Floating charge Case Study Example | Topics and Well Written Essays - 3750 words

Floating charge - Case Study Example A search at Company's House had not revealed any other existing charges. This floating charge was registered on the 24th of April 2008 at Companies' House, the same day it was created. In October 2008 Marina and Mortimer also decided to double their orders for polymeric fibers with Synthetic Fibres Plc, needed for the production of fake furs. Synthetic Fibres Plc insisted on a reservation of title clause in all contracts for future supplies of polymer fibers. In November 2008 Synthetic Fibres Plc made a delivery of '30,000 worth of polymeric fibres to Imitation Furs Ltd. Following the advice of their accountants on the 18th of March 2009, Imitation Furs Ltd is now in insolvent liquidation. To come up with an answer to the question, it is necessary to define first the meaning of floating charge and reservation of title clause (or simple retention of the title clause), where, when and how they are used, who can use, and the extent of their use. This paper will first begin with the discussion on the floating charge on the first part and the discussion of the simple retention of title clause on the second part. The discussion and conclusion will be based available scholarly works and decided cases relevant to the topic from reputable sources in the internet in answering the question. A floating charFloating Charge, Defined A floating charge is a mortgage, debenture or other security documentation, is likely to create charges over particular assets as security for borrowings or other indebtedness. There are essentially two types of charge, floating and fixed. A floating charge is appropriate to assets and material which is subject to change on a day to day basis, such as stock. Individual items move into and out of the charge as they are bought and sold in the ordinary course of events. The floating charge crystallizes if there is a default or similar event. At that stage the floating charge is converted to a fixed charge over the assets which it covers at that time. A floating charge is not as effective as a fixed charge but is more flexible.1 History of Floating Charge Floating charge has its roots from the United Kingdom.2 Historically, there is no legislation and no judicial decision that was a genesis of a floating charge, and the nature of the chargee's interest in the charged assets (or fund assets) remains doctrinally uncertain. The earliest descriptions were given by Lord Macnaghten in two cases.3 First, In Government Stocks and Other Securities Investment Co Ltd v Manila Rly Co [1897] AC 81 at 86 he said: "A floating security is an equitable charge on the assets for the time being of a going concern. It attaches to the subject charged in the varying condition in which it happens to be from time to time. It is the essence of such a charge that it remains dormant until the undertaking ceases to be a going concern, or until the person in whose favour the charge is created intervenes. His right to intervene may of course be suspended by agreement. But if there is no agreement for suspension, he may exercise his right whenever he pleases after default." Later in Illingworth v Houldsworth