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Re Spectrum Plus: Difference between revisions
→Ruling
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===Ruling=== | ===Ruling=== | ||
“The correct conclusion, in my opinion, is that the debenture, although expressed to grant the bank a {{tag|fixed charge}} over Spectrum's [[book debts]], in law granted only a {{tag|floating charge}}. | “The correct conclusion, in my opinion, is that the debenture, although expressed to grant the bank a {{tag|fixed charge}} over Spectrum's [[book debts]], in law granted only a {{tag|floating charge}}. | ||
===Relevance to stock lending=== | |||
Can a [[Borrower]] create a fixed charge over collateral you have pledged to a [[Lender]] under a [[Pledge GMSLA]], if the Borrower retains a right to substitute and replace collateral it has posted with other collateral. Conservative souls suggest {{casenote1|Re Spectrum Plus}} calls this into question. | |||
[[Your humble correspondent]] suggests the cases are not exactly on all fours: | |||
*'''No possession''': In a Pledge GMSLA the borrower delivers the collateral to a third party custodian who is a security trustee - that is, the chargor is not in possession of the collateral day to day. | |||
*'''Restriction on right of substitution''': The return of collateral is at the security trustee's pleasure, and is in any case subject to rigid rules requiring substitution of replaced collateral with other assets having an equivalent value. So while the chargor can take the collateral out, it cannot diminish the value of the security pool. | |||
*'''The collateral is not cash: it is physical assets over which one can and customarily does grant a lien. | |||
===In other words=== | ===In other words=== | ||