn Quality / FOQ- The insurance coverage extended to defects and differences in quality parameters and/or specifications in any Goods under specific terms and conditions. "Misappropriation shall mean unauthorized, fraudulent or dishonest appropriation or use, or unexpected or unforeseen or unexplained loss of the Goods under collateral management / Field Warehousing and /or monitoring and/or storage supervision by ACE GLOBAL and shall, inter alia, include the risk association with fraud, defalcation, misapplication, embezzlement, fraudulent transfer of ownership from the insured interest and dispossession thereof (except that which solely results from a governmental intervention). 32 COLLATERAL CONTROL SERVICES GROUP CONTACT DETAILS 33 Main Regional Offices Contact Details MENA ACE GLOBAL DEPOSITORY DMCC DUBAI, UAE TEL : +971 4 4539758 : +971 4 4539759 email: [email protected] SOUTHERN AFRICA ACE GLOBAL ZAMBIA LIMITED LUSAKA, ZAMBIA TEL: +260 211 291768 +260 211 294711 email: [email protected] INDIA ACE GLOBAL DEPOSITORY (INDIA) PVT. LTD MUMBAI, INDIA TEL: +912228379495 email: [email protected] EAST AFRICA ACE GLOBAL UGANDA LIMITED KAMPALA, UGANDA TEL: +256 414 233 973 : +256 414 348 425 email: [email protected]
www.aceglobaldepository.co m EURASIA ACE GLOBAL TURKEY GOZETIM HIZMETLERI A.S ISTANBUL, TURKEY TEL: +90 216 474 17 55 email: [email protected] WESTERN AFRICA ACE GLOBAL DEPOSITORY CI ABIDJAN, COTE DIVOIRE TEL: +225 20 25 48 50 +225 58 09 86 14 email: [email protected] 34