Topic 1(Part 2)-Amended supplementary notes & questions-Fraudulent & unfair preference notes

Topic 1(Part 2)-Amended supplementary notes & questions-Fraudulent & unfair preference notes

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F un c t i o n s o f L a w f o r S o c i e t y a n d B u s i n e s s - To p i c 1 ( P a r t 2 ) - C o r p o r a t e l aw Topic 1 (Part 2)-Supplementary notes on floating charge, fixed charge, fraudulent preferences and unfair preferences Unsecured Creditor-> Sue -> Judgment -> Enforce the judgment -> Charging/ freezing order Secured -> Sell the securities ** Fixed charge secured creditor has the FIRST priority to get back money upon liquidation. The difference between a secured and unsecured creditor. A fixed charge is a charge over ascertained and definite property. After the creation of a fixed charge, the borrowing company is not allowed to sell the security/charged assets. A floating charge is a charge on a class of assets; this class of assets would change from time to time; and after the creation of a floating charge, the company is allowed to sell the security/charged assets. LIST OF PROIRITY 1. Liquidator 2. Taxes and rates 3. Fixed Charge Holder 4. Employees (Preferential Creditor) 5. Floating Charge Holder 6. Unsecured Creditor 7. Shareholder Transaction arising in Liquidation Avoidance of floating charges Liquidation automatically renders void, under S267, any floating charge created within the period of 12 months of the commencement of the winding up subject to the following exceptions : the charge is valid if the company was solvent at the time when the charge was created, unless as a result of the transaction under which the charge was created the company became unable to pay its debts. A company is solvent if it can pay its debts in full as they fall due. 1
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F un c t i o n s o f L a w f o r S o c i e t y a n d B u s i n e s s - To p i c 1 ( P a r t 2 ) - C o r p o r a t e l aw (Fresh Cash Exception) if the company was not solvent, the floating charge is still valid to the extent of money paid to the company at the same time or after the charge is created in consideration for the charge, together with interest on that amount. The general purpose of the rule is to prevent an unsecured creditor of an insolvent company from getting an advantage over other creditors by obtaining a floating charge to secure an existing debt.
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