SECURING THE BANK'S INTERESTS

 1- HOW CAN COLLATERAL CONTROL SERVICES BENEFIT A BANK AND ITS FRANCHISE

Under and pursuant to any financing against commodity arrangements, the main objective of the financing Bank would be to perfect its security at law. What must be ensured is that the integrity of the collateral which has been pledged to the Bank as a security against the loan extended, can be maintained throughout the duration of the financing.

One method of doing this is by appointing a "collateral controller" (and not an inspection company) to perfect the Bank's lien by taking and maintaining custody and control of the pledged goods for the duration of the financing. In order to do this, the collateral controller must create a valid, binding and legally effective `Field Warehouse' over the storage premises, where such premises are under the ownership or control of the depositor of the goods (whilst availing financing from the Bank).

Hence, "Field Warehousing" in essence refers to a scheme which began as a device to enable the owner of a stock of shifting goods (Borrower) to pledge it as collateral for a loan and if properly conducted, it creates a valid bailment and a resulting security interest in the Goods deposited in favor of the Warehouse Receipt holder (the Bank) and provides effective third party control and enables close regulation of the amount of the goods which are to be made available to the Depositor for subsequent use or sale. 

Ideally, the field warehouseman whilst acting as the collateral manager for the lender must not only reinforce and protect the security over the pledged goods after the underlying financing terms have been finalised, but play a key role as a buffer between the borrower and the lender before the lender finalises the terms of the underlying financing transaction. This is in order to ensure that the lending terms and strategy perfectly match the ground operations and the underlying transaction flow. It is this function when properly conducted, which allows the warehouse receipt to assume its role as a financial instrument actually securing the lenders interests in the underlying commodities. It must be noted that the legal basis of Field Warehousing is the underlying scheme of the pledge which is made effective by way of a valid deposition of the goods into the custody and possession of the Collateral controller (Bailment) and the attornment by the Collateral controller to the Bank that the goods as deposited are deemed to be within the constructive possession of the Bank. Goods have to be deposited in the custody and possession of an independent third party, the third party has to acknowledge receipt of such goods for and on behalf of the Bank, and the Bank in return disburses the loan amount to the Depositor.

WHAT ABOUT CONSIDERING A FLOATING CHARGE?

The principal competitor of Field Warehousing as a method whereby a corporate customer can give security over stocks and similar assets to a lender is the floating charge. However, not only does the floating charge have many disadvantages, but Field Warehousing has certain advantages which assist in providing the Bank greater security as against floating charges. Thus:  

• Field Warehousing enables the Bank immediately to perfect its security through the principle of constructive possession via an appointed agent (its collateral controller) over the assets. A floating charge, on the other hand, only "crystallizes" (that is, becomes fixed and enforceable) if the customer goes into liquidation or makes default in payment of principal or interest or if some other breach of the terms of the financing facility occurs. Action is required to be taken in order to enforce the charge over the assets. Until such time as the floating charge crystallizes it will be superseded in order of priority by any subsequent fixed charge unless the floating charge prohibits this and the fixed charge has notice of the prohibition.
• Field Warehousing provides the Bank with both the organization and expertise to control its security. The existence of a floating charge, on the other hand, gives no such control and until it crystallises will not prevent the customer disposing of all or any of the assets charged. The customer may therefore, unknowingly to the Bank, realize his stocks and other current assets in order to meet pressing unsecured creditors, with the result that when the Bank appoints a receiver the value of the remaining assets secured by the floating charge may be inadequate.
• A security perfected under a valid and effect Field Warehousing operation, and provided that it is not a fraudulent preference, would ideally remain unaffected by subsequent liquidation.

It is also to be noted that client companies are frequently subject to restrictions in loan agreements or debenture trust deeds which prevent them giving charges. In some cases this prohibition may not extend to pledges, depending on the terms of the particular restriction.

 2- Can this Model be Used for Both Islamic Finance and Conventional Finance Structures?

