Titan Europe 2007-1 (NHP) Limited - Irish Stock Exchange

shares. The right to the former is transferred by delivery of the instrument and security in the same may be
created by way of pledge. The latter, however, cannot be pledged as title does not pass on delivery.
The fundamental distinction between an equitable charge and a legal mortgage is that, in the former case,
the shareholder granting the charge (the “Chargor”) retains legal title to the shares until default, whilst in the
latter case, legal title is transferred to the party granting credit (the “Chargee”) when the Charge is created.
From a security point of view, an equitable charge is less satisfactory than a legal mortgage in that it will
rank behind any subsequent legal mortgage granted by a third party without notice of the equitable mortgage
and will generally rank behind any prior equities. Further, the articles of association of the Cayman Islands
company may contain restrictions or impediments to share transfers which could impact enforcement. On the
other hand, a major disadvantage of a legal mortgage is that it may operate to group the Chargee and the
Cayman Islands company with potential adverse tax and regulatory consequences and accounting complications.
Note that some of the disadvantages associated with an equitable charge of shares can be addressed by the
service of a “Stop Notice” in accordance with the rules of the Grand Court of the Cayman Islands. This is a
procedure allowing the Chargee to serve a notice on the Cayman Islands company preventing the Cayman
Islands company from registering a transfer (or other dealing) in the securities until it has given 14 days’ notice
to the Chargee of its intention to do so. The purpose of the rule is to allow the Chargee an opportunity to take
steps (including an application for an injunction) to stop the proposed transfer or dealing.
Note also that, apart from security interests in land and certain types of personal property (i.e. aircraft and
vessels), there is no system for registration of security interests in the Cayman Islands. Section 54 of the
Companies Law provides that a Cayman Islands Chargor granting a mortgage or charge of its assets must record
the same in its Register of Mortgages and Charges, but failure to do so does not have any consequences to
attachment, perfection or priority of the security interest.
Documents creating security in the shares of a Cayman Islands company will be subject to stamp duty in the
event the documents are executed in or brought into the Cayman Islands for enforcement or otherwise. Stamp
duty is calculated at 1.5 per cent. of the amount charged, but is subject to a cap of CI$500 (US$600) where the
Chargor is a foreign company or is a Cayman Islands non-resident or exempted company.
Assignment of a Security Interest
Provided the charge allows for the security interest to be assigned without consent, the Chargee can assign
its interest to a third party. However, pursuant to Cayman Islands law, the Chargee must give notice to the
Chargor of such assignment.
Enforcement of Security over Shares
If the Chargee has taken a legal mortgage of the shares, upon default the Chargee is able to sell the shares
(subject to any contractual restrictions contained in the Charge). Note that the articles of association of the
Cayman Islands company may contain restrictions or impediments to share transfers.
If the Chargee has taken an equitable mortgage of the shares, upon default the Chargee would have the
shares transferred to itself and proceed to sell the shares (subject to any contractual restrictions contained in the
Charge). Note that the articles of association of the Cayman Islands company may contain restrictions or
impediments to share transfers.
Certain Matters of Jersey Law
The following is a summary of certain aspects of Jersey law related to the creation and enforcement of
security governed by Jersey law, the enforcement of English judgments and the institution of insolvency
proceedings in relation to companies (other than cell companies) incorporated under the Companies (Jersey)
Law 1991, as amended. This is not a complete summary of currently applicable Jersey law and prospective
Noteholders should consult their own professional advisers.
Creation of security interests. As a matter of Jersey law, security over intangible moveable property (other
than a lease) may only be created pursuant to the Security Interests (Jersey) Law 1983, as amended (the “Jersey
Security Law”).
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