What are advantages and disadvantages of a floating charge to a debenture holder?
ANSWER
• Capacity to appoint receiver or manager in the event of default.
• It charges both existing and future assets of the company.
• Upon crystallization, the chargee becomes entitled to sell the security.
• Until crystallization value of security remain uncertain.
• Other interests e.g. landlord‟s distress for rent have priority in the satisfaction of claims.
• A fixed charge created subsequent to a floating charge has priority in the satisfaction of claims
• A floating charge created within 6 months before the commencement of winding up is deemed to be a fraudulent preference and is void.
• A floating charge created within 12 months before the commencement of winding up is invalid unless it is proved, that the company was solvent immediately after its creation.