The Lenders' Choice: A Pledge Or A Charge

First published in Appleby's Mauritius Newsletter, August 2019

A fundamental question that arises during secured debt financing transactions is which type of security would provide the lender with more advantageous options vis-à-vis any other creditors of the obligor. The article seeks to highlight the main factors that affect a lender's choice when it comes to taking security in Mauritius.

The most common types of security taken in Mauritius are either a charge over the assets of the obligor, that is, the Mauritian entity, or a pledge over either the shares of the Mauritian entity, granted by its shareholders or over the bank accounts of the Mauritian entity.

A charge generally takes the form of either a fixed charge over all assets of the chargor, fully particularised in the instrument of charge; and all related rights thereto, or of a floating charge over all assets, whatsoever and wheresoever of the chargor, both present and future, other than any assets