ACE GLOBAL DEPOSITORY has in-house expertise comprising of an accomplished and dedicated legal services team which has a wealth of experience in all aspects of international trade, corporate and commercial law, particularly in structured trade and commodity financing and related advisory work with respect to the legal and regulatory matters of collateral control and warehouse receipt financing (both Conventional and Islamic financing) under various legal systems, such as those falling under the Common Law, Civil Law including specialist jurisdictions like OHADA. Our team has developed documents enabling us to work with both conventional and Islamic financing and assists us in providing solutions which fit the operational model of the transaction with ease. Our legal contracts have been designed in a way which accommodates the standard pledge and lien structure as envisaged under the conventional banking models, as well as the Islamic Murabaha ownership structure which places the Bank in the shoes of the owner of the goods for the duration of the financing. ACE GLOBAL DEPOSITORY's legal templates are dynamic, progressive and innovative in that they offer solutions to all lenders in order to meet the needs and requirements of the underlying financing transaction.

Our Collateral Control and other non-custodial monitoring and inspection services provide the Banks and other financiers and Traders with dynamic solutions and documentary support when considering collateralization of loans. Our documentation clearly establishes the link between pledge over goods by the Bank, acceptance of goods by ACE GLOBAL DEPOSITORY on behalf of the Bank as bailee of the goods and an effective change in possession of the goods under conventional finance, which in turn serves to enforce the validity of the security and the Bank's collateral under the financing facility. We are also the critical link between the issuance of the Warehouse receipt and the disbursement of the finance facility to the borrower.

The practice of Field Warehousing, although well established in the United States and Europe, is relatively new to developing or emerging countries. Bank and lenders often mistakenly use the term collateral management to refer to all types of collateral control operations without understanding the core distinction between Field Warehousing and Collateral Management.

 3- Specialists in Field Warehousing Operations

Field Warehousing operations essentially employ a method whereby a Depositor's trading assets are used as security at the Depositor's own premises for a loan or financing. It is a security instrument which enables the Depositor, to deliver to the Bank legally valid documents of title and to grant a possessory pledge over the goods stored in the Depositor's own plant, mill, refinery or warehouse via the legal principle of "Bailment." This creates constructive possession in the goods for and on behalf of the Bank.

"Bailment" would refer to the transfer of the possession of goods by the owner (bailor) to another (the bailee) which shall thereafter maintain notorious, continuous and exclusive possession of all the goods, for particular purposes such as hiring, financing, pledge of goods, and the delivery of goods for carriage, safe custody or repair.

Notorious possession is evidenced by numerous conspicuous signs placed at the storage premises; continuous and exclusive possession is assured by the fact that the collateral controller has one of its employees or agents or representatives on duty at all times when the premises are unlocked and that anyone permitted to enter the premises does so only at the will of the collateral controller or with its consent.

The foregoing steps accomplish an effective change in the possession of the goods and premises. Thereafter, warehouse receipts may be issued at the borrower's premises in respect of goods stored therein and the constructive possession of the Goods is maintained by the collateral controller for and on behalf of the Bank/ Financier throughout the duration of the financing and until the goods are required to be released.

Collateral Management operations envisage use of storage premises which are owned and operated by an independent third party without the influence of the depositor over the goods.

The inventory collateral or pledged goods are therefore placed at third party premises such as independent, public or terminal warehouses. In such cases ACE GLOBAL DEPOSITORY, as the collateral controller, is required to enter into an arrangement with the store keeper/ warehouseman in order for it to devise a methodology for maintaining control, custody and possession and for effecting release within the premises, all of which binds the third party to ACE GLOBAL DEPOSITORY as the collateral controller as per the mechanism agreed by the Bank/ financier. Such an arrangement would allow ACE GLOBAL DEPOSITORY to be eyes and ears of the Bank/ financier within the independent premises.

It is therefore critical for the success of such operations that ACE GLOBAL DEPOSITORY devise a methodology for maintaining control, custody and possession and effecting release (where legally and practically permissible), all of which binds the third party to the mechanism agreed by the Bank. In such Collateral Management Operations, it is this third party which is deemed to be the original goods father in respect of such goods i.e. the first bailee of the goods.

