ACCA Applied Skills · Corporate and Business Law (Global) · Loan capital
Marlow Ltd has granted a floating charge to Lender X. Which of the following events would cause the floating charge to crystallise and become fixed on the assets then held?
Liquidation of the company causes a floating charge to crystallise. The charge then becomes fixed on the assets held at that time, and the company can no longer deal with them freely. Ordinary trading, management changes and timely interest payments have no such effect.
- AThe company appoints a new finance director
- BThe company sells inventory to a regular customer
- CThe company goes into liquidationCorrect
- DThe company pays a quarterly instalment of interest on time
Explanation
Crystallisation converts a floating charge into a fixed charge over the assets then held. It occurs on events such as liquidation, appointment of a receiver, cessation of business, or other events agreed in the charge document. The other options are normal business activities that do not affect the charge.
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