In November 2021,  Arena Television (a well-known outside television broadcaster) went into administration. It has been reported by the administrators that Arena had borrowed nearly £300 million from around 50 lenders with most of the outstanding debt irrecoverable due to an alleged fraud by Arena, which it was running alongside its usual trading business.

Following the administration of Arena, we look at the likely impact for lessees and borrowers who are seeking to access equipment financing from asset-based commercial lenders in 2022.

Given the scale of the impact following the collapse of Arena, with respect to its footprint across the asset finance industry, the extent and sophistication of the alleged fraud and the speed of its collapse, it is expected that many asset-based lenders, whether directly impacted by Arena or not, will look to review their own credit and operational processes. Furthermore, there may be increased external scrutiny on those processes following recent reports in the Times that Kevin Hollinrake, a member of the Commons’ Treasury Select Committee, said that the Financial Conduct Authority must “undertake urgent inquiries” into the processes lenders undertake when carrying out due diligence on assets being financed.

We consider below the additional pre-financing steps or conditions to funding and the ongoing obligations during the term of a financing which financiers may look to implement in 2022, so that potential lessees or borrowers can prepare, in advance, to satisfy the demands of their financiers.

Increased scrutiny on the chain of title

It is a well-established common law maxim that the transferor of goods cannot pass a better title than they themselves possess and therefore the emphasis is on the third-party buyer (i.e. the financier) to check the seller's title. Arena highlights the importance of a financier carrying out such checks on a seller's title to an asset which is to be financed to ensure that the financier will themselves receive good title to the asset. Financiers may therefore make increased demands for evidence of the chain of title from the ultimate manufacturer to the current owner. Such demands could include requesting copies of the relevant bills of sale and/or manufacturer invoices and evidence of payment against those invoices.

Lessees and borrowers should make certain that they require a manufacturer to provide any title documents that the manufacturer is contractually obliged to provide under the terms of the relevant supply contract, as these may later be requested by a financier, and they should retain copies of such documentation so that they can be readily provided upon the request of the financier.

Where a financier is acquiring title to or taking security over assets which are located outside of the United Kingdom, the general rule is that title to a moveable object is governed by the lex situs (the law of the place where the asset is located at the time of the event said to confer title). Whilst previously equipment financiers may have been more relaxed about any local law risk, it is likely that financiers may place more focus on the lex situs, ensuring the asset is in the UK when financed or if not in the UK, requiring a legal opinion on the valid transfer of title within that jurisdiction where located, a "lex situs" opinion.

Equipment inspections

Following the report from the administrators of Arena that they are investigating alleged fraud, with asset financing allegedly secured against equipment which does not exist or with multiple lenders having financed the same item of equipment, it is likely that asset financiers will want to place more focus in their due diligence in ensuring that the assets which they are financing exist. The concern for financiers being that for any assets which do not exist or where they have placed reliance on fraudulent photos/acceptance certificates, the question of whether they have good title to the assets is immaterial as there would be no physical asset to repossess. Clearly a customer who is willing to go to sophisticated lengths to conceal their fraud will not be easy to spot, but steps such as verifying serial numbers with the original manufacturer are likely to become more common where financiers feel they need to go further to be sure they are not at risk of falling victim to fraud.

Lessees and borrowers should therefore be prepared to permit financiers, or their agents, onto their premises to inspect assets and "touch metal", prior to financing, in order to give comfort as to the assets' existence and to confirm that no other financier has a registered mark or interest on the assets to be financed. Financiers may also place more focus on carrying out inspections or audits during the term of the financing to ensure that financed assets remain in existence and any labelling or nameplates remain attached thereto.

Notification of interest in the financed equipment

Whilst it is a standard provision in asset finance security or lease agreements, that a lessor or security holder may affix nameplates or labels to an asset to denote it is subject to third party financing, this has not always been strictly enforced by financiers. Following Arena it is perhaps to be expected that this may change, with financiers placing more focus on nameplate/labelling requirements and/or Hpi registration. 

Applying a nameplate or label to an item of equipment or registering on Hpi does not of itself establish title to an asset, but evidentially it may help evidence title and provide protection to a financier against any subsequent third party interest in the asset if that third party subsequently inspected the assets or searched the Hpi register and had prior notice of the financier's interest pursuant to the nameplate or label or Hpi registration. It is though, a feature of fraud that labelling is not going to defeat a sophisticated fraudster and it should not be assumed that this is in itself sufficient if other checks are not then made. Even the most robust plates or labels can still be removed.

Increased obligations on brokers or third-party agents

Arena has highlighted to financiers the need to be close to the detail in terms of the assets they are financing. For brokers or third party agents this may result in increased obligations placed upon them by the ultimate financier to ensure that the ultimate financier's title interests and the assets' existence are sufficiently checked and evidenced by their broker or third party agent prior to funding.


Whilst none of the above pre-funding steps or conditions to funding are new requirements for asset finance customers to comply with, financiers are likely to want to adopt a more comprehensive approach to title issues in light of Arena which asset finance customers should be prepared to satisfy in 2022 and beyond.

This article is for general information only and reflects the position at the date of publication. It does not constitute legal advice.