- This topic has 11 replies, 3 voices, and was last updated 1 year ago by
.
- Posts
Hello Sir ,
1- Don borrowed £50, secured by floating charges. The loan charge was created on 1feb and registered on 15th feb.2-Else borrowed £50, secured by floating charge. The loan charge was created on morning 1april and registered on 15th april.
3- Flash borrowed £100, secured by fixed charge. The loan charge was created in afternoon 1April and registered on 20April.
4-Bank borrowed £100, secured by fixed charge. The loan charge was created on 5April and registered on 15th april.
My question is that : If a floating charge is registered even before fixed charge, who will take priority first?
In this question there are 2 floating and fixed charges and I am confused.
Help me in this question !If you want to ask the tutor something directly, please ask on the relevant ask the tutor forum-
https://opentuition.com/forum/ask-acca-tutor-forums/ask-the-tutor-acca-lw-exams/
Hope this helps.
Since you are here, I will say I believe fixed charges generally outrank floating charges even if created after floating charges.
The question above confuses me because it seems to involve more than one individual borrowing money. Are you sure you don’t mean that the above individuals or entities lent an entity money and that you are being asked whom has priority on the loans they have made to an entity?
While you wait for the tutor’s response, here is a post he made with general regard to the topic of fixed and floating charges
Mishal (and Jon) I’ve just posted my answer to Jon’s question on the Ask ACCA Tutor page. I believe that that post should have cleared up much of the confusion.
Mishal, as Jon has already pointed out, your question doesn’t really make any sense! You repeatedly use the word ‘borrowed’ for each of the four players. Is it possible that you mean ‘lent’?
Where is the question from? The continuing issue of the dates of ‘creation’ and ‘registration’ is, I believe, answered in my post on the Ask ACCA Tutor forum that I posted some 20 minutes ago.
OK?
Sorry , I made a mistake in writing question.
Its a Crums Ltd company which borrowed money from these parties and made transactions .I’ll just direct anyone coming across this thread to the following link-
Mishal – there’s a lesson to be learned! Please do make sure that you include ALL the information from within a question – it makes the effort of answering it so much easier!
🙂
OK?
Ok Sir , I’m sorry for that.
But kindly clear my point.
If a floating charge is registered does not it means that it is under Negative Pledge Clause ?
Because if floating charge registered under Negative Pledge clause it will take priority over fixed charge.
I am confused about either its a simple Registration of floating charge or a Negative Pledge Clause ?Hi Mishal
A negative pledge clause is not an automatic inclusion when writing a security document. It’s an optional extra and the effect is that the company that is borrowing the money under the security of some of its assets (typically in this situation ‘the whole or substantially the whole of the undertaking including goodwill’) is obliged to notify the floating charge holding lender that the company is about to pledge specifically some assets and secure the loan by way of fixed charge.
Now, the effect of a negative pledge clause is merely this notification from the company about the proposed fixed charge about to be granted. This does NOT have the effect of promoting / protecting the priority of the floater. It is merely the notification of the proposed fixed charge.
So what can the floater do? Typically the floating charge lender could ask for early repayment of the floating charge loan. OR …. they could simply do nothing and accept that, in the event of the loans having to be repaid before the proposed expiration / repayment date, their loan would rank after the claims of the later-dated fixed charge lender.
Is that OK?
NB – this forum is for students to help students. If, in future, you want me to respond to a question, the appropriate forum is Ask ACCA Tutor forum. OK?
- You must be logged in to reply to this topic.