The Bank’s position on floating charges

The meeting begins with discussing floating charges as securities for finance. The three qualities of a floating charge are flexibility , the freedom it gives to the charging company to continue to operate without reference to the proprietor of the charge and its attractiveness to banks. The charge covers all the debtors and all the stocks supplied by another trader.

The meeting emphases that the most important feature of floating charges as securities is the freedom they give to a company to deal with its assets. Therefore, the committee concludes that the present state of floating charges is satisfactory, and that some of the suggestions put to it would undermine the security aspect of a floating charge.

The proposed duty of receivers does not seem to be inconsistent with the then current duty. A creditor should not control the activities of a receiver, but may remove or replace him or her. And a receiver must have the interests of creditors in mind, but exercise his/her duties reasonably. Again, the committee sees the proposals in front of it as consistent with the current duty of receivers.

The committee reiterates the views of the banks that a receiver should be under no duty to distribute assets prematurely, since the absence of such duty would not delay the completion of a receivership.

The Bank’s Three pillars 

The Bank’s position is as follows: keep floating charges as they are, prevent receivers from acting to the detriment of debenture-holder, even if this collides with their duties to unsecured creditors, and finally, codify the duties and rights of receivers as they are now.

It is then suggested that the committee could introduce new creditor procedures for without altering existing ones. A second suggestion would be to empower the courts to issue floating charges for unsecured creditors, subject to certain conditions, which you could find on page 7.

 

meeting2agenda - 24th March 1977