Fixed charge?
Lender has control over asset - borrower cannot sell or dispose of it without consent
Fixed charge first in line to recover money from asset during insolvency of any kind
multiple can be made on one item, but the first charge takes priority
Floating charge?
secures a group/class of assets which are always changing like stock
multiple charges possible on one class
company can use or sell assets in ordinary course of business
Book debts?
security over amounts owed TO the borrower
type of floating charge usually as debts change
fixed if lender controls debts
What certain events will trigger crystallisation on a floating charge?
receivership
liquidation
ceasing trade
any other event detailed in charge document
What event gives a fixed charge priority?
date of creation, unless they miss registeration window then it’s entirely void
What is subordination agreement?
creditors to agree between themselves their priority to recover debt in a deed of priority
What is a negative pledge?
This clause prohibits the company from creating later charges with priority to the floating charge (ie fixed charges) without the floating charge holder’s permission.
In practice, the existence of a negative pledge clause is disclosed by completing a section of Form MR01, sent to Companies House
Under s 44 CA 2006, a company can execute a deed by:
- affixing its seal and be signed by at least one authorised person (director, company secretary or other authorised person) in the presence of a witness who attests the signature.
- by the signatures of:
- two authorised signatories (a director or company secretary); or
- a director of the company in the presence of a witness who attests the signature.
Security
Within what time frame should a fixed or floating charge be registered with Companies House?
Within 21 days, or it becomes void and must be repayed ASAP
