December 13, 2010
It is a well-known provision of company law that a floating charge taken on company property must be registered in order to be enforceable against the liquidator, administrator or creditors of the company.
In the recent case of Re F2G Realisations Ltd (in liquidation), Gray amp; Another v GTP Group Limited (2010), it was argued that the floating charge in question constituted a security financial collateral arrangement (SFCA), under the Financial Collateral Arrangements (No.2) Regulations 2003 and so did not need to be registered, in accordance with the Act.
The judge stated that in order to constitute an SFCA the following conditions would need to apply:
- the agreement must be in writing;
- the purpose of the agreement must be to provide security for financial obligations owed to the collateral taker, by way of a security interest in the financial collateral;
- the financial collateral must be in the possession or control of the collateral taker;
- both the collateral provider and the collateral taker must be legal entities.
This would rarely be the case where floating charges are concerned as the chargee is unlikely to have sufficient control over the property that is the subject of the charge so the requirement for registration is still likely to apply, as in the case in question.
Anyone taking a floating charge as security should ensure that it is registered by the company at Companies House within the deadline of twenty-one days from creation of the charge, or undertake to do so on the company’s behalf.
