ACCA Applied Skills · Corporate and Business Law (Global) · Loan capital
Which of the following events would normally cause a floating charge to crystallise and become a fixed charge over the assets then held?
Liquidation or the appointment of a receiver under the charge crystallises a floating charge. It then attaches as a fixed charge to the assets then held. Ordinary trading sales and changes in management do not crystallise it.
- AThe company sells part of its inventory at a normal price
- BThe company's appointment of a new finance director
- CThe company goes into liquidation, or the lender appoints a receiver under the chargeCorrect
Explanation
Crystallisation happens on events such as liquidation, appointment of a receiver, cessation of business, or an event specified in the charge agreement. Ordinary sales of inventory are the very dealings a floating charge permits, and a change of director has no effect on the security.
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