ACCA Applied Skills · Corporate and Business Law (Global) · Loan capital
Orion Ltd gave Banco Ltd a floating charge over all its stock. Banco Ltd failed to register the charge within the required time limit. Orion Ltd later enters liquidation, owing Banco Ltd 400,000 under the loan. What is the effect of the failure to register?
The unregistered charge is void against the liquidator and creditors, so Banco Ltd loses its security. The underlying debt is still owed, and Banco Ltd claims as an unsecured creditor. The loan is not cancelled, and the liquidator's knowledge of the charge does not save it.
- AThe charge is void against the liquidator and other creditors, but the loan debt itself remains payable and Banco Ltd ranks as an unsecured creditorCorrect
- BThe loan agreement is void and Orion Ltd need not repay the 400,000
- CThe charge remains fully valid because the liquidator had actual notice of it
Explanation
Failure to register makes the security void against the liquidator, administrator and creditors, but not the underlying debt. Banco Ltd becomes an unsecured creditor. Actual notice does not cure non-registration.
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