How debentures may be described
283BH How debentures may be described
The borrower may describe or refer to the debentures in:
any disclosure in relation to the offer of the debentures; or
any other document constituting or relating to the offer of the debentures; or
the debentures themselves;
only in accordance with the following table:
How debentures may be described | ||
|---|---|---|
Item | Description | When description may be used |
1 | mortgage debenture | only if the circumstances set out in subsection (2) are satisfied |
2 | debenture | only if the circumstances set out in subsection (2) or (3) are satisfied |
2A | secured note | only if: (a) the circumstances set out in subsection (4) are satisfied; and (b) in a case described in subsection 283BHA(1), (2) or (3)—the requirements set out in that subsection are satisfied |
3 | unsecured note or unsecured deposit note | in any other case |
The borrower commits an offence if it intentionally or recklessly contravenes subsection (1).
When debentures can be called mortgage debentures or debentures
The borrower may describe or refer to the debentures as:
mortgage debentures; or
debentures;
if:
the repayment of all money that has been, or may be, deposited or lent under the debentures is secured by a first mortgage given to the trustee over land vested in the borrower or in any of the guarantors; and
the mortgage has been registered, or is a registrable mortgage that has been lodged for registration, in accordance with the law relating to the registration of mortgages of land in the place where the land is situated; and
the total amount of that money and of all other liabilities (if any) secured by the mortgage of that land ranking equally with the liability to repay that money does not exceed 60% of the value of the borrower’s or guarantor’s interest in that land as shown in the valuation included in the disclosure document for the debentures.
When debentures can be called debentures
The borrower may describe or refer to the debentures as debentures if:
the repayment of all money that has been, or may be, deposited or lent under the debentures has been secured by a security interest in favour of the trustee over the whole or any part of the tangible property of the borrower or of any of the guarantors; and
the tangible property that constitutes the security for the security interest is sufficient and is reasonably likely to be sufficient to meet the liability for the repayment of all such money and all other liabilities that:
have been or may be incurred; and
rank in priority to, or equally with, that liability.
When debentures can be called secured notes
The borrower may describe or refer to the debentures as secured notes if:
the repayment of all money that has been, or may be, deposited or lent under the debentures has been secured by a first ranking security interest in favour of the trustee over the whole or any part of the property of the borrower or of any of the guarantors; and
the property that constitutes the security for the security interest is sufficient and is reasonably likely to be sufficient to meet the liability for the repayment of all such money and all other liabilities that:
have been or may be incurred; and
rank in priority to, or equally with, that liability.
This Act’s bill:Explanatory memorandumSecond reading speech
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