It may be noted that under Collateral Management, a Warehouse or Silo operator will use its own warehouses and clients will deliver commodities for storage in such warehouses/ silos. In such cases, ACE GLOBAL DEPOSITORY Collateral Management Services provide the banker with on-site physical and legal control of inventory stocks, which are pledged as the operator's collateral. They are designed to allow continuing relations with marginal or troubled operators, while retaining the flexibility to provide protection to the trader in the event of unanticipated increases in the operator's requirement for further funding. By employing the relevant Collateral Management Services to control and secure the pledge over the operator's inventory, the trader can customize the terms of its loan to support the operator's specific needs.

 4- Our Expertise and Procedure in Document Preparation

The heart of the transaction lies in executing accurate and comprehensive contracts and supporting documentation in order to protect the interest of the Bank, we at ACE GLOBAL DEPOSITORY ensure that our documentation encompassing such collateral control operations are close to operational and ground realities and are in compliance with local law and regulations.

Based on our past track record and experience, we are able to provide adequate legal expertise in terms of enforceability and legal framework.

ACE GLOBAL DEPOSITORY conducts its own legal due diligence and follows a systematic and detailed approach to each deal under consideration before circulating a draft contract.

The ACE GLOBAL DEPOSITORY templates of documents generally in use are as follows:

• ACE GLOBAL DEPOSITORY- Field warehousing and Storage Agreement- General Commodities- Conventional Financing
• ACE GLOBAL DEPOSITORY- Field warehousing and Storage Agreement- Petroleum (liquid)- Conventional Banking
• ACE GLOBAL DEPOSITORY- Monitoring and Inspection Agreement (with Bank)
• ACE GLOBAL DEPOSITORY- Secured Distribution for Suppliers
• ACE GLOBAL DEPOSITORY- Credit Account Receivable Services Agreement
• ACE GLOBAL DEPOSITORY- Credit Inventory Services Agreement

For a copy of our templates please provide us with your request and we shall send you the most relevant document pertaining to the proposed transaction.

 5- Keys steps considered when constructing a valid field warehouse operation

a- Custody, Possession and Control.  

In order, for ACE GLOBAL DEPOSITORY to create a valid Field Warehouse at the premises of the borrower, it is essential that ACE Global Depository constructs a legally independent warehouse within the borrower's premises. The validity of the bailment of the goods into the custody and possession of ACE GLOBAL DEPOSITORY, and the independence of ACE GLOBAL DEPOSITORY operations at the storage premises is subject to:

• ACE GLOBAL DEPOSITORY leasing/ sub leasing the storage area in which the collateral is to be stored by the borrower and managed by ACE GLOBAL DEPOSITORY - this creates a legal dominion over the premises and enables the exclusion of unauthorized persons.
• ACE GLOBAL DEPOSITORY posting conspicuous and prominent signs giving the public notice that the storage premises are operated and controlled by ACE GLOBAL DEPOSITORY.
• ACE GLOBAL DEPOSITORY adding its own lock and key to the storage premises and/or double locking the premises in order to have complete control over warehouse and specially the movement of goods constituting the collateral, in and out of the warehouse.

ACE GLOBAL DEPOSITORY must ensure that it is granted unequivocal, exclusive, continuous and notorious possession over the storage facilities. To satisfy the test of possession, one must show control plus the intent to exclude others. Notorious possession is evidenced by placing numerous signs and continuous and exclusive possession is evidenced by the fact that ACE GLOBAL DEPOSITORY has one of its employees agents or representatives on duty at all times when the premises are unlocked.

b- Warehouse Inspection and Appraisal

ACE GLOBAL DEPOSITORY conducts its own internal inspection procedures and prepares a due diligence checklist before accepting a warehouse for providing its services. A detailed Inspection of the warehouse is conducted to ascertain that the warehouse is feasible in all respects for conducting the Field Warehousing services.

i. Suitability Of Storage Facilities - Recordal Of Prevailing Conditions

Storage Facilities must be equipped to provide for proper care of the inventory and for preservation of its quality.

• Common dangers, such as those from fire might arise from the structure of the building, condition of electrical wiring, inadequacy of fire control apparatus, poor housekeeping, the neighbourhood, remoteness of local fire department, proximity to incinerators, etc. If such dangers exist they should be recognized and brought to the attention of the Bank and the borrower immediately in and noted in the inspection report.
• Some goods require temperature regulation, humidity, aeration or equipment where required must be adequate and reliable.
• Floor loading is a consideration with heavy goods and wooden floors.

