How security packages are built, perfected, and sequenced in mid-market lending - practical points for both sides of the facility.
For lenders, a facility is only as strong as the security package behind it. For borrowers, understanding perfection requirements helps negotiate realistic timelines and avoid surprises at drawdown. Ugandan practice typically involves a combination of corporate authorities, security documents, and registration or filing steps depending on the asset class.
This note is aimed at credit teams, CFOs, and in-house counsel who want a fuller picture of how security is commonly structured and perfected for mid-market facilities. It is general guidance, not a substitute for advice on a specific financing.
The recurring theme is sequencing: documents signed without the supporting authorities, valuations, or filings can create a false sense of completion while priority remains imperfect.
Why perfection matters
Creating a security interest in a document is not always enough. Perfection - the steps that put third parties on notice or complete statutory formalities - often determines priority against other creditors and effectiveness in insolvency.
Lenders who fund against “signed but unregistered” packages take a calculated risk. Borrowers who treat registration as the bank’s problem alone can still face delayed drawdown, higher pricing, or default if conditions precedent are not met.
Understanding which assets require which formalities allows both sides to build a realistic critical path from term sheet to first utilisation.
Common security elements
Packages may include charges over assets, mortgages over land, pledges, guarantees, assignments of receivables, and share charges over subsidiaries. Each instrument has different formalities and different enforcement profiles.
Using the wrong instrument for the asset class can undermine priority. For example, treating a land interest as if it were ordinary movable property, or failing to perfect a share charge when the lender’s real comfort is ownership of the operating company, are classic structuring mistakes.
Guarantees from parent companies or sponsors are common but are only as strong as the guarantor’s own balance sheet and the enforceability of the guarantee terms (including any limitations required for corporate benefit or financial assistance analysis).
All-asset debentures and fixed-and-floating charge structures should be reviewed against the borrower’s actual asset base. A floating charge over assets that are already encumbered or operationally essential may deliver less recovery than the term sheet implies.
Corporate authorities and capacity
Boards and, where required, shareholders must authorise borrowing and security. Constitutions may impose borrowing limits or require special resolutions for charges over undertaking.
Lenders typically require certified board minutes, specimen signatures, and sometimes legal opinions on capacity and authority. Borrowers should prepare these in parallel with negotiation of the facility agreement, not after signature when the clock is running on a commercial deadline.
Group structures add complexity: upstream and cross guarantees need careful analysis so that each guarantor has genuine corporate benefit and proper authorisation.
Process and sequencing
Board and shareholder approvals, KYC, valuation, insurance, and registration should be sequenced in the conditions precedent. Parallel workstreams reduce the gap between signing and first drawdown.
A practical checklist often includes: final form facility and security documents; evidence of authority; perfection steps completed or committed with undertakings; conditions on equity contributions or intercreditor arrangements; and evidence that no default exists at utilisation.
Where third-party consents are needed (landlords, prior lenders, regulators), identify them at term-sheet stage. Consent timelines frequently determine whether a “four-week close” is realistic.
Points borrowers should negotiate
Release mechanics matter. Borrowers should know how security is released on full repayment, and whether partial releases are available when assets are sold in the ordinary course or when a facility is prepaid in part.
Negative pledge, cash dominion, and consent thresholds for further debt can constrain growth. Align these with the business plan so that ordinary expansion does not require constant lender waivers.
Costs of perfection, stamp or registration fees (where applicable), and lender legal fees should be transparent in the term sheet to avoid closing friction.
Enforcement awareness (without waiting for default)
Even at origination, both sides should understand how enforcement would work: notice requirements, power of sale, appointment of receivers, and practical obstacles such as occupied premises or regulated assets.
Intercreditor arrangements among multiple lenders should be agreed before funds flow. Fighting over priority after default is far more expensive than documenting it at the start.
How McFord can help
Our banking and finance practice supports lenders and borrowers on facility documentation, security packages, perfection formalities, and restructuring of existing facilities in Uganda.
If you are preparing a new facility, refinancing, or reviewing whether an existing security package is complete, contact McFord Advocates for clear, commercially minded advice.