Secured & Unsecured Creditors

Hi Hamza,

So if I’m a bank that lends your company money and you give me a fixed charge, you are basically giving me rights that attach to certain assets like Land and Property your company operates from. If you miss any payments then I have the right as a fixed charge holder to repossess the land or property and to sell it and get my money back effectively. Also if your company goes into liquidation, I will as a bank with a fixed charge get paid before all the other creditors.

If I am a bank with a floating charge then I have the ability to also repossess assets if you miss payments of the loan, but they are different types of assets e.g. stock, plant and machinery. On liquidation of your company I get paid after the fixed charge bank, preferential creditors (employees) but before the Unsecured creditors.

Unsecured creditors have no right to repossess any assets if they dont get paid and on liquidation of a company they get paid towards the end of the list of creditors.

I would also recommend watching the recorded lectures to help you on this topic.

Kind regards,

Vijay

My pleasure 🙂