Advantages of floating charge
- enables a company without fixed assets to borrow
- enhances the borrowing capacity of the companies with fixed assets
- enables a company to use future assets as current collateral
- the charge does not prevent the company from carrying on business as it is free to sell and acquire new stock
Disadvantages of floating charge
- the value of the charge remains unknown since the company carries on business
- a fixed charge is given more priority to the floating charge
- a floating charge created 6 months before commencement of liquidation is treated as null and void
Crystallization of a floating charge
- When the company ceases to be going concern.
- Upon commencement of recovery proceedings against the company.
- When a receiver is appointed a debenture holder pursuant to the terms of a debenture or the court on application.
- Failure to pay the principle or interest when due and payable provided the chargee takes some steps to enforce the security
-Occurrence of an event which under the terms of the debenture causes crystallization.
When a floating charge crystallizes it becomes a fixed charge
iann answered the question on March 14, 2022 at 13:46
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