#17440 - Company Law Corporate Finance I Mortgages, Fixed And Floating Charge - Company Law II

CORPORATE FINANCE • • • • Main focus is loans and credits These are two branches of the same tree - Loans - advance of money w promise to repay - Credit - goods or services supplied w promise to pay and in either case, what's created is a debt. - Debt itself can be used as security for other debts - Law historically cautious about loans as opposed to credits Retail lenders: business is to loan money. Venture capitalist: usually for start ups - out and in pretty fast via their desire and probably the desire of the borrowing company as their interests can be onerous. When you get up and running and have more choice amongst credit sources, you'll likely move away from venture capitalists Debentures and security • • • • • Debenture: document acknowledging or creating a debt with a promise to repay the debt and interest if incl. sometimes it creates a security on the loan. Its an IOU document. - there's no specific form, any document like this - corporate IOUs or 'loan documentation' - we call debentures Real securities: real in the context means in rem as opposed to meaning imaginary - by 'real' it effectively means that the agreement will confer some sort of interest in the lender. - Mortgages - Charge - Pledge - Lien Personal securities: against a person not a thing. You're guaranteeing the debts of someone else for ex. I agree to repay ___debts if you lend me X amount? Director may guarantee the debts of the company - circumvents the rule in solomuns case which says director not responsible for debts of company. Reservation of title clauses: when you reserve title in something until a debt is repaid. Pledge: if the pledgee does not repay they will simply sell the goods and pay it that way. No receiver appointed. Real securities: mortgages and charges. • • Real securities confer interest in the company's property on the creditor - we say, 'encumbers the company's interest in the asset' Equitable, meaning• • the interest travels with the goods and can be asserted against anyone else. You can mortgage interests e.g. if you do not pay the creditor back they can gain title to that interest Interests can be legal or equitable. ➢ Equity of redemption - The right protected in equity which is given to a person who mortgages their property. If I secure my property as interest, equity says that they're entitled to get that back if they repay according to the conditions of repayment. You can also mortgage equity of redemption. If you lend me money and I fail to repay via our conditions, you gain my equity of redemption on something else. Mortgage: • Mortgagor assigns to the mortgagee, the interest. - The net effect is that the interest is now the mortgagees - The mortgagee advances the loan to the mortgagor in return. - The mortgagor gets equity of redemption. This is an interest which travels w the property and allows mortgagor to get back the interest. Charge: • Charger appropriates to the chargee, the interest. - Appropriating something - you still hold the interest but you grant access to it. - Mortgage you give away, charge you keep yourself. - When the chargee advances the money, they're given an equitable charge - The charge is an equitable right, interest, can be asserted against third parties - Entitles chargee to have recourse to the asset in default of the charger. - If the conditions of the equity of redemption are fulfilled, then there is no issue - - If the chargor defaults via the conditions, the chargee can come after the asset. - The chargee can enforce the charge meaning they can appoint a receiver! - Chargor is still the legal owner - Chargee only has equitable remedies. If they were the legal owner they could just go and ge tit. They must try equitable remedy - need assistance of courts. FIXED CHARGE Re Yorkshire woolcombers 1903 Evans v rival granite quarries ltd 1910 Re keenan brothers 1985• Once the fixed security attaches to the asset, the asset cannot be disposed of free from the security without the permission of the chargee But this permission can be given in advance. Re cimex tissues 19194 • If the chargee gives permission to sell the asset and then the fixed charge is created, can still be disposed of. Tailby v Official receiver 1888 Involved a young man who expected to inherit. He mortgaged his inheritance to a person. He did not have the legal right, so it was effectively a promise. he mortgaged it to two other people. His mother died, and he then became entitled to the inheritance.The person who was first promised the inheritance should be entitled. Can create charges over things that will be acquired in the future.