Reviewable transactions - avoidance of a floating charge

Question 1

what are the conditions for a floating charge to be invalid?

Answer 1

A floating charge will be invalid where:
o No new consideration was given for the charge;

o The charge was given within the ‘relevant time’:
 Unconnected = within 1 year preceding insolvency
 Connected = within 2 years preceding insolvency

o if the charge was to an unconnected person, insolvency must be proven (s123)

Question 2

what is the procedure in relation to invalid charges?

Answer 2

o If the criteria is met, the charge is automatically invalid so the office-holder doesn’t need to apply to the court. They will write to the chargee and state they believe it is invalid. They may seek an injunction if the chargee seeks to enforce.

o Either party could apply to the court for a declaration as to the charge’s validity