Security
Priority of charges
Priority between charges is settled by agreement far more often than by the order of registration. Granting a second charge is usually possible with the incumbent's consent, and almost never without it.
Also called deed of priority · ranking of security · second charge · subordination deed · negative pledge
Registration order matters less than borrowers assume. On any structured deal, agreement decides it.
| Factor | How decisive |
|---|---|
| Date of creation | Default rules only |
| Order of registration | 12–35 on the scale |
| Fixed or floating | 40–65 on the scale |
| Deed of priority | Settles it |
General position in UK secured lending. Not legal advice; the position depends on the documents.
What determines ranking
Borrowers generally assume priority follows the order in which charges were registered, first in time taking first place. There are default rules along those lines, and they matter where nothing else has been agreed.
On any structured transaction, something else has been agreed. Where two lenders share security over the same company, the ranking is settled by a deed of priority or an intercreditor agreement in which the lenders agree between themselves who ranks where, who can enforce, and when. That agreement overrides what the registration order would otherwise suggest.
So the honest answer to what determines priority is: whatever the lenders wrote down. Reading the Companies House register tells you charges exist and who holds them. It does not tell you the ranking, because the ranking lives in a private document.
The negative pledge on the public register
One detail that is public, and that is worth knowing before approaching a second lender.
The particulars registered for a charge state whether the charge's terms restrict the company from creating security ranking equally with or ahead of it. In other words, the existence of a negative pledge is visible to anyone who looks at your file, under Companies Act 2006 section 859D.
That has a practical consequence. A prospective second lender can see, before speaking to you, that your existing facility restricts further security. They will price and plan on that basis, and a borrower who opens the conversation as though the position were clear is starting from a position the other side has already checked.
Adding a lender is a consent process, and the incumbent has no reason to hurry. It belongs first in the sequence, not last.
| Stage | Timing |
|---|---|
| Read the register and pledge | Week 1 |
| Incumbent consent in principle | Weeks 1-3 |
| Deed of priority negotiated | Weeks 3-9 |
| Execution and registration | Weeks 9-11 |
Illustrative sequence for adding a second lender alongside an incumbent. Timings vary; the intercreditor is often the long pole.
Can you grant a second charge
The honest answer is: usually yes, with the first lender's consent, and rarely without it.
The reason is not that a second charge is impossible to create. It is that granting one in breach of a negative pledge is an event of default under the facility the pledge protects. A borrower who grants security in breach has not merely annoyed their lender; they have handed them the right to act on a default at a moment of the lender's choosing.
So the sequence is consent first, security second. That sounds obvious and is regularly got the wrong way round by businesses arranging asset finance or an invoice facility without checking the debenture that already sits over everything.
How consent is documented
Where two lenders are to share the same company's security, a working capital line beside a term loan, or a junior facility behind a senior one, the consent takes documented form.
That document is a deed of priority or an intercreditor agreement, in which the lenders agree between themselves who ranks where, who can enforce and when. On simpler arrangements a deed of priority does the work in relatively few pages. On layered structures it becomes a full intercreditor with standstills, payment blockages and enforcement control.
These are ordinary documents on ordinary deals, negotiated between the lenders' lawyers. The borrower is largely a spectator to the negotiation while paying for both sides of it.
Why it takes so long
Because the incumbent is not obliged to hurry for the benefit of a newcomer, and has no commercial reason to.
The incumbent lender gains nothing from your new facility. Their exposure is unchanged at best and diluted at worst, their lawyers are working to their own queue, and the transaction that matters to you is an administrative task to them. None of that is obstruction; it is simply an absence of shared incentive.
The result is that where a plan involves adding a lender rather than replacing one, the intercreditor is often the long pole in the timetable. It belongs in the plan from the first conversation rather than being discovered in week eight when everything else is ready.
Replacing a lender needs a release. Adding one needs a negotiation between parties with nothing in common.
| Plan | Typical weeks |
|---|---|
| Replace the incumbent | 3w |
| Add a second lender | 9w |
Illustrative comparison of the two routes. Derived from the point that the intercreditor is often the long pole when adding rather than replacing.
Adding against replacing
The two routes have very different timetables, and the choice is worth making deliberately rather than by default.
