debenture
In order for a company to borrow money the creditors must have security. The creditor wants security to protect its position in case of the insolvency of the company; equally the company wants to be able to borrow without having to give such security to the lender that would restrict its ability to trade.
There are two types of security—fixed charges and floating charges. A fixed charge is a charge over a specific identifiable asset or property. A floating charge is a charge over a fluctuating class of assets which are used in the ordinary course of business. Both charges are subject to registration and if not registered are void. Section 93-105 of the Jamaica Companies Act 2004 and sections 237-251 of the Barbados Companies Act cap 308 provide the statutory basis for the registration of a charge. The Barbados act further stipulates that registration must take place within 28 days of the creation of a charge in order for the charge to be valid. On insolvency, the creditor holding a fixed charge takes priority over those in possession of a floating charge on the company’s assets.
It seems that despite the differences between floating charges and fixed charges outlined by Lord McNaghten in the citation, the distinction between the two is of critical importance to the law as it relates to whether or not a fixed charge can be applied to a fluctuating class of assets such as book debts. In 2001 the Privy Council considered this question in Agnew v. IRC and reaffirmed the earlier decision of the court in Siebe Gorman v. Barclays Bank that fixed charges could only be applied to book debts under certain circumstances. The issue highlighted by these cases is the challenge faced by the courts in determining the status and applicability of a charge. The decision should be based on the realities of the relationship as determined by law rather than the intention of the parties.
Thought we were supposed to say the advantage of each type of charge. A fixed charge gives
There are two types of security—fixed charges and floating charges. A fixed charge is a charge over a specific identifiable asset or property. A floating charge is a charge over a fluctuating class of assets which are used in the ordinary course of business. Both charges are subject to registration and if not registered are void. Section 93-105 of the Jamaica Companies Act 2004 and sections 237-251 of the Barbados Companies Act cap 308 provide the statutory basis for the registration of a charge. The Barbados act further stipulates that registration must take place within 28 days of the creation of a charge in order for the charge to be valid. On insolvency, the creditor holding a fixed charge takes priority over those in possession of a floating charge on the company’s assets.
It seems that despite the differences between floating charges and fixed charges outlined by Lord McNaghten in the citation, the distinction between the two is of critical importance to the law as it relates to whether or not a fixed charge can be applied to a fluctuating class of assets such as book debts. In 2001 the Privy Council considered this question in Agnew v. IRC and reaffirmed the earlier decision of the court in Siebe Gorman v. Barclays Bank that fixed charges could only be applied to book debts under certain circumstances. The issue highlighted by these cases is the challenge faced by the courts in determining the status and applicability of a charge. The decision should be based on the realities of the relationship as determined by law rather than the intention of the parties.
Thought we were supposed to say the advantage of each type of charge. A fixed charge gives