PLEDGE IN THE REALM OF SECURITY TRUST

The relation between the debtor and the creditor is one which is characterised by their respective individual concerns, predominantly evident in relation to the security granted to the creditor as a guarantee for his credit. 

 

“Taking security involves the concept that one or more assets (collaterals), is set aside or appropriated by the security giver to provide a security right or interest in favour of a creditor of the obligor, the security giver, or other debtor.”1 Therefore the principal reason for taking security over an asset is to provide the creditor with protection against the consequence of a default by the obligor or another debtor whose liabilities are covered by the security. This protection usually takes the form of a right of priority to get payment or satisfaction of the secured debt out of the particular asset over which security is granted in preference to other creditors of the debtor or security giver (if different) and its usefulness manifests itself particularly in a situation of insufficiency of assets of the debtor or guarantor to satisfy all his/her debts. It is explicable that the more reliable, less risky, flexible and inexpensive the security arrangement is, the more willing the creditor would be to grant credit to the debtor. 

 

There are several forms of security, with different arrangements operative in different jurisdictions. In Malta however the main security forms are pledge and hypothec. 

 

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