Replacing the incumbent entirely means a redemption figure, a deed of release, and a new charge registered on completion. It is a short and well-worn process, and everyone involved is motivated: the outgoing lender is being repaid.
Adding a lender alongside means a deed of priority negotiated between two sets of lawyers, one acting for a party gaining nothing. The security workstream is considerably longer, and it is the stage most likely to move a completion date.
Where the numbers are close, that difference belongs in the comparison. A slightly more expensive facility that replaces the incumbent can complete materially faster than a cheaper one that sits alongside them.
What a second lender will want
A lender taking security behind an incumbent is accepting a worse position, and will want that position defined rather than assumed.
The provisions they negotiate are broadly consistent: a cap on the senior debt ranking ahead, so the incumbent cannot enlarge its facility and dilute them further; standstill periods governing when they may enforce; rights to be consulted on an enforcement; and turnover provisions requiring any payment they receive out of turn to be handed over.
For the borrower, the cap on senior debt is the provision with the longest reach. It constrains your ability to increase the senior facility later without going back to the junior lender for consent, which is the same problem in reverse. Where growth is expected, negotiating headroom into that cap at the outset is far easier than seeking it afterwards.
What has to be true before you start
Three things, all of them cheap and all of them commonly skipped.
Your own charge register reads differently once you read it the way a prospective lender will, establishing which charges are live. Because satisfaction filings are voluntary, repaid charges linger, and a file showing three outstanding debentures when only one secures anything invites questions and slows diligence. Clear the dead ones before a raise rather than during it.
The negative pledge in the existing facility sets what consent is required and from whom. The plan is better raised with the incumbent early, in a call rather than in a formal request. A lender told in week one that a second facility is contemplated behaves differently from one presented with a signed term sheet in week eight.
Common questions
What determines the priority of charges?
On any structured deal, the agreement between the lenders. A deed of priority or intercreditor agreement sets out who ranks where, who can enforce and when, and it overrides what the order of registration would otherwise suggest. The public register shows that charges exist and who holds them, not how they rank.
Can I grant a second charge over assets already secured?
Usually yes, with the first lender's consent, and rarely without it. Granting one in breach of a negative pledge is an event of default under the facility the pledge protects, which hands the incumbent the right to act at a moment of their choosing. Consent first, security second.
Can a new lender see that I have a negative pledge?
Yes. The particulars registered for a charge state whether its terms restrict the company from creating security ranking equally with or ahead of it, under Companies Act 2006 section 859D. A prospective lender can check that before speaking to you, and will plan on that basis.
What is a deed of priority?
The document in which two or more lenders sharing security over the same company agree between themselves who ranks where, who can enforce and when. On simpler arrangements it is short; on layered structures it becomes a full intercreditor agreement with standstills, payment blockages and enforcement control.
Why does the intercreditor take so long?
Because the incumbent lender gains nothing from your new facility and is not obliged to hurry for the benefit of a newcomer. Their exposure is unchanged at best, their lawyers work to their own queue, and your transaction is an administrative task to them. Where a plan involves adding a lender rather than replacing one, it is often the long pole in the timetable.
Is it faster to replace my lender than to add one?
Usually considerably. Replacing means a redemption figure, a deed of release and a new charge, with everyone motivated because the outgoing lender is being repaid. Adding means a deed of priority negotiated between two sets of lawyers, one acting for a party gaining nothing. Where pricing is close, that difference belongs in the comparison.
What will a second lender insist on?
A cap on the senior debt ranking ahead of them, standstill periods governing when they may enforce, consultation rights on an enforcement, and turnover provisions requiring any payment received out of turn to be handed over. The cap has the longest reach for a borrower, because it constrains enlarging the senior facility later.
What should I do before approaching a second lender?
Your own charge register shows which charges are live, and it repays reading, since repaid charges linger on the file and slow diligence. The negative pledge in the existing facility sets whose consent is needed. And raise the plan with the incumbent early in a call, rather than presenting a signed term sheet in week eight.
The full treatment sits in the guide: debentures and charges explained.
Related terms
This page explains a term as it is used in the UK lower-mid-market. It is general information, not advice on any particular facility. Terms vary between lenders and between deals, and the drafting in your own agreement governs.