Why Use Special Notarial Bonds? Understanding the Benefits | Barter McKellar

In South Africa, businesses and individuals often require financing to grow or meet operational needs. One way to secure loans or credit is through a special notarial bond. This type of bond provides security over specific movable assets, allowing borrowers to retain possession of their property while still offering lenders the legal protection they need.

At Barter McKellar, we specialize in the drafting, registration and enforcement of special notarial bonds, helping clients protect their financial interests. In this article, we explain what special notarial bonds are, why they are used and the benefits they offer for both borrowers and lenders.

What is a Special Notarial Bond?

A special notarial bond is a legal instrument that provides security over specific movable assets, such as vehicles, machinery or equipment, in favor of a creditor. Unlike a general notarial bond, which covers all movable property owned by the debtor, a special notarial bond is limited to identified items that are clearly described in the bond.

This bond allows the debtor to retain physical possession and use of the secured assets while granting the creditor a preferential right over those assets if the debtor defaults on the loan. Special notarial bonds are registered at the Deeds Office, giving the creditor a real right over the identified movable property.

Why Are Special Notarial Bonds Used?

Special notarial bonds are commonly used in commercial transactions and financing agreements. Both borrowers and lenders benefit from this legal mechanism in various ways:

1. Securing Business Loans or Credit Facilities

   Businesses often use special notarial bonds to secure financing for expansion, equipment purchases or working capital. By offering specific movable assets as security, companies can access loans without needing to provide immovable property (like land or buildings) as collateral.

2. Protecting the Lender’s Interest

   Lenders require security to reduce the risk of non-payment by borrowers. A special notarial bond provides the lender with a preferential right over the secured assets, meaning the lender can seize and sell the assets if the borrower defaults.

3. Retention of Possession by the Borrower

   One of the unique advantages of special notarial bonds is that the borrower retains possession and control of the assets. This makes the bond ideal for businesses that rely on specific equipment, machinery or vehicles to generate revenue.

4. Compliance with Lender Requirements

   Many financial institutions and banks require borrowers to register a special notarial bond over high-value assets to secure large loans. This adds a layer of protection for the lender while allowing the borrower to use the assets for business operations.

5. Securing High-Value Movable Assets

   Special notarial bonds are ideal for securing assets such as heavy machinery, agricultural equipment, vehicles, or high-value inventory. They are commonly used in industries like manufacturing, agriculture, transport and construction.

Benefits of Special Notarial Bonds

1. Access to Financing Without Losing Assets

With a special notarial bond, borrowers can secure loans without transferring ownership or physical possession of the assets. This ensures that businesses can continue using their equipment or stock while meeting their financing needs.

2. Preferential Rights for Creditors

The registered bond provides the creditor with a real right over the specific assets, meaning they have priority over unsecured creditors if the borrower becomes insolvent. This makes special notarial bonds a highly effective way for lenders to reduce financial risk.

3. Legal Certainty and Enforceability

Once registered with the Deeds Office, the special notarial bond becomes legally enforceable. In case of default, the creditor can apply for a court order to seize and sell the secured assets to recover the debt.

4. Flexible Security Option

Special notarial bonds provide flexibility by allowing borrowers to offer a wide range of movable assets as collateral, from agricultural machinery to transport fleets. This flexibility makes it easier for businesses to access the funding they need.

5. Avoids Tying Up Immovable Property

Borrowers do not need to pledge immovable property (like land or buildings) as security, which is particularly beneficial for businesses that need to retain immovable property for other investments or projects.

6. Streamlined Financing Process

The process of drafting, notarizing, and registering a special notarial bond is faster and less complicated than obtaining a mortgage bond. This makes it an attractive option for businesses that need quick access to funding.

Key Legal Requirements for Special Notarial Bonds

To ensure that a special notarial bond is valid and enforceable, several legal requirements must be met:

• Accurate Description of Assets

  The movable assets covered by the bond must be clearly identified and described, including any serial numbers or distinguishing features.

• Drafting by a Notary Public

  The bond must be drafted and executed by a qualified notary public, who will also witness the signing of the document.

• Registration at the Deeds Office

  The bond must be registered at the Deeds Office to give the creditor a real right over the secured assets. Without registration, the bond cannot be enforced.

• Compliance with Applicable Laws

  The special notarial bond must comply with the provisions of the Security by Means of Movable Property Act which governs the registration and enforcement of notarial bonds in South Africa.

How Barter McKellar Can Assist with Special Notarial Bonds

At Barter McKellar, we offer expert legal services for the drafting, registration, and enforcement of special notarial bonds. Our team of experienced attorneys and notary publics ensures that the bond meets all legal requirements and protects the interests of both the lender and borrower.

Why Work with Us?

• Experienced Notaries and Attorneys: Our team has extensive experience in handling notarial services and bond registration, ensuring your bond is correctly executed and enforceable.

• Tailored Legal Solutions: We provide customized legal advice based on the specific needs of your business and the assets being secured.

• End-to-End Service: From drafting the bond to registering it at the Deeds Office, we handle the entire process, giving you peace of mind and ensuring a smooth transaction.

• Fast and Efficient Process: We understand that businesses need quick access to funding, and we work diligently to ensure that your special notarial bond is registered without unnecessary delays.

Contact Barter McKellar Today

If you are considering a special notarial bond to secure financing or protect your assets, contact Barter McKellar today. Our expert team is ready to assist with all aspects of the bond registration process, ensuring that your financial interests are safeguarded.