When comparing fixed and floating charges, which must be registered first to maintain priority?

When comparing fixed and floating charges, which must be registered first to maintain priority?

• A. Floating charge
• B. Fixed charge
• C. Either charge
• D. Neither charge

Answer: (B)

In the context of company law, particularly regarding security interests such as charges over a company's assets, the priority between fixed and floating charges is an essential consideration for lenders and creditors. A fixed charge must be registered first to maintain priority over a floating charge. This is because fixed charges are typically attached to specific assets and provide the lender with a higher degree of control and security over those assets. When a fixed charge is registered, it creates a legal obligation that the company cannot dispose of the charged asset without the consent of the fixed charge holder. On the other hand, a floating charge does not attach to specific assets immediately but covers a general class of assets that may change over time. If a floating charge is registered before a fixed charge, it can lead to complications regarding the priority of claims in the event of insolvency. Creditors with fixed charges will generally rank ahead of those with floating charges if the fixed charge is registered first, thus ensuring that they have a primary claim over the secured assets. Therefore, for a fixed charge to secure its position and have priority over any floating charge, it needs to be registered before the floating charge. This hierarchy is crucial for anyone dealing with corporate financing and asset security.

In the context of company law, particularly regarding security interests such as charges over a company's assets, the priority between fixed and floating charges is an essential consideration for lenders and creditors.

A fixed charge must be registered first to maintain priority over a floating charge. This is because fixed charges are typically attached to specific assets and provide the lender with a higher degree of control and security over those assets. When a fixed charge is registered, it creates a legal obligation that the company cannot dispose of the charged asset without the consent of the fixed charge holder.

On the other hand, a floating charge does not attach to specific assets immediately but covers a general class of assets that may change over time. If a floating charge is registered before a fixed charge, it can lead to complications regarding the priority of claims in the event of insolvency. Creditors with fixed charges will generally rank ahead of those with floating charges if the fixed charge is registered first, thus ensuring that they have a primary claim over the secured assets.

Therefore, for a fixed charge to secure its position and have priority over any floating charge, it needs to be registered before the floating charge. This hierarchy is crucial for anyone dealing with corporate financing and asset security.