Perfection (law)

In law, perfection relates to the additional steps required to be taken in relation to a security interest in order to make it effective against third parties[1] or to retain its effectiveness in the event of default by the grantor of the security interest. Generally speaking, once a security interest is effectively created, it gives certain rights to the holder of the security and imposes duties on the party who grants that security.[2] However, in many legal systems, additional steps --- perfection of the security interest --- are required to enforce the security against third parties such as a liquidator.[3]

  1. ^ See generally "Perfection of security interest," Black's Law Dictionary, pp. 1023-1023 (5th ed. 1979).
  2. ^ Mace Builders v Lunn [1987] Ch 191
  3. ^ For example, section 395 of the Companies Act 1986 of the United Kingdom requires certain security interests to be filed at Companies House within 21 days of being created. A failure to make such a filing does not affect the validity of the security interest between the debtor and the secured party, but if the debtor goes into insolvent liquidation, the security interest is void against the liquidator.