Anything which can be reasonably observed to be detrimental to the care or preservation of inventory should be notified to the Bank and corrected by the borrower immediately and in any event prior to the location being approved for storage and field warehousing.

ii. Locking - Ability to exclude others

Under Field Warehousing Arrangements there is an obligation on ACE GLOBAL DEPOSITORY to control the storage, movement and release of the Goods as per the Bank's instructions.

• It is essential that ACE GLOBAL DEPOSITORY be able to control release of the Goods and accordingly, ACE GLOBAL DEPOSITORY must be provided with the right to install its locks on entrances to areas where inventory subject to the Bank's interest is stored, and to lock the entrances or institute whatever other control measures (such as double locking) as are necessary to prevent the movement of inventory when a ACE GLOBAL DEPOSITORY employee is not on duty or if in the opinion of ACE GLOBAL DEPOSITORY, further releases of inventory would constitute a violation of the Bank's instructions.
• The locks used may be padlocks furnished by ACE GLOBAL DEPOSITORY, or any other style of lock which is compatible with the ACE GLOBAL DEPOSITORY systems on ground. Keys must be kept in the possession of ACE GLOBAL DEPOSITORY employees only and the storage facilities must be conspicuously sign posted.
• Where required, there must be alternative control measures available to prevent the unauthorized release of the inventory.
• If the inventory can only be controlled by excluding the borrower's own employees and the borrower requires access to the inventory in order to process the goods or otherwise deal in them up to an agreed minimum release quantity without formal Bank instructions, ACE GLOBAL DEPOSITORY should not undertake to stop the deliveries/ releases provided the Bank has so agreed.

c- Details of Storage Facility

Under Field Warehousing, the inventory collateral or pledged goods are placed at premises which either belong to the borrower or have been leased by it, and there is accordingly either a lease or sublease granted by the borrower to ACE GLOBAL DEPOSITORY directly.

d- Lease / Sub-Lease

A lease or sub lease is a condition precedent to commencing the Field Warehousing operations. If the warehouse is owned by the borrower who becomes the depositor of the goods, (which more than often is the case under field warehousing), ACE GLOBAL DEPOSITORY obtains a direct lease over the premises owned by the borrower, being owner of the warehouse. Where the warehouse is taken on lease by the borrower, ACE GLOBAL DEPOSITORY ensures that the head lease allows for a sublease to be lawfully granted to it by the borrower and then enters into such a sub-lease. In addition, a Landlord Waiver and Consent Agreement is signed with the landlord in parallel to the sub lease document in order to confirm the landlord's approval and consent to the underlying operations. Where the head lease prohibits or restricts the grant of a sublease, then it is advised to amend the head lease and to obtain the express and unconditional assent of the landlord.

NOTE: The provisions of the lease or sub lease will vary depending on the nature of the goods / products e.g dry, liquid, frozen, open storage etc and that it can be granted over the entire premises or only a part thereof, provided that the section under control and custody of ACE GLOBAL DEPOSITORY is clearly defined and identified in a floor plan.

e- Letter of Indemnity

As the actual operations may entail a number of third parties involved such as agents of the borrower, transporters, processors, sub-contractors etc, and because more often than not, the borrower is required to maintain continued access to the goods in the warehouse, albeit under the supervision of ACE GLOBAL DEPOSITORY, a letter of indemnity as issued by the borrower to ACE GLOBAL DEPOSITORY is essential and must be obtained. Our standard template for the Field Warehousing and Storage Agreement and all its Annexures has been attached hereto.

f- Cargo / Marine / FOG/ FOQ Insurance?

ACE GLOBAL DEPOSITORY ensures in the interests of the Bank that an adequate Cargo insurance, being a condition precedent to commencing operations (unless otherwise waived by the Bank), has been obtained by the Borrower.

