Adequate value

The value needed as security for a loan to an employer which will not trigger any unauthorised payment charge if:

• the market value of the assets charged when the loan is given is at least equal to the value of the loan;
• the value of the assets falls after the loan is made to an amount less than the outstanding loan and the reduction in value is not attributable to any steps taken by the sponsoring employer or a connected party (this is to prevent value being taken out of the security after the loan is made);
• the security takes priority over any other charge over the assets (i.e. must be a first legal charge).

Back