Company & Insolvency Law Assignment Example | Topics and Well Written Essays - 2500 words

Company & Insolvency Law - Assignment Example whereas a floating charge is that which allows a company to undertake borrowings despite non possession of assets which may be specific in nature and the charges are placed on the company’s assets like its machinery, stock in trade etc. Before and at the onset of insolvency, fixed charge holders enjoy an unfettered right to enforce their debt repayments by dragging their debtors to court upon default by the latter.1 A debenture holder, whose debt is secured by a floating charge over the assets of a company such as its book debts and trading stock, is likely to enjoy boundless benefits should such a charge crystallize preferably before the onset of insolvency. In Khalid and Mahmood’s business, the bank charges a fixed charge on the company’s assets meaning it secures via mortgaging the assets of the company in case of debts and further affixes a floating charge on the rest of the undertaking of the company. ... er party owing to the weight of his needs, leaving room for the stronger party to make collateral demands whose fairness may be of little relevance, given the freedom of contract doctrine at the heart of contract law. However, when the sum realized from the fixed assets is not enough to pay the debt owed to the creditors, the holder is then relegated to the undesirable general league of unsecured creditors for the remaining balance, subject to pari passu regime. The fixed charge of 75,000 that has been granted by the bank is an automatic security clause, and is the first priority and thus needs to be paid before anything else. According to the facts of the case, the bank got the 75,000 pounds of loan as a fixed charge interest. This loan was undertaken to be a floating charge loan with a negative pledge on the floating assets of the company. It can be demarcated to a floating charge loan only when the loan is given on collateral which is not fixed in nature. Loanshark granted a 20000 Pounds worth of floating charge on the company’s undertaking. Adopting from the theory, we can assume that such charge was given on the floating assets of the company. Taking case laws into account, the case of Agnew v Commissioners of Inland Revenue2 involved the security interest of the company’s assets and the priority of the creditors in the winding up of the business. Other cases like Leyland Daf Ltd3 involve floating charges depicting how crystallization on time can help save the company. Under all the circumstances, if a company has taken loan on a fixed charge interest and floating charge interest, the loan which has been taken on the fixed charge interest has to be paid at the earliest time possible. This is done so that the loan on the fixed security which is more vulnerable