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Concept:
Charge created within 6 months prior to liquidation
– it becomes invalidMy Question 1:
– What happens when charge becomes invalid?
My Question 2:
Receiver also proves validity:
– if the charge was on new money
Note: What is new money here.
– or company was solvent at that time of creating charge
Note: the main concept says its invalid when done six months prior to liquidation commencement…
So whats the point of his proving it to be solvent?
I would be really grateful for your response.
Thanks
‘ What happens when charge becomes invalid?’ – it’s no longer a secured creditor – there is now no valid charge / security so the debt ranks alongside the other unsecured trade creditors
‘– if the charge was on new money
Note: What is new money here.’
New money is money that is paid into the company’s assets. ie a charge cannot be created whereby the creditor is given security over the company’s existing assets. This prevents the company from preferring one creditor over others. But if new money is being paid into the company’s assets, then that charge would be valid
‘– or company was solvent at that time of creating charge’ If it’s not in exchange for ‘new money’ it could still be valid even if it was within the crucial 6 months. If the secured creditor can prove that, at the date the charge was being created and registered, the company was solvent. This is a rule to allow the creation as valid even though it could potentially be alleged that the charge represents a fraudulent preference in favour of the new charge holder.
Is that better for you?
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