Acquisition fi nancing devices
Businesses often purchase assets on credit, and the rights on those purchased assets serve as security for the credit in favour of the credit provider. Under certain secured transactions systems, these are called purchase-money security interests (PMSIs). In order to establish a harmonised, secured transactions regime it is critical to ascertain whether title retention devices and PMSIs should be subject to the same rules as traditional security interests (i.e. creation, third-party effectiveness, priority). As part of the functional approach to the security element, the Guide refl ects the view that retention-of-title agreements may be treated as security interests, unlike the stand taken by English law. However, States that have not adopted the UCC Article 9 type of legislation treat these transactions and other transactions based on title retention (they may also be referred to as ‘quasi-security interests’ in English legal terminology) distinctly, and subject them to separate rules particularly in relation to creation, third-party effectiveness, priority and remedies. International instruments have, generally, the tendency to accommodate both title devices and security agreements, and in doing that either take the functional or the formalist approach. Arguably, even if traditional security interests and quasi-security interests are combined under a single scheme (functional scheme), it is paramount to draw a distinction of how far rules applicable to traditional security interests apply to quasi-security interests.1 International instruments refl ect this tension clearly. As a fundamental policy of the Guide, balancing the interests of lenders and sellers in a comprehensive, integral and functional system is critical for the facilitation of credit; hence drafting of the unitary and non-unitary approach to acquisition fi nancing devices. This is a unique approach to a signifi cantly sensitive area of secured transactions law. In essence there are two methods to achieve the results desired to facilitate credit: the unitary and the non-unitary approach. This chapter will discuss the signifi cance of acquisition fi nancing devices and the approach of international instruments.