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What happens if fixed or floating charge becomes invalid?

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA LW Exams › What happens if fixed or floating charge becomes invalid?

  • This topic has 3 replies, 2 voices, and was last updated 2 years ago by MikeLittle.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • November 3, 2022 at 2:41 pm #670601
    acca2050
    Participant
    • Topics: 41
    • Replies: 51
    • ☆☆

    1-

    Charge becomes invalid if:

    Floating charge: 12 months period
    Fixed charge: 6 months period
    …of commencement of liquidation period.

    (note: this part is clear, but 2 part is not clear)

    2-

    What I cant able to understand what does that mean by
    – invalidity of charge, and why liquidator would try to prove invalidity?

    Its bit confusing.

    What Im guessing is
    – liquidator proving invalidity hence the charge wont classed fixed or floating,
    – and it doesnt get any priority in asset distribution in liquidation
    – and goes to other category for this, thus it goes in favor of issuer or company

    Kindly answer my this confusion, I look forward to it, and would really appreciate your help.

    Thanks Sir!

    November 3, 2022 at 3:09 pm #670605
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23321
    • ☆☆☆☆☆

    You’re almost there (except I couldn’t understand your last line about “thus it goes in favour of issuer or company”!)

    If a liquidator can show that a charge is invalid, then it will no longer rank as a secured debt.

    And if it’s not secured then it’s …unsecured

    And, as an unsecured debt, it ranks alongside all the other unsecured trade creditors and non-preferential creditors

    All clear?

    November 3, 2022 at 5:01 pm #670613
    acca2050
    Participant
    • Topics: 41
    • Replies: 51
    • ☆☆

    Thanks alot sir! Really appreciate your help. Stay blessed!

    November 4, 2022 at 8:17 am #670645
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23321
    • ☆☆☆☆☆

    You’re very welcome

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    Posts
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