This forms the backbone of the compensation structure under the tripartite Field Warehousing agreement. Hence the Borrower is required at its own cost and expense to obtain with an approved insurance company, insurance for the Goods during storage in the Premises as well as for the goods-in-transit. The insurance is preferably to be in accordance with the Institute Cargo Clauses (All Risks) and in respect of standard risks under fire and burglary policies, riots and/or strikes and/or civil commotion and/or terrorism and/or malicious damage, and all other related risks including misappropriation.

Additionally, ACE GLOBAL DEPOSITORY in light of its excellent relationships with several international insurance providers, may be engaged for the procurement of appropriate insurance for the Goods against all risks for either one or several of the following segments of operations:

• Pre-shipment including storage and transit
• Marine coverage (vessel overage premium to be considered when applicable)
• Post shipment including storage and transit
• Full Outturn Guarantee (FOG) and Full Outturn Quality (FOQ)

WHAT IF THERE IS NO CUSTODY AND CONTROL REQUIRED?

In circumstances where the Banker/ Trader does not require ACE Global Depository to maintain custody and control, we offer exclusive non-custodial services based on the specialized templates developed by our in-house legal team pertaining to Monitoring and Inspection Services, as well as Inventory Control and Receivables services, which allow the Bank / Trader to have a first-hand view of the client's borrowing base and the trade receivables. A brief introduction to the services is set out below however for the detailed forms of the different agreements in this regard please do not hesitate to contact us.

What other services can benefit the bank?

 1- Secured distribution - what is it?

This a specialized type of Field Warehousing developed to service the needs of suppliers of commodities who wish to retain ownership of the inventory they supply, or to have a possessory lien on the goods till such time that payments are received in full against such inventory, and to regulate the delivery of the inventory to the Buyer.

To put a Secured Distribution plan in effect, ACE GLOBAL DEPOSITORY enters into a Secured Distribution Agreement with the Supplier and the Buyer. This service replicates the Field Warehousing and Storage Arrangement as analysed earlier. This service essentially comes into demand where the Buyer does not require Bank financing or where the transaction forms part of a bigger transaction which is being ring fenced by the Bank. This service has been developed by ACE GLOBAL DEPOSITORY to service both the Suppliers needs as well as the Buyers needs and the Agreement is adjusted accordingly based on the operational requirements.

 2- How can the bank utilize our certified inventory control services?

Certified Inventory Control service is used by companies who would like to avail financing from banks but not by pledging their stocks specifically for this financing. Under Certified Inventory control, the company, ACE GLOBAL DEPOSITORY and the bank enter into a tripartite agreement. Since no lease is taken under Certified Inventory Control (as compared with field warehousing), the agreement provides that ACE GLOBAL DEPOSITORY shall have full right of ingress and egress to premises where inventory is stored, and that ACE GLOBAL DEPOSITORY shall have access to any of the company's inventory records which are necessary to render its service.

The banker has ACE GLOBAL DEPOSITORY's certificate to the extent that its reports are accurate and that the assets being controlled will not fall below an agreed minimum level. ACE GLOBAL DEPOSITORY will deliver to the Bank periodic reports and inventory certificates as and when required by the Bank.

NOTE: Under Certified Inventory Control, ACE GLOBAL DEPOSITORY has no lien perfecting responsibility; it does not take exclusive possession; there is no bailment; no signposting; no legal responsibility for taking care of goods. ACE GLOBAL DEPOSITORY `s objectives are therefore to control the withdrawal of the inventory to be able to prevent removal of the inventory when the limit specified by the Bank has been reached.

 3- What can certified account receivables services achieve?

A company's book debts may be worth as much or even more than the underlying stocks so any monitoring ACE GLOBAL DEPOSITORY provides would be enhanced by their inclusion. This can be done by employing many of the same techniques used in implementing the Certified Inventory Control services. ACE GLOBAL DEPOSITORY's survey for example, would include the handling of book debts as well as stocks. A Certified Accounts Receivable Service Agreement would be entered into by the appropriate parties. The bank would give ACE GLOBAL DEPOSITORY and the company, instructions regarding any debts to be excluded from its reporting (such as sales to affiliated companies, employees or those covered by repurchase agreements). ACE GLOBAL DEPOSITORY then examines the company's books, verifies the balance if necessary, prepares an ageing analysis and includes its findings on the first Collateral Control Certificate and all changes on the subsequent Certificates.

