The Inventory Security Agreement serves as a crucial financing tool in South African commercial transactions, enabling businesses to use their inventory as collateral for securing financial obligations. This document is typically used when a company needs to obtain financing while retaining possession and use of its inventory, or when lenders require additional security for their exposure. The agreement must comply with South African security laws, particularly the Security by Means of Movable Property Act and related legislation. It contains detailed provisions regarding the identification of inventory, maintenance requirements, reporting obligations, and enforcement mechanisms. The document is essential for businesses seeking asset-based lending and for financial institutions managing their security positions in South African commercial transactions.
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1. Parties: Identification of the Secured Party and the Grantor, including registration details for companies
2. Background: Context of the security arrangement, reference to any underlying obligations or facilities
3. Definitions and Interpretation: Key terms used in the agreement, including specific inventory definitions and interpretation rules
4. Grant of Security Interest: Express creation of the security interest over the inventory collateral
5. Description of Collateral: Detailed description of the inventory subject to the security interest
6. Representations and Warranties: Grantor's confirmations regarding ownership, authority, and status of inventory
7. Perfection and Registration: Requirements for perfecting the security interest and maintaining registration
8. Grantor's Obligations: Ongoing obligations regarding maintenance, insurance, and reporting of inventory
9. Rights and Remedies: Secured Party's rights upon default and enforcement mechanisms
10. Default Events: Circumstances constituting default under the agreement
11. Notices: Process and requirements for giving notices under the agreement
12. General Provisions: Standard boilerplate clauses including governing law, jurisdiction, and amendments
1. Third Party Consents: Required when inventory is subject to third party rights or stored in third party premises
2. Insurance Requirements: Detailed insurance obligations when specific insurance requirements are needed
3. Custodian Arrangements: When inventory is held by a third-party custodian or warehouse
4. Priority Arrangements: When multiple security interests exist and priority needs to be established
5. Foreign Currency Provisions: When inventory transactions involve foreign currency
6. Tax Provisions: When specific tax implications need to be addressed
7. Environmental Compliance: When inventory includes hazardous or regulated materials
1. Schedule 1 - Inventory Description: Detailed list and description of all inventory subject to the security interest
2. Schedule 2 - Storage Locations: List of all locations where inventory is stored or maintained
3. Schedule 3 - Existing Security Interests: Details of any pre-existing security interests or encumbrances
4. Schedule 4 - Form of Inventory Report: Template for periodic inventory reporting
5. Schedule 5 - Insurance Requirements: Specific insurance requirements and minimum coverage
6. Appendix A - Perfection Requirements: Checklist of actions required to perfect the security interest
7. Appendix B - Notice Forms: Standard forms for various notices under the agreement
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