What is one of the ways in which a borrower can provide the lender with secured collateral in South Africa? When requesting a loan or business finance, you are required to put up security in ensuring that the money will be repaid, with interest. It has over the years become common practice for banks and financing institutions etc. The pledge theory has been endorsed in a Supreme Court of Appeal decision¹ and was further regarded as having settled the law with regards to security cession. With security cession’s being endorsed there is uncertainty in whether National or Provincial government department particularly will continue to accept cessions as collateral due to the risks associated with such bilateral agreements. There is always an impending or future possibility of a litigious dispute arising between the parties to a cession agreement as a result of prior or future cessions concluded.²

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Written by Corporate Law Consultant: Mikateko Lucia Baloyi at Masephule Dinga Inc