The degree to which ACE GLOBAL DEPOSITORY would control payments received by the company would be entirely at the bank`s discretion and the bank might change its instructions to ACE GLOBAL DEPOSITORY at the point when the company`s financial condition changes.

The Bank's legal security over the accounts receivable may be a floating charge, an equitable mortgage where appropriate or other alternative means as devised.

The Collateral Control / Receivables Certificate contain a summary of changes and level of assets being controlled but does not include details such as description of inventory and information concerning debtors. This can be provided as a supplement to the Collateral Control / Receivables Certificate or rendered separately at periodic intervals as and when required.

 4- What are stock monitoring and inspection services?

Under this Arrangement, the Bank appoints ACE GLOBAL DEPOSITORY to monitor and inspect the physical and documentary handling of the Goods. ACE GLOBAL DEPOSITORY provides these services for the account of the Bank and the role of ACE GLOBAL DEPOSITORY is solely one of logistical monitoring and inspection. In order for ACE GLOBAL DEPOSITORY to be responsible or liable for the condition, quality, management or control of the Goods, then ACE GLOBAL DEPOSITORY will adopt the more appropriate Collateral Control Agreement and not a Stock Monitoring Agreement.

In addition to all the above, our legal services team also assists in issuing legal opinions to Banks on an as and when requested basis depending on the type of transaction proposed to be structured by the bank, whilst taking into consideration the jurisdiction and local law requirements as well as the ground realities in respect of the specialized commodity which is being financed.

WHAT IF THERE IS NO BANK INVOLVED?

In circumstances where there is no Bank involved ACE Global Depository provides a specialized and unique type of service which replicates field warehousing operations to service the needs of suppliers of commodities who wish to retain ownership of the inventory they supply, or to have a possessory lien on the goods until such time that payments are received in full against such inventory, and to regulate the delivery of the inventory to the Buyer. Such service may be provided at either end of the spectrum - i.e. for the benefit of the Supplier or the Buyer and essentially comes into demand where the Buyer does not require Bank financing or where the transaction forms part of a bigger transaction which is being ring fenced by the Bank.

ACE Global Depository's Secured Distribution services as illustrated in the above paragraphs, allow a Supplier to maintain or increase shipments to buyers who require deterred sale or deterred payment terms and to control the financial risk involved in such transactions. Obviously, the ultimate goal of both the Supplier and the Buyer is the same: to increase sales.

To put a Secured Distribution plan in effect, we enter into a Secured Distribution Agreement with the Supplier and the distributor (Buyer) and thereby for example, allowing a Supplier to maintain or increase shipments to its distributors or dealers on a deferred sale or deferred payment terms basis whilst controlling the risk involved in such a transaction by engaging ACE Global Depository to control the release of the goods on an as and when instructed basis.

Warehouse receipt financing - an appraisal

Set out below is a general appraisal of Warehouse Receipt Financing operations which at a glance highlight the advantages and disadvantages associated with such operations.

 1- Advantageous to both borrower and lender

Most actors who borrow against warehouse receipts do so because in the very nature of their business it is the most advantageous way for them to obtain credit.

a- The Borrower

The practice enables them to:

1. Obtain a maximum of credit at reasonable rates of interest

2. Repay loans in an orderly manner through funds made available by the sale of the commodities pledged.

3. Take advantage of cash and quantity discounts and buy materials at the most advantageous times

4. Provide adequate capital for their business at periods when production and operating costs are at a peak and working capital lowest.

5. Maintain adequate inventories and avoid forced liquidation.

6. Bridge the financial gap between completion of production and sale of finished product

7. Carry certain commodities for the period necessary to age them properly

8. Obtain more working capital than ordinarily be available by most other sound financing programs

9. Permit year-round employment of competent help in the manufacture of a seasonal product, thus stabilizing employment.

b- The Lender

1. The loans are self-liquidating.they are paid as the goods are sold.

2. The loans are sound because they are well secured.

3. The loans can be made to meet the eligibility requirements of the Reserve Banks and are readily discountable

4. The loan is guaranteed by the commodities themselves. In most sensible countries there is no better way to protect the loan as most other assets (construction, equipment, transportation units, etc) are not easily "reachable" in case of problem or intend of recovery on the money loaned.

