9. Security Flashcards by Annie wood

What should you check before accepting mortgage over shares

Ds cannot refuse reg + pre-emption rights do not apply

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What part of Re Yorkshire did Spectrum focus on

B intended to keep trading + control

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Method of perfection if fixed charge over cash (other than CH)

Give notice to debtor/bank BUT NOT NECESSARY

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Method of perfection for EA of IP

Reg at IP office

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What kind of mortgage over shares will L prefer and why

EM to avoid becoming M of company

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Method of perfection if LA of insurance C

Notice to insurance company (L at least noted on policy, but better is to be ‘xo-insured’)

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How is a lien perfected

L retains property until an O is met

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What phrasing stops security falling away upon even temporary repayments

‘By way of continuing security’

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What does it mean that most debentures are ‘all monies’ debentures

Provide security for all facilities, including future facilities

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When is an assignment by way of security legal

If s.136 LPA ‘25 met

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Three methods of security over future IP/property

Fixed charge/EM/EA

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Two cases on distinguishing between fixed and floating charges

Re Yorkshire and Spectrum

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What kind of right does a charge give

Equitable right over an asset

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How is a pledge perfected

L takes actual/constructive delivery

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How can you perfect fixed charge over P&M, other than reg at CH

Affix notice

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Does any security need to be registered at CH to be valid?

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What are 3 tests for floating charge

Over present + future class of assets, which in OCoB would change, and B intended to keep trading

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Why is it a benefit to L of having QFlC and appointing own A

Control of the administration process

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Two examples of floating charges

Stock and book debts (if insufficient control)

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Method of perfection if LA over book debts

MUST give notice to debtors to stay LA

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If LM of shares, what is the method of perfection

Transfer shares, new certificates and reg in M reg

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What should C do once secured debt repaid

Request release of security on register at CH

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Name three assets whose only possible method of reg is at CH (but they do not need to be reg at CH)

Goodwill (fixed), stock and cash (floating)

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3 things for floating CASE

Re Yorkshire

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What M is used for future property

Equitable M

Two kind of charges

Fixed and floating

General rule on priority of security which has not been reg at CH

Date of notification

What kind of charge is generally less advantageous for L

Floating

If trying to assign benefit of C, what should you check first

Doesn't contain NAC

What is the aim of perfecting security

Notifying 3rd parties

When might book debts be fixed charge

If truly blocked account (Spectrum)

What is the effect of security on B

Lowers borrowing costs + means B who couldn't get loan otherwise can

Why is a mortgage over shares a weak form of security

Rank bottom in priority + unlisted shares less marketable

What is a floating charge

Attaches to fluctuating assets, allowing B to continue to deal in OCoB, crystallising on specific event

What is CbwolM usually in addition to

Fixed charge over property to

Benefits of grandfathered floating charge

Can appoint AR + not subject to prescribed part + tax advantages

What commercial issues might there be w/ giving notice to 3rd parties

Making 3rd nervous about B's financial stability

When does reg at CH NOT give constructive notice?

Shares, cash and bonds (covered by Financial Collateral Regs) - only actual notice if checked

Two downsides of pledge

L becomes bailee and B cannot generate income

Two kinds of insurance that may be assigned

Keyman or buildings insurance

If B has CiA against 3rd, what can B do

Assign benefit to L

Most common form of security for land

CbwoLM

What other assets might form basis of security, but are not in BS

Insurance, IP rights, key contracts, goodwill, TMs/patents

Control for floating CASE

Spectrum

What to do before accepting M over shares of non-English company

Local law advice on perfection

What is the effect of reg at CH

Deem 3rd parties to have constructive notice

What is the usual charge over bookdebts

Floating

Cons of floating charge

Vulnerable, not recognised in other Js and if over stock, might be subject to RoTs

What will L want if EM over future property

'Further assurance' claus + PoA to be able to take security when new rights acquired

859A gives what

Reg at CH within 21 days from day after creation of charge

What case confirmed Re Yorkshire

Spectrum

When is a floating charge qualifying

Over substantially all the assets + doc states para 14 Schedule B1 applies

What is the CL rule on priority between LAs

Date notice given to debtor (Dearle v Hall)

What is a fixed charge

Attaches to specific asset if chargeholder has sufficient control

Why are floating charges vulnerable

To fixed charges, preferential creditors, A's costs, and higher chance of avoidance

What kind of M has to be registered to maintain priority against BFP

What is the key criteria that distinguishes LA from EA

Notifying original debtor/counterparty

What is a 'catch all' floating charge called and what is it's purpose

Sweep up floating charge, ensures that charge will = qualifying floating charge

Two situations in which B will not be able to give security

Negative pledge or unlawful FA

If no notice is given to counterparts when assigning benefit of C, what happens (x3)

Only EA, counterparty can set off amounts B owes it, and can pay B directly

What is the criteria in s.136 LPA '25

Absolute assignment, in writing, signed by assignor and NOTIFIED to original debtor/counterparty

What administrative issues might there be w/ giving notice to 3rd parties

Too many to give notice to

4 examples of fixed charges

Goodwill, property, book debts, IP, P&M, uncalled capital

Spectrum key

Control for floating

If Ds can refuse reg or pre-emption rights do apply, what should you do before M over shares

Amend AoA

What is the effect of failure to reg security at CH

Void against L/A/other creditors + debt becomes immediately repayable

What is a grandfathered floating charge

Over substantially all assets + pre 15/09/2003

How to reg at CH

Form MR01 + certified copy of debenture + reg fee, within 21 days from day after creation of charge

General rule on priority at CH

By order of creation, subject to proper reg

Priority for CbwoLM

Ranks according to date of reg, not creation (48(1) LRA '02)

Two options of security over insurance Cs

Fixed or assignment

What changes the CL rule on priority between LAs

Reg at CH gives constructive/deemed notice, so first reg = priority

859H states what

Consequences of failing to reg security

Procedure for requesting release of security on CH reg

Deed of Release + either MR04 or MR05

Two ways of security through physical possession

Pledge and lien

What is the best protection of security

Reg at CH

Why must you reg EM and EA

BFP for value w/o notice takes free

What documents are required for EM over shares

STF signed but undated, blank share certificates + PoA in favour of bank

What three assets (if they have security over them) do not need to be reg at CH bc covered by Financial Collateral Regulations

Cash, shares and bonds

When must security over future IP/property be reg at LR/IP office

Once acquired

What did Spectrum define a fixed charge as

Asset only released from charge on active occurrence of L, e.g. prior written consent

When is an assignment equitable

If 136 LPA '25 criteria not met

Three advantages of floating charge for L

B can keep trading, grandfathered FlC has benefits, and QFlC can appoint own A

Method of perfection of reg land

Reg at LR

When must you consider the value of the security

At time of potential enforcement

Re Yorkshire key

3 things for floating

When is it more likely a book debt will have a fixed charge over it

One-off loan, e.g. inter-group loan

What did Spectrum define floating charge as

Assets not appropriate until a later date

What five subjects of security do not need notice to be given to any third party to perfect

Shares, cash, bonds, goodwill, stock

For what security over cash is there no need to give notice to a bank, even as a matter of good practice

Floating charge - only if fixed charge