Collateral Management is a critical component of financial transactions aimed at minimizing credit risk. This process involves the legal and operational control of assets (real estate, movable property, securities, intangible assets) used as a guarantee for the performance of loan obligations. In Georgia, the effectiveness of collateral management is directly linked to a creditor's ability to recover debt promptly and in full in the event of default. Professional management ensures constant monitoring of asset status, protection against third-party claims, and the elimination of legal flaws at the registration stage.
What Does Collateral Management Services Cover?
The service covers all stages of the collateral lifecycle, from asset selection to liquidation:
- Legal Due Diligence of Assets: Verifying the legal standing of property, identifying seizures, existing mortgages, or other encumbrances.
- Valuation Oversight: Monitoring the market and liquidation value of the asset to ensure compliance with established standards.
- Documentation and Registration: Drafting mortgage, pledge, and surety agreements and registering them with the Public Registry or relevant agencies.
- Monitoring and Inventory: Periodic physical inspections and status checks of pledged movable property (e.g., inventory, machinery).
- Collateral Substitution and Release: Legally formalizing the rotation or release of assets during the loan term.
- Enforcement Strategy: Preparing optimal ways for asset realization (auction, direct sale) in case of breach of obligations.
Common Scenarios for Collateral Management
1) Banks issuing large business loans where the entire package of company assets is taken as collateral; 2) Inventory financing, which requires constant control over stock levels; 3) International financial institutions lending to Georgian companies, requiring local security agent services; 4) Loan agreements between private investors where real estate serves as a guarantee; 5) Project financing where future revenues and rights are pledged as security.
Georgian Legal Framework
The primary regulatory act for collateral management is the Civil Code of Georgia, which details the legal regimes for mortgages and pledges. Registration procedures are governed by the Law of Georgia on the Public Registry. The Law of Georgia on Enforcement Proceedings is vital as it defines the rules for the sale of secured assets. For movable items, the Law of Georgia on Registration of Rights to Movable Items and Intangible Property is also applicable. Creditors must also consider the Tax Code of Georgia regarding tax obligations arising during asset realization.
Service Steps
In the first stage, the collateral object is identified and its legal "cleanliness" is verified. In the second stage, lawyers prepare the relevant agreements to maximize the protection of the creditor's interests. The third stage involves registering rights with state authorities. The fourth stage marks the beginning of constant monitoring—controlling changes in asset value and physical condition. The fifth stage occurs upon the performance of obligations (release of collateral) or, in case of breach, the initiation of enforcement procedures.
Why Find a Specialist on Legal.ge?
An error in collateral management can leave a creditor without a real guarantee. On Legal.ge, you will find experienced specialists with deep knowledge of property law and banking practice. Experts available through our platform ensure the correct legal formation of your collateral, timely registration, and effective monitoring. Do not risk your capital; entrust collateral management to verified professionals on Legal.ge.
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