Chapter 20 Self-test questions

. Which of the following are examples of possessory security?

Pledge

Mortgage

Lien

Equitable charge

. Regarding a fixed charge, which of the following statements are untrue?

A fixed charge can only be granted by an incorporated body

A fixed charge is usually taken over a specific identifiable asset or assets

Assets subject to a fixed charge are not available to the liquidator

Fixed charges usually allow the charger to deal with the charged assets

A fixed charge cannot be set aside by a liquidator or administrator

Debts secured by fixed charge rank ahead of other debts

. If two fixed charges are taken over the same asset, then the charge created first will take priority.

True

False

. Regarding a floating charge, which of the following statements are untrue?

A portion of the assets subject to a floating charge must be set aside to pay the unsecured creditors

A floating charge cannot be set aside by a liquidator or administrator

Assets subject to a floating charge are not available to the liquidator

A floating charge is usually taken over a class of assets or the entire undertaking

Assets subject to a floating charge can be disposed of by an administrator

Debts secured by floating charge rank behind preferential debts

. If a floating charge is taken over all the assets and business of the company, then a subsequent floating charge cannot also be taken over all the assets and business of the company.

True

False

. The process by which a floating charge becomes a fixed charge is known as?

Conversion

Crystallization

Fixation

De-flotation

. Which of the following will usually cause a floating charge to crystallize?

The company goes into liquidation

The company is taken over

A receiver is appointed

The company's business ceases

. The status of a charge (i.e. is it fixed or floating) is determined by how the charge is described in the charge instrument.

True

False

. Are companies required to register charges with Companies House?

Both fixed and floating charges must be registered

Only fixed charges need to be registered

Only floating charges need to be registered

No, charges do not need to be registered

. What is the effect of the failure to register a charge with the registrar of companies?

A criminal offence is committed

The directors will be in breach of duty

The debt secured by the charge will no longer be payable

The charge will be void against a liquidator, administrator or creditor of the company

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