Secured Lending Transactions: Anti-Assignment Provisions; 'Best Efforts'; 'Ordinary Course of Business'; “Business Judgment”, ‘Reasonable Discretion’

Documenting UCC Security Interests in Assets Subject to Anti-Assignment Clause, Interpreting Complex Covenants

Recording of a 90-minute premium CLE webinar with Q&A


Conducted on Thursday, May 23, 2019

Recorded event now available

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Program Materials

This CLE webinar will guide counsel on drafting and interpreting exclusions from collateral for contracts and other assets that are subject to restrictions on being pledged by the loan parties. This CLE webinar will also help counsel interpret loan document terms that are often not adequately understood, including "ordinary course of business," "best efforts," "reasonable best efforts," "commercially reasonable efforts", “business judgment” and “reasonable discretion.”

Description

Commercial finance counsel must know how to draft and interpret exclusions from collateral for contracts and other assets that are subject to restrictions on assignment and/or prohibited from being pledged. UCC Article 9 has “override” language regarding such provisions that apply in certain circumstances. Counsel must recognize what UCC Article 9 "override" provisions can and cannot accomplish.

The interpretation of terms in loan documents such as "in the ordinary course of business", "best efforts" and “business judgment” can be problematic. How ordinary does the transaction have to be? How are "best efforts," "reasonable best efforts," and "commercially reasonable efforts" different? What is “business judgment”? Drafting with clarity is critical.

Listen as our authoritative panel of commercial finance attorneys offers guidance on dealing with contractual and legal restrictions on assignment and security interests in the context of secured lending. The panel will also offer practical approaches on drafting, negotiating and interpreting covenants using "best efforts", "in the ordinary course of business", “business judgment” and “reasonable discretion” contract terms.

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Outline

  1. Interpretation of common terms in loan documents:
    1. Ordinary course of business
    2. Best efforts, reasonable best efforts, and commercially reasonable efforts
    3. Business judgment
    4. Reasonable discretion
  2. Dealing with contractual and legal restrictions on assignment and security interests in the context of secured lending:
    1. Examples of assets with restrictions on being pledged
    2. The UCC "override" applicable to certain assets: UCC Sections 9-406 through 408
      1. What the "override" does not do
      2. Important state variations and why they are important
      3. Related choice of law issues and documentation considerations
    3. Traps for the unwary

Benefits

The panel will review these and other questions:

  • How should commercial finance counsel craft "best efforts" or “business judgment” -style obligations in their agreements to reflect the intent of the parties and not promise either too much or too little?
  • What are the traps for the unwary in exclusions from collateral for assets that are subject to restrictions on assignment or security interests?
  • What are some ways secured lenders can structure the grant of security in assets subject to restrictions on assignment or security interests to maximize the strength of their collateral position?

Faculty

Hildebrandt, Jennifer
Jennifer B. Hildebrandt

Partner, Corporate Department
Paul Hastings

Ms. Hildebrandt represents banks, commercial finance companies, hedge funds, and other lenders in commercial and...  |  Read More

Ross, Christopher
Christopher G. Ross

Of Counsel
Paul Hastings

Mr. Ross' practice focuses on representing U.S. and foreign financial institutions and corporations in leveraged...  |  Read More

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