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Pledge Note for Nigeria

Pledge Note Template for Nigeria

A Pledge Note is a formal security document used under Nigerian law to create and evidence a pledge of assets as security for obligations. The document serves as both the creation and proof of the security interest, complying with Nigerian secured transactions law, particularly the Secured Transactions in Movable Assets Act 2017. It details the pledged assets, secured obligations, and enforcement mechanisms while incorporating necessary provisions for registration with relevant authorities and stamp duty compliance. The document is particularly important in banking and commercial transactions where tangible or intangible assets are provided as security.

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What is a Pledge Note?

The Pledge Note is a crucial security document in Nigerian commercial and financial transactions, used to create a security interest over assets in favor of a creditor. This document type is particularly relevant when businesses or individuals need to secure financial obligations by pledging specific assets, whether tangible or intangible. The Pledge Note must comply with Nigerian federal and state laws, including the Secured Transactions in Movable Assets Act 2017 and relevant Central Bank regulations. It serves as both the creating instrument and evidence of the pledge, containing essential details about the pledged assets, the secured obligations, and enforcement mechanisms. The document is commonly used in banking transactions, asset financing, and commercial lending, requiring careful consideration of registration requirements, stamp duties, and enforceability provisions under Nigerian law.

What sections should be included in a Pledge Note?

1. Parties: Identification of the Pledgor and Pledgee, including full legal names, addresses, and registration details if companies

2. Background: Brief context of the underlying transaction or relationship giving rise to the pledge

3. Definitions: Key terms used in the document, including 'Pledged Assets', 'Secured Obligations', and 'Enforcement Event'

4. Pledge Creation: Express declaration of the pledge and description of the pledged assets

5. Secured Obligations: Clear description of the obligations being secured by the pledge

6. Representations and Warranties: Basic representations regarding ownership of assets and authority to pledge

7. Pledgor's Obligations: Ongoing obligations regarding maintenance and preservation of pledged assets

8. Enforcement: Circumstances and process for enforcing the pledge

9. Governing Law and Jurisdiction: Specification of Nigerian law as governing law and jurisdiction for disputes

What sections are optional to include in a Pledge Note?

1. Further Assurance: Additional undertakings to perfect the security - include when dealing with complex assets or registration requirements

2. Power of Attorney: Authority for pledgee to perfect or enforce the pledge - include when direct pledgor action may be difficult to obtain

3. Insurance: Requirements for insurance of pledged assets - include when dealing with physical assets

4. Notices: Communication procedures - include for more complex arrangements or where formal notices may be required

5. Assignment: Rights to transfer or assign the pledge - include when transferability is important to the pledgee

What schedules should be included in a Pledge Note?

1. Schedule 1 - Pledged Assets: Detailed description and/or list of the assets subject to the pledge

2. Schedule 2 - Secured Obligations: Detailed description of the secured obligations if complex or multiple obligations are involved

3. Schedule 3 - Form of Notice: Standard form of notices required for perfection or enforcement if applicable

4. Appendix A - Asset Registration Details: Registration numbers, serial numbers, or other identifying details of pledged assets

5. Appendix B - Corporate Authorizations: Copies of relevant corporate approvals where either party is a company

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents

Jurisdiction

Nigeria

Publisher

Genie AI

Document Type

Promissory Note

Sector

Banking

Cost

Free to use

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