ACCA Applied Skills · Corporate and Business Law (Global) · Loan capital
Orion plc granted a charge over its assets to a lender. The lender registered it correctly. A supplier later checked the public register of charges before agreeing to sell goods on credit to Orion plc. Which statement best describes the main purpose of the register in these circumstances?
The register of charges exists to give third parties public notice of charges already created over a company's assets. This lets suppliers and prospective lenders assess creditworthiness and likely priority. It does not guarantee repayment or prohibit further borrowing.
- ATo guarantee that Orion plc will repay all secured lenders in full
- BTo give third parties notice of existing charges so that they can assess the company's creditworthinessCorrect
- CTo prevent the company from creating any further charges over its assets
Explanation
The register of charges is a public disclosure mechanism. It lets suppliers, lenders and others see which assets are already secured and so judge the risk of dealing with the company. It does not guarantee repayment or stop further charges being created.
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