Loan Finance The majority of small businesses fund themselves from bank lending and retained funds. Loan finance can extend from short term finance, typically provided by a bank, to longer term finance provided by investors. A loan or investment, whether from family, friends or outsiders, should be formalised in a legal agreement. The legal agreement should provide for the nature […]
“Debentures” A debenture, in its broadest sense, is a document evidencing a debt. It is used in two senses in the context of company borrowing. In one sense, discussed in the following section a debenture refers to a debt “security” i.e. an interest in a company, which may be transferable. In another sense, discussed in a later section, a debenture […]
Fixed and Floating Charges I A fixed and floating charge may be created over the entire assets and undertaking of the company. If it is sufficiently broad, it may capture the entire of company’s undertaking, thereby facilitating its sale for the benefit of the secured creditor. This type of “debenture” is commonly granted by a private company to a single […]
Registerable Charges I The Companies Act requires most types of charge made by a company to be registered in the Companies Registration Office (CRO). A charge which is not registered is void as against the liquidator and any creditor of the company. It remains valid as between the debtor and the creditor. This defeats the principal purpose of security, as it […]
Overview I The appointment of a receiver is a mechanism for the enforcement of security granted by a company by way of a fixed and/ or floating charge over its assets. The receiver’s powers are set out in the debenture deed. The 2014 Act provides statutory powers for receivers. A receiver may be appointed under a fixed charge, a floating […]
Crystallisation I When a floating charge is enforced, it “crystallises” on all the assets within its scope. The wording of the floating charge is typically in very broad terms and charges each class of assets. The borrower is entitled to use and transfer the circulating assets in the course of its business prior the crystallisation. At that point, the charge […]
General I The receiver is bound and empowered primarily by the terms of his appointment and the debenture/ mortgage under which he is appointed. He is entitled to act in the interests of the charge holder/ mortgagee. The interests of the company and other creditors are not his primary consideration. The receiver must not unnecessarily or recklessly damage the interests of third […]
All Assets Charges A fixed and floating charge over all of the present and future assets of the company allows for the creation of a security over (and the appointment of a receiver) over most and in some cases, all of the company’s assets, business, and undertaking. This can be a very effective form of security as it allows the […]
Personal Liability I A receiver of the assets of a company is personally liable on any contract entered in the performance of his functions. This is the default position, whether the contract is entered in the name of the company or on his own behalf. Both the receiver and the company may be liable on the contract. This default position […]