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You will be interested in the definition
of a fixed charge as it is fixed charge holders who get repaid
first of all on the demise of a company.
There are several types of fixed charge
. The one with which you are likely to be most familiar with
is the "mortgage".
You know that if you sell your home then
the mortgage holder gets repaid first out of the proceeds.
It is similar with company law.
Several types of company assets can be
subject to a "mortgage".
The first, as you would expect, is the
land and buildings owned by the company. Such a mortgage is
evidenced by two documents:
- the fixed charge document (sometimes
known as "mortgage" or "legal charge"
or "fixed charge" or "fixed and floating
debenture") which has to be registered at Companies
House.
- the second document is the charge
document filed at the land registry.
The second type of "fixed
charge" that exists relates to what is known as a "chattels
mortgage". A "chattels mortgage" is again evidenced
by a piece of paper known as a debenture. The chattels mortgage
must directly record the specific assets over which the charge
relates.
For example a chattels mortgage
could exist over:
"A Straw and Henshaw milling machine serial number 1572431
6"
but could not exist over vaguely
defined assets such as:
"all plant and machinery"
In other words to hold a chattels
mortgage the assets subject to that mortgage must be clearly
identifiable. The mortgage document also is recorded at Companies
House.
Have you secured your company's
financial position by obtaining chattels mortgages over the
assets of your customers?
The third type of "fixed charge"
that can be registered is against such assets as goodwill
and other intellectual property rights.
Until June 2001 it was thought
that a fixed charge could also be available over the debtors
of a company. Following the decision in a case known as "Brumark"
it is anticipated that it will no longer be possible for bankers
to hold a fixed charge over debtors other than in very exceptional
cases.
If you would like to receive a
transcript of the court judgment in the Brumark case please
contact us. Purnells can also advise as to the circumstances
that must exist before a fixed charge over debtors is likely
to be valid.
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