Can a secured lender sell its security to itself?
If, when reading the above question, you thought ‘No’ then you would in substance be wrong.
Although over the years the courts have developed a series of rules for the protection of borrowers, these rules will not be allowed to impugn a transaction that in ‘practical commercial terms’ is in the interests of a borrower even if there is no attempt to test the market and even if the buyer was associated with the lender. A ruling in July 2003 of the Privy Council (composed of five of the UK’s most eminent judges) emphasises the above.
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