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#10310 - Ws 5 Task 1 - Finance and Capital Markets

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BDF – WS5 – TASK 1

N.B UNDER NEW LAW, EVERYTHING IS REGSITERABLE (APART FROM SECURITY ON SHARES – BUT BEST PRACTISE TO REGISTER NONETHELESS)

HOLDINGS

ASSET SECURITY WHY? PERFECTION MINIMISE 3rd PARTY CLAIMS ADDITIONAL CONSIDERATIONS?
100 % Shares in EDL Equitable Mortgage

  • Mortgage = highest priority

  • Legal mortgage = destroying Parent/Sub relationship. Also increased Admin due to dividends and voting rights.

 Not registerable, but best practice to do so. Register at CoHo (s860) Registering gives notice to 3rd parties

  • Take custody of share certificates

  • Need power of attorney for bank to fill in & file STF (this is how bank enforces the security)

  • Check D’s have authority.

  • Need to check pre-emption rights.
Insurance Policy Legal Assignment (see s136 requirements)

  • Transfers ownership of asset to bank

  • Legal > Equitable as money is paid directly to bank

 Not registerable, but best practice to do so. Register at CoHo (s860)) Dearne v Hall – need to give notice to 3rd party get priority (done by registering) Need to check contract to see whether you need consent
Painting worth 1m Fixed Charge/ Legal Mortgage

  • Fixed Charge/ Legal Mortgage = highest priority

  • Pledge = problems insurance, storage, client may want it etc.

 Register at CoHo (s861 = mortgage) Registering gives notice to 3rd parties N/A
Any other Assets Qualifying Floating Charge Gives charge holder power to appoint an administrator on insolvency (para 14 Sch B1 IA 86) Register at CoHo (s860) Registering gives notice to 3rd parties Make sure there is a negative pledge in charging document to get priority over future charges.

EDL

ASSET SECURITY WHY? PERFECTION MINIMISE 3rd PARTY CLAIMS ADDITIONAL CONSIDERATIONS?
Freehold property A charge by deed expressed to be by way of legal mortgage’ (s87 LPA).

  • Gives highest priority.

  • Can’t transfer ownership for land, therefore this is next best option (gives rights equivalent of 3000 year lease.)

  • Register at CoHo (s861) (21 days after creation (s870))

  • Register at Land Registry (LRA 2002) (30 days)

  • In practise register ASAP

 Registering gives notice to 3rd parties N/A
Building contract Legal Assignment (see s136 requirements) See p1 See p1 See p1 See p1
Freehold property with existing charge on it A charge by deed expressed to be by way of legal mortgage’ (s87 LPA). See above See above See above Need to check previous mortgage has been discharge (look for MG02 (full), MG04 (partial) or MR04 (full & partial)
Book Debts Floating Charge Difficult to have fixed charge over book debts (see prep task) Register at CoHo (s860) Registering gives notice to 3rd parties N/A
Leasehold Property A charge by deed expressed to be by way of legal mortgage’ (s87 LPA). See above See above See above Need to check with Landlord, need to check for consents within lease.
Cars hired under finance lease N/A Can’t take security out on it as Company doesn’t own it. N/A N/A N/A
Misc Office Equipment & Furniture Mortgage/Fixed or Floating

  • If valuable = mortgage (most valuable)/fixed charge

  • If low value = floating charge

 Register at CoHo (s860) Registering gives notice to 3rd parties Check to see if it is leased. If so, can’t take security out on it as Company will not own it.
74% shares in EML Equitable Mortgage See p1 See p1 See p1 See p1
Any other Assets Qualifying Floating Charge See p1 See p1 See p1 See p1

EML

ASSET SECURITY WHY? PERFECTION MINIMISE 3rd PARTY CLAIMS ADDITIONAL CONSIDERATIONS?
Long Term Service Contract Legal Assignment (see s136 requirements) Transfers ownership of asset to bank See p1 See p1 See p1
Short Term/ Future Service Contracts Equitable Assignment

  • Less admin with equitable assignments

  • Can only have equitable assignment over future contracts

 Not registerable, but best practice to do so. Register at CoHo (s860)) Dearne v Hall – need to give notice to 3rd party get priority (done by registering) N/A
Book Debts See p2 See p2 See p2 See p2 See p2
Computer Equipment Mortgage/Fixed or Floating See p2. As it is depreciating, floating charge may be more appropriate, but need to know value of asset to decide properly See p2 See p2 See p2
Misc cleaning & Maintenance equipment Mortgage/Fixed or Floating See p2 See p2 See p2 See p2
Any other Assets Qualifying Floating Charge See p1 See p1 See p1 See p1
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