All Assets Charge
Fixed and floating charges offer a comprehensive security measure over a company’s assets, allowing lenders substantial control. Unlike individuals, companies can grant such charges over movable assets without strict limitations. These charges, covering present and future assets, can be flexible, combining fixed and floating elements, tailored to the lender’s needs.
Fixed charges, restricting asset dealings, contrast with floating charges, permitting business-as-usual asset management until crystallization upon default. While floating charges offer versatility, they are subject to statutory limitations, including preference to certain creditors in insolvency proceedings, especially within a year of winding-up.
Book debt charges exemplify the distinction between fixed and floating charges. Without restrictions on asset dealings, purported fixed charges on book debts are often reclassified as floating. Moreover, tax legislation prioritizes revenue debts over the proceeds of fixed charges on book debts unless specific notice is given.
Crystallization of floating charges occurs upon default, triggering enforcement and receiver appointments. However, clauses automatically crystallizing charges face challenges as they may not align with the company’s perceived authority. Registration of these charges is crucial, with failure resulting in invalidation against liquidators and creditors, underscoring the importance of timely registration and potential court extensions.
Read a detailed Article on this subject with the Legislation and Cases, browse Irish Legal Guide or Contact Us for advice below.