LIEN Services

OVERVIEW

LIEN services afford investors the opportunity to use their securities such as shares and assets available in CSCS Plc Depository as collateral for loans. CSCS Plc LIEN Services manages securities and assets pledged by investors to financial institutions as collateral for loans.

BENEFITS

Borrowers

  • Affordability: the cost of registering LIEN Services on securities is cheaper compared with other asset classes. CSCS Plc charges 0.25% for equity and 0.02% for bonds.
  • Use of 3rd party shares as collateral: 3rd party shares can be used to secure a facility thereby providing alternatives for prospective borrowers.
  • Dividends: Borrowers will still earn dividends on their shares.
  • Easy access to monitor the increase/decrease in share values.

Lenders

  • Liquidity: Shares are liquid assets that can be easily converted to cash, hence lenders can easily recover the loan in case of default.
  • Fair Value: The forces of demand and supply allows for a fair value of shares. Unlike other assets, the price/value of shares of quoted companies can be easily ascertained. Over/undervaluation is minimal.
  • Divisible: shares can be partially liquidated to satisfy the creditor or the loan parties demand.
  • Fast and less cumbersome: unlike other asset classes, it takes a maximum of 4 working days to realize and take possession of share proceeds.
  • Easy monitoring: Collateralized shares in CSCS Plc are marked to market. Lenders are advised on the value of shares placed in their favour on a daily, weekly or monthly basis depending on the agreement to enable the lender make quality decisions on whether to hold the shares or liquidate.
  • Easy access to monitor the increase/decrease in share values.

NOTES FOR GUIDANCE

  1. The lender should demand from the borrower, a current statement of stock position issued to him/her/it by CSCS Plc.
  2. The lender can confirm from CSCS Plc, the statement of shareholding issued to a shareholder/prospective borrower by CSCS Plc (status report) on payment of a fee of =N=100.00. The Lender must obtain from the borrower/shareholder a letter of authority to the effect that the borrower/shareholder has mandated the lender to collect the stock position on his/her/its behalf.
  3. (a). A memorandum jointly, signed by the parties requesting CSCS Plc to place a lien on a specific quantity of the stock(s), should be forwarded to CSCS Plc. Also, an undated letter signed by the Borrower, authorizing the Lender to sell the stocks in the event of default at the expiration of the loan due date, must be given to the Lender upon which CSCS Plc would act when the Lender so instructs.

(b). It is essential that the Joint Memorandum be registered at the Stamp Duties Office or sworn to before a Commissioner for Oaths in any Court of Law. Note that the Joint Memorandum must have been completed on the front and reverse sides as directed thereon and explicit therefrom, before same is stamped or sworn to.

(c). It is in the interest of the lender not to disburse funds until a letter advising lien placement has been received from CSCS Plc.

(d). The Lender, the Borrower and the Stock-broking firm(s) may be required to confirm and/or consent to the lien agreement. The stockbroking firm(s) in particular is required to expressly ascertain/confirm in writing that the Shareholder is the genuine owner of the stated stock(s) and that they, therefore, have no objection on Lien being placed on the stated stock(s) by CSCS Plc.

(e). The stockbroking firm(s) must write the letter (referred to in paragraph (d) above and address it to CSCS Plc of which same is expected to accompany the Joint Memorandum when forwarded to CSCS Plc.

(f). Any insertion/alteration on the Joint Memorandum may be a ground for rejection of the application although a Letter of Indemnity from the Applicant/Lender or stock-broking firm may give us the comfort to process the application.

(g). The drawdown date and duration of the lien agreement must be specifically stated (filled out) in the Joint Memorandum.

  1. Upon the receipt of the executed Joint Memorandum referred to in Paragraph 3 (three) above and after the lien processing at CSCS Plc has been completed, the shareholding of the shareholder would be moved into a CSCS Plc Reserved Lien Account with the interest of the Lender Noted. This will be communicated to the parties, thereafter.
  2. The Lender (and no other party) should advise CSCS Plc to remove the lien placed on stocks en bloc when the Borrower has discharged his/her/its obligation under the contract. The stock(s), which should be listed on the letter of instructions from the Lender, is/are moved back to the original stock-broking firm(s) from where the stock(s) was taken.
  3. When the Borrower defaults and/or fails to discharge his/her/its obligation under the contract, the Lender at the expiration of the loan due-date shall:

(a). Inform CSCS Plc of the default by the Borrower and advise CSCS Plc to remove the lien to enable the sale to be effected.

(b). With a copy of the undated letter written by the Borrower to the Lender further give instructions/directives to CSCS Plc for the purpose of the release and sale of the totality of the holdings through a mandated or named stock-broking firm, which is a member of The Nigerian Stock Exchange.

(c). CSCS Plc, if satisfied that the procedure has been complied with, will be obliged to remove the lien on the stock(s) upon such information/instructions from the Lender after the expiration of the loan due-date without recourse to the Borrower, moreso when evidence of Notice of Default from Lender to Borrower is received/sighted by CSCS Plc.