The Enduring Distinction Between Business Entities and Security Interests

Why are security interests and legal entities both widely used?  The prevailing answer in legal scholarship is that both bodies of law exist to partition assets for the benefit of designated creditors.[1] This view is not merely an academic matter; rather, it is exemplified by many financial products, such as asset securitizations. In a standard securitization, a sponsor corporation transfers some of its assets to an entity, which borrows money from creditors and passes the money back to the sponsor as consideration for the assets. This entity is not a prototypical business with an active management and going concern … Read more