The Collateral Substitution Agreement is utilized when parties to a secured financing arrangement wish to replace existing collateral with alternative assets while maintaining the security package's integrity. This document is crucial in the Philippine context, where secured lending is governed by multiple regulations including the Personal Property Security Act and Central Bank directives. It becomes necessary when the original collateral needs to be released (for example, due to business requirements, asset disposal, or optimization of security arrangements) and replaced with substitute collateral of equivalent or greater value. The agreement ensures compliance with Philippine legal requirements, preserves the lender's security position, and provides a clear framework for implementing the substitution while addressing registration requirements, perfection of security interests, and risk allocation. The document is particularly important in maintaining the continuity of security interests and avoiding any gaps in collateral coverage that could affect the lender's rights or the borrower's obligations.
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1. Parties: Identification of the secured creditor, debtor, and any other relevant parties
2. Background: Details of the original security agreement, outstanding obligations, and reason for collateral substitution
3. Definitions: Key terms used in the agreement, including description of Original Collateral and Substitute Collateral
4. Substitution Agreement: Core agreement to substitute the collateral and maintain the security interest
5. Conditions Precedent: Requirements that must be met before the substitution can take effect
6. Substitution Process: Step-by-step procedure for implementing the substitution
7. Representations and Warranties: Statements about ownership, condition, and value of the Substitute Collateral
8. Security Continuation: Provisions ensuring the security interest remains continuous and enforceable
9. Registration and Perfection: Requirements for registering the security interest in the Substitute Collateral
10. Costs and Expenses: Allocation of costs related to the substitution process
11. Governing Law and Jurisdiction: Specification of Philippine law as governing law and jurisdiction for disputes
1. Valuation Mechanism: Include when the agreement requires specific valuation procedures for the substitute collateral
2. Insurance Requirements: Include when the substitute collateral requires specific insurance coverage
3. Third Party Consents: Include when third party approvals are needed for the substitution
4. Tax Provisions: Include when there are significant tax implications of the substitution
5. Security Trustee Provisions: Include when a security trustee is involved in the arrangement
6. Multiple Creditor Provisions: Include when there are multiple secured creditors involved
1. Schedule 1 - Original Collateral Description: Detailed description and documentation of the original collateral
2. Schedule 2 - Substitute Collateral Description: Detailed description and documentation of the substitute collateral
3. Schedule 3 - Existing Security Documents: List and copies of all relevant existing security documents
4. Schedule 4 - Form of Notice of Substitution: Template for formal notification of substitution to relevant parties
5. Schedule 5 - Valuation Reports: Independent valuation reports for both original and substitute collateral
6. Appendix A - Required Filings and Registrations: List of all necessary filings and registrations for the substitution
7. Appendix B - Form of Release Documents: Templates for documents releasing security over original collateral
Relevant legal definitions
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Relevant Industries
Banking
Financial Services
Real Estate
Manufacturing
Agriculture
Mining
Construction
Infrastructure
Retail
Wholesale Trade
Transportation
Energy
Telecommunications
Relevant Teams
Legal
Risk Management
Credit
Compliance
Treasury
Finance
Operations
Security Administration
Portfolio Management
Documentation
Corporate Secretariat
Relevant Roles
Legal Counsel
Risk Manager
Credit Officer
Loan Officer
Collateral Manager
Security Trustee
Compliance Officer
Corporate Secretary
Chief Financial Officer
Treasury Manager
Asset Manager
Portfolio Manager
Security Agent
Documentation Specialist
Credit Risk Analyst
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