Fixed charge: Difference between revisions
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''See also: [[Assignment by way of security]]'' | ''See also: [[Assignment by way of security]]'' | ||
Revision as of 18:50, 17 January 2018
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A word about credit risk mitigation
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See also: Assignment by way of security
A fixed charge is a type of charge. That is fixed. It doesn’t, so to say, float.
A fixed charge encumbers asset it secures from day one. To benefit from a fixed charge you need to have control over the assets - if the debtor can deal with the secured assets as it pleases without your knowledge and control, your fixed charge may fail - see Re Spectrum Plus. On a good day it might get recharacterised as a floating charge — but don't bank[1] on it and note that there are certain formal requirements to perfect a floating charge which you are likely not to have done, seeing as you were thinking what you had was a fixed charge which didn’ require them.
Why take a fixed charge?
A fixed charge is better than its poor relation the floating charge:
- practically, because you do (right?) keep control over the asset and can prevent the debtor salting it away, and
- legally, because it ranks ahead of a floating charge in the debtor’s insolvency (well - it would do: the first in time prevails, and by definition, a floating charge only fixes when it crystallises, imeaning a floater is always last to the party).
However, it does require the security holder to have control of the charged asset. If she doesn’t her fixed charge conceivably fail.
Fixed charges are good for
- Buildings
- Plant
- immovable forces
- Custody assets (where the charge holder is the Custodian)
In more recent times intangible legal rights:
Important case law
Just because you say you have a fixed charge doesn't mean you do. Practical, factual considerations will apply. There are two important recent cases:
Fixed charges are not so good for
- Stock in trade
- Consummables that are in the debtor’s possession
See also
References
- ↑ This gag comes to you direct from our “here all week, folks!” store of corking one-liners.
