ACCA Applied Skills · Corporate and Business Law (Global) · Loan capital
Orla Ltd issues a debenture that is secured by a charge over a specific freehold building, so the company cannot sell the building without the lender's consent. What type of security does this debenture carry?
The debenture carries a fixed charge. It attaches to a specific identifiable asset, the freehold building, and stops the company disposing of it without the lender's consent, unlike a floating charge over a changing pool of assets that the company can freely trade.
- AFloating charge
- BFixed chargeCorrect
- CUnsecured guarantee
- DLien over inventory
Explanation
A fixed charge attaches to a specific, identifiable asset such as a building and prevents the company disposing of it freely without the chargeholder's consent. A floating charge covers a changing class of assets that the company may deal with in the ordinary course of business.
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