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Basic Rules:
a/ Fixed charge takes priority over floating charge
b/ in the event of same charge type like 2 charges and both are fixed or floating. Earlier registered one takes priority.My concern is related to (b):
1- Two same charge created, so priority is based on date of creation or date of registration.
2- If two fixed charge created, and two floating charge created. What happens in this event?note:
( I think floating charge isnt created on specific assets like fixed one, so maybe my concern 2 mightnt be valid)Looking forward to clarify my this confusion with your help.
Many Thanks
This is tricky! If a charge is registered within 21 days of its creation, the effective date is the date of creation. But, if registration is not registered within 21 days, the effective date is the date of registration.
As for your second concern, it is possible that a floater is created over ‘the whole or substantially the whole of a company’s undertaking’ so that would cover TNCA as well as current assets.
Fixed would take precedence over current and earlier fixed would take precedence over later fixed … unless! … the earlier fixed was not registered within 21 days. If later fixed WERE registered within 21 days and before the earlier fixed, the later one would win.
UNLESS!! the second one was created and within the charging instrument the second one was registered as ‘a secondary charge’. So the second lender could not improve their status whilst KNOWING that the charge was created as secondary.
Is that all clear now?
If not, post again
Registered in 21 days:
Effective date is date of creationNot register in 21 days, it becomes invalid and will be eligible for immediate debt repayment.
Not reg in 21 days:
Effective date is date of registrationWhich part I didn’t understand:
Your last paragraph “UNLESS!! the second one was created and within…”Many Thanks
I’m confused! I can interpret your post as meaning that you still don’t follow the bit in the last paragraph – ‘UNLESS!! the second one …’
Or equally I can interpret it as though you do now understand and all is clear.
Please let me know, one way or the other, thanks
I can interpret your post as meaning that you still don’t follow the bit in the last paragraph – ‘UNLESS!! the second one …’
I don’t understand the last paragraph that you explained.
OK, two similar charges on the same asset, both registered within 21 days, the earlier creation date wins it.
Two similar charges on the same asset, neither registered within 21 days, the earlier registered one wins it.
Two similar charges on the same asset, the first (earliest) registered within 21 days, the second (later) not registered until after 21 days, the first (earliest, registered) wins it
Two similar charges on the same asset, the first (earliest) NOT registered within 21 days, the second (later) WAS registered within 21 days, … now, here’s the problem! The point about the requirement of registration is so that later potential lenders can know of the existence of prior charges. But if the first one isn’t registered, how can the second one know of the existence of an earlier charge on that asset?
And here’s the UNLESS from my earlier post … if the charging instrument (the loan agreement) states within the documentation that the second loan is created as secondary to an earlier loan, the mere failure to register the earlier loan should not automatically raise the status of the second lender to the position of primary lender.
Does that make it any easier for you?
If not, post again and I’ll try with different words! I fully understand that it’s a tricky sub-subject area … but quite fun if you have a wicked mind!
Further to that last post of mine, here’s an issue and I can only suggest how the Courts would resolve it!
OK, two similar charges on the same asset …
Charge 1 created on 1 August, registered on 20 August
Charge 2 created on 7 August, registered on 15 August
Empirically, earlier created (both registered within 21 days) should win the day.
But how could lender 2 KNOW of the existence of the prior charge? It hasn’t yet been registered.
I believe that, in practice, lender 2 would ask the directors of the borrowing company whether there were any prior charges (and would get the directors to confirm in writing that there weren’t any such charges) and then wait for 3 weeks following the company’s request for a secured loan to see if any such registration takes place within that time period.
That’s for interest’s sake. There’s no way that that contrivance would appear in an ACCA Law exam
OK?
Thanks a lot Mike for such detailed response. I appreciate it.
You explained everything in clarity.
So the chargeholder can take benefit of earlier chargeholder mistake of missing registration date and taking priority over it.
Thanks for your contribution. Have a nice day!
‘So the chargeholder can take benefit of earlier chargeholder mistake of missing registration date and taking priority over it.’
That is, hopefully, a mistype from you! It depends to which of two alternative situations you are referring.
If you are referring to the situation of a missed registration and then a second registration after the 21 days but with no notification of the existence of an earlier charge then, yes, the second lender will take priority because they have registered first, even though they themselves registered only after the 21 day registration period.
But if you were referring to the situation where second lender had notice of the existence of the earlier charge, in that situation lender 2 cannot improve to become priority lender.
Again, I hope that’s clear for you
Everything is clear so far with your help in this thread. I must mention again that thanks for your contribution and time.
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