ACCA Applied Skills · Corporate and Business Law (Global) · Loan capital
Marlow Ltd issues a series of debentures to ten lenders, each ranking equally, all secured by one charge over the company's property. How are these debentures best described?
They are a series of debentures ranking pari passu, meaning equally, under a common charge. If the security is enforced and falls short, the lenders share the proceeds proportionately. They are loan capital, not shares, and ranking does not depend on repayment order.
- AA series of debentures ranking pari passu under a common chargeCorrect
- BDebentures ranking in order of the date each lender was repaid
- CBearer shares in the company's capital
Explanation
Debentures in a series ranking equally share the security proportionately, which is the meaning of pari passu. Ranking is not decided by repayment date. They are loans, not shares.
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