 2- Warehouse receipts

NON-NEGOTIABLE & NEGOTIABLE WAREHOUSE RECEIPTS

A Warehouse Receipt is evidence of the relationship which exists among the parties to a storage transaction. A storage transaction is a commercial relationship just as is a sale or a loan.

NEGOTIABLE

The use of Negotiable Warehouse Receipts is usually limited to the storage of goods which are traded on the commodity exchanges. A negotiable warehouse receipt is one that can be given, for value, to another without the need for any formal assignment of right or transfer of interest.

Such negotiable receipt may act as documents of title (signed or certified by the warehouseman) guaranteeing existence and availability of a specified quantity and quality of a commodity, and used as an instrument of transfer in cash (spot) and/or futures transactions on a specified exchange. If releases are to be made, the Receipt is required to be presented to the warehouseman and the new balance is duly recorded and certified on the back of the receipt by the warehouseman.

NON- NEGOTIABLE

A Non-Negotiable Warehouse Receipt is made out in the name of the lender and indicates specifically that the goods called for are deliverable only to the order of the party named thereon; presentation of the warehouse receipt is not required. If partial releases are to be made, a release order from the registered holder of the Receipt is always required.

A Non- Negotiable Receipt is NOT a certificate of, or proof of ownership in the stored goods. It is merely evidence of the fact that the warehouseman has received the goods and is holding them subject to the instructions of the named party.

 

NOTE: If you would like the forms of any the different agreements referred to above, you may contact and request our in house legal team for such documents or for satisfying any other queries or seeking clarification. The team is available at any of the following email addresses - felicia.soumah@ace-group.net; ac.banniermathieu@ace-group.net; anissa.mahious@ace-group.net/ legal.uga@ace-group.net; info@ace-group.net for further information.

SELECTION OF COLLATERAL CONTROL COMPANY

A warehouse receipt depends largely upon the character of the company concerned issuing it and whether the issuing body treats the receipt being issued as a mere storage receipt or as a financial instrument. Therefore it is imperative that some of the following key qualifications of the issuing company be subjected to most careful scrutiny:

1. Its integrity and track record

2. Its experience and expertise in bank products and its understanding of the notion of bailment and pledge.

3. Its internal processes and procedures and ability to identify, manage and mitigate risks within the supply chain and transaction flow and to operate transparently and with accountability at all times.

4. Its ability to assist the middle and back office of the lender institution in managing the commodity being financed and specifically the market, operational and legal risks associated therewith.

5. Its ability to act as a true custodian of the goods with the intent and ability to protect and enforce the lenders interests during the financing and in the event of default.

6. Its ability to understand the commodity being financed and taken into custody and to be a master of the commodity specifications in order to effectively manage and supervise the pledged goods for the duration of the financing and to raise alerts to the lender as soon as possible, if any event jeopardizing the interests of the lender arises.

7. Its legal authority and operational capacity to act as a collateral controller on ground securing possession of the goods on behalf of the lender at the designated warehouse.

8. Its financial ability to meet and fulfill the obligations imposed upon it by the underlying tripartite contract and to indemnify holders of his receipts for any failure or negligence in performance through professional indemnity and fraud insurance which is of sufficient standing.

ANNEX 1
EXECUTIVE SUMMARY OF SERVICES OFFERED
AND
KEY DIFFERENCES

I - Collateral Control Services

 

EXECUTIVE SUMMARY OF SERVICES OFFERED
AND KEY DIFFERENCES

II - Monitoring & Inspections Services

 

DISCLAIMER: The above information has been provided for information purposes only and on a private and confidential basis. It is not to be shared or used in a manner which shall be prejudicial to the interests of ACE GLOBAL DEPOSITORY or any of its affiliates or associates.

ACE GLOBAL DEPOSITORY provides no contractual warranty in respect of the information provided herein and does not guarantee the correctness of information deriving from third party/other sources. Persons having acquired this material from a third party cannot on the basis of the material assert a claim or the like against ACE GLOBAL DEPOSITORY.