The forms in which security may be taken include a charge, pledge, lien, legal assignment, set-off, hypothecation, guarantee and indemnity.
A charge is the legal expression signifying that certain property is encumbered. A charge can be on land or assets of the company. Where a charge is on land, the concept is a statutory creation as the National Land Code 1965 provides for registration of charges as security for loans and advances. The Company Act 1965 also uses the term charge which is registered as a security with the Registrar of Companies and which expression usually covers the fixed and floating assets of the company.
A pledge in law means the transfer of the possession (but not ownership) of a chattel, which includes stocks and shares and cheques by a debtor to his creditor as security for the payment of a debt or performance of an obligation: in default of which the chattel may be sold.
A lien denotes a right to hold the property of another as security for the performance of an obligation. A lien can either be on personality or on realty. In law, when the term is applied to personality, a lien is understood to be the right of a bailee to retain the possession of a chattel entrusted to him until his claim upon it is satisfied. A banker’s lien is the banker’s right to enforce his claim upon the land until the debt is repaid. This is recognized in the National Land Code where the lender can enter a lienholder’s caveat which is a notice to third parties that the land is encumbered by that lien. A lien is a form of security although its effect is to prohibit further dealings on that land. A common law lien lasts only so long as possession is retained, but while it lasts it can be asserted against the whole world.
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