Floating Charge Essay

Samuelson believes that the assets definition should concentrate upon property rights that are concerned with wealth, which provides a true balance sheet orientation, rather than being concerned with revenue generation, Samuelson’s definition may lead to an exit value orientation for assets. One of the key points about the property rights approach lies in exchangeability of the asset. Samuelson’s viewpoint would result in certain deferred charges being expensed immediately even though their incurrence may bring about future economic benefits.

This essay will explain the concepts of separate personality and limited liability and their significance in company law. The principle of separate personality is defined in the Companies Act 2006(CA) ; “subscribers to the memorandum, together with such other persons as may from time to time become members of the company are a body corporate by the name contained in memorandum.” This essentially means that a company is a separate legal personality to its members and therefore can itself be sued and enter into contracts. This theory was birthed into company law through the case of Salomon v Salomon and Co LTD 1872. This case involved a company entering liquidation and the unsecured creditors not being able to claim assets to compensate them. The issue in this case was whether Mr Salomon owed the money or the company did. In the end, the House of Lords held that the company was not an agent of Mr Salomon and so the debts were that of the company thus creating the “corporate Veil” .

The court verified that a person is a partner and jointly liable with others in the firm “if his agreement with them is that he should be paid by the firm a fixed sum, irrespective of profits, for work done by him”.

Provided Case 09-3, we, Group 7 have dutifully researched the topic, using resources at our disposal to formulate a consistent, clear and legal response. The following submission outlines the case, our conclusions with supporting evidence and the accounting issues present in the subject.

Co= grantor, Lendor= security holder, fixed charge= security int over non-circulating asset s339(4) PPSA, floating charge= circulating security interest in circulating asset, consider if security interest has “attached” and is “perfected”, no diff b/w floating & fixed charge; look at who got

Lipton, P. & Herzberg, A. (2010). Understanding Company Law. (15th ed.). Pyrmont, NSW: Lawbook Co.

Paragraphs 255-10-55-1 through 55-13 of this Section provide guidance on the interpretation of paragraphs 255-10-50-50 through 50-55 for the classification of certain asset and liability items as monetary or nonmonetary. The following table illustrates the application of the definitions to common cases under typical circumstances. In other circumstances the classification should be resolved by reference to the definitions.

Choosing a Corporation/Company Structure - the business structure of a company/ corporation is highly recommended, it has the flexibility to gain more capital, or credit capability and assets used as security. Based on the Corporation Act 2001 (Cth) AC 22, a corporation is another legal entity with their own legal rights, duties and responsibilities separate to the individual or owner of the company (Harris, Hargovan & Adams, 2013, pp 229). The risk and consequences are one of the principal considerations of choosing a company structure (Harris, Hargovan & Adams, pp 50). Based on the “Corporate Veil” Liability is owned by a separate legal entity and not to the extent of the owner, for instance, the debt of the company is not a personal liability, but the company. This is further explained in the case below.

This case is related to Carrefour S.A. planning to finance its growth by issuing debt securities and considering borrowing in British sterling in order

to the extent that the charge relates to "circulating assets" where the grantor is a company, some unsecured creditors will take priority in respect to the realisation of the proceeds of these assets.

The concept of a company being a separate legal entity is the most striking illustration in separating the company from its owners. A paramount principle of corporate law is that no shareholder or member of a company is made liable for the obligations incurred by such incorporations A company is different from its members in the eyes of law. In continuations to this the opposite also holds true in the sense that neither can the company be held liable for the acts of its members. It is a fundamental distinction that a company is distinct from its members.

Whether or not certain assets and liabilities should be placed on a balance sheet is a much talked about subject. The accounting equation, Assets – Liabilities = Ownership Interest, represents the balance sheet; which is produced each year in a Public Limited Company’s financial statement; which can be viewed by the public. I will use this essay to discuss why the asset of a ‘home-grown’ football player, a player who signs as a trainee with a professional club under the age of 16, is not included in the balance sheet of the company.

The third ratio mirroring the company’s efficiency is the creditors’ days ratio, which measures, according to Atrill, the number of days in which the business pays its debts to suppliers. Britvic PLC’s financial statements recorded in 2009 a 20 days increase in the above mentioned ratio compared to the 2005-2008 average that had a value of 149 days. Therefore, Britvic PLC paid in 2009 its debts 169 days after the enclosure of the transactions. Taking into consideration the fact that Britvic PLC is operating in the soft drinks industry, which has a medium pace of generating cash, it may be stated that this ratio’s value is high enough to reflect that Britvic PLC is risking the creditors’ goodwill. On the other hand, the company paid its short-term liabilities in approximately four months after receiving the supplies

1. Review the decision in the case of Shah v. HSBC (2012) and evaluate the implications of the decision for regulated financial services firms. In particular:

This essay will critically evaluate on the floating charge being a useful security to banks in the modern day society. There are several controversies surrounding the floating charge which will be examined in this essay. The concept of floating charge over assets as medium of security is relied upon by many companies thereby showing us that it is inevitable for the banks to grant security based on them. The essay commences with an Introduction to concept of loans provided by the banks based on different modes of security followed by the nature and characteristics of the charges. The essay in the second part will discuss about the legal aspects revolving around the charges vis-à-vis registration and the third part will discuss on the advantages of the floating charges as a security. Further down in the fourth part of the essay the researcher attempts to bring out the distinction between the fixed charges and floating charges. The fifth part of the essay analyses the core question of floating charge being an effective security with the help of judicial pronouncements and legislations. Various concept viz, priority, crystallisation, impact of Insolvency Law, Enterprise Act, 2002 are given an insight under this part. The sixth part deals with the scenario in other states to a limited extent. Through the use of legislation, legal precedent and journal articles, a deeper examination will be provided into the application of the law surrounding the above issues and the