Featherweight securities and administration risk – make sure you have sufficient security

Featherweight security and administration risk are unique to Australia and often misunderstood or overlooked in the market.

In this article, our Finance team step through administration risk, outline the benefit of featherweight security, and set out some key concepts that should be considered and addressed.

Key takeaways

• Financiers taking security from a company that does not capture the whole (or substantially the whole) of that company's assets should consider taking a featherweight security;
• A featherweight security should be drafted to ensure that the company is not restricted from dealing with its assets, other than where an administrator is appointed, and the amount secured by the featherweight security should be limited to a nominal amount;