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Financial Collateral Regulations: Difference between revisions
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While a [[floating charge]] still offers less practical protection than a [[fixed charge]], where it qualifies as an [[security financial collateral arrangement]], the [[FCRs]] strengthen the lender’s position in certain respects. | While a [[floating charge]] still offers less practical protection than a [[fixed charge]], where it qualifies as an [[security financial collateral arrangement]], the [[FCRs]] strengthen the lender’s position in certain respects. | ||
*'''Exemption from registration''': An SFCA is exempt from registration under the [[Companies Act 2006 (UK)|Companies Act 2006]]: Therefore, failure to register a an SFCA will not result in the [[floating charge]] being [[voidable preference|void]] against the borrower’s creditors<ref>Reg 4(4) FCRs.</ref>. | *'''Exemption from registration''': An SFCA is exempt from registration under the [[Companies Act 2006 (UK)|Companies Act 2006]]: Therefore, failure to register a an SFCA will not result in the [[floating charge]] being [[voidable preference|void]] against the borrower’s creditors<ref>Reg 4(4) FCRs.</ref>. | ||
*'''Exemption from moratorium''': Generally, [[security interest|security interests]] cannot be enforced against an insolvent debtor without the consent of the administrator or the court. However, an SFCA is | *'''Exemption from moratorium''': Generally, [[security interest|security interests]] cannot be enforced against an insolvent debtor without the consent of the administrator or the court. However, an SFCA is exempt from this prohibition and can be enforced without delay<ref>Reg 8(1) FCRs.</ref>. | ||
*'''Better insolvency ranking''': Generally, a creditor’s claim on a secured asset will rank behind preferential creditors and the administrator’s costs and expenses. However, if it is an SFCA, the Lender’s claim will only rank behind prior fixed chargeholders’ claims<ref>Reg 8(1) and 10 FCRs.</ref>. | *'''Better insolvency ranking''': Generally, a creditor’s claim on a secured asset will rank behind preferential creditors and the administrator’s costs and expenses. However, if it is an SFCA, the Lender’s claim will only rank behind prior fixed chargeholders’ claims<ref>Reg 8(1) and 10 FCRs.</ref>. | ||
*'''Exemption from disposal of secured assets''': Generally, an administrator could deal with assets subject to a [[floating charge]] as if the charge did not apply (though the secured party would maintain priority over the proceeds of the disposal). This does not apply for an SFCA<ref>Reg 8(1) FCRs.</ref> | *'''Exemption from disposal of secured assets''': Generally, an administrator could deal with assets subject to a [[floating charge]] as if the charge did not apply (though the secured party would maintain priority over the proceeds of the disposal). This does not apply for an SFCA<ref>Reg 8(1) FCRs.</ref> | ||