Avoidance of floating charges, Business Law and Ethics

Avoidance of Floating Charges:

Under s.314 liquidation automatically renders void any floating charge created within the period of 12 months before commencement of liquidation subject to the following exceptions:

(a) valid if the company was solvent at the time when the charge was created.  A company is not solvent unless it can pay its debts in full as they fall due;

(b) if the company was not solvent the floating charge is still valid as security for cash paid to the company (with interest at six per cent per annum) after the charge was created and in consideration of the loan.

The general purpose of the rule is to prevent an unsecured creditor of an insolvent company from getting advantage over other creditors by obtaining a floating charge to secure an existing debt at a time when the company is heading towards insolvent liquidation.  It is only the charge (as security) not the debt itself which becomes void.

Posted Date: 1/15/2013 5:35:33 AM | Location : United States







Related Discussions:- Avoidance of floating charges, Assignment Help, Ask Question on Avoidance of floating charges, Get Answer, Expert's Help, Avoidance of floating charges Discussions

Write discussion on Avoidance of floating charges
Your posts are moderated
Related Questions
What are the ways of aggregate demand policy To illustrate some of the issues involved in policy coordination we will focus on monetary policy. We discuss three ways in which

Accounts to be Annexed to Balance Sheet: By S.156 (1) the profit and loss of account, and, thus far as not incorporated in the balance sheet or profit and loss of account, any

Question 1: (a) Briefly outline the role of the State in Employee Relations. (b) Write short notes on any three of the following: (i) The Ministry of Labour and Industrial

Law Society of US Establishment However it is established through sec 3 of the Law Society of US Act Cap 18.  Hence it is a body corporate through the name Law Society

Mischief rule: "Four things are to be considered and discussed:; (i) First is 'what was the common law earlier than the making of the Act?' (ii) is 'what was the mischie

Legal justification - Constructive notice: The legal justification for this rule is that since the company's public documents in its file at the Companies Registry are availab

Corporate Social Responsibility (CSR) has become a key aspect in the activities of an organization in the context of environment and community development, employees, customer serv

Drawee - Negotiable Instruments There following points concerning to the drawee should be noted. Through S.4(2) (a) provides that: like; (i) The drawee is dead or might bankr

Leon, a bank vice president, joined Fitness Center, Inc. (FC). He signed a contract stating, among other things, an exculpatory clause that FC

QUESTION 1 What are the scope and limitations of administrative law? Is the demarcation clear? What are the criteria by which you would decide on which side of the line a case