Finance and securities

In circumstances where external finance is sought, where possible, an appropriate policy should be adopted to minimise cross-collateralisation of the companies within the group so that assets are not linked together. Cross-collateralisation exposes other assets to additional risk as they are used to secure a loan for a different asset.

Corporate groups commonly implement financing and securities structures designed to protect the group’s assets from claims by creditors. This strategy aims to reduce the level of recourse available to creditors and creates a limited recourse risk. To manage this risk to those who deal with the group, creditors may require guarantees to be provided.

See Finance and securities.