Re new bullas trading ltd 1994 1 bclc 485 is a uk insolvency law case, concerning the definition of a floating charge. Book debts are debts which arise out of the ordinary course of business and are of the. If all the elements of control are not met then the charge will only be a. The debt toequity ratio helps in measuring the financial health of a company since it shows the proportion of equity and debt a company is using to finance its business operations. It has always been possible for lenders to take a valid fixed charge over book debts providing that the lender is in control of the debts. Brumark was free to collect debts for its own account and to use proceeds in its business.
Dec 20, 2004 richard gray discusses the latest instalment on the issue of fixed charges on book debts. Agnew v commissioner of inland revenue re brumark investments 2001 fixed charge over uncollected book debts and floating charge over their proceeds when those debt proceeds were credited to a specified bank account as in re new bullas trading. The end of an era re spectrum plus despite romer ljs classic statement identifying the usual characteristics of a floating charge, 1 it has long been clear that the essential difference between a fixed and a floating charge turns upon the extent to which the chargor is free to deal with the charged assets in the ordinary course of business. In re spectrum plus ca 2005 2 all er, 2004 all er d 390, times 04jun04, bailii, gazette 10jun04, 2004 ewca civ 670 the court was asked whether a charge given over book debts in a debenture was floating or fixed. Fixed and floating charges over book debts the implications.
Definition of book debt from the cambridge business english dictionary. However, the house of lords also discussed the power of the court to make rulings as to the law that were prospective only. Yes, you can take a fixed charge over book debts, but if you want to it to be enforceable, you must have practical control of the item, and a legal right to stop the. It can give us an overall indication of our debt profile so we know if were underleveraged, over leveraged, or positioned just right. In an english case reported earlier this year re spectrum plus limited the vicechancellor delivered the latest instalment in the long running debate on what is required to establish a fixed charge on book debts. Tips for parenting a child on the autism spectrum webmd. Book debts and the need for careful drafting of security. In the decision of the house of lords in national westminster bank plc v spectrum plus limited in voluntary liquidation and others 2005 ukhl 41 it was suggested that a fixed charge over book debts. Read the latest credit, loans and debt news and issues including reverse mortgage, credit card management and interest rates. Free practical law trialto access this resource, sign up for a free trial of practical law. To secure its indebtedness on the overdraft, the company issued a debenture expressed to create a fixed charge over the companys book debts and a floating charge over the current account, into which proceeds of the. The authors own prediction is that the next likely battleground will be the effect of the analysis in re spectrum plus upon the characterisation of fixed and floating charges over assets other than book debts and the determination of what restrictions are necessary in respect of any particular asset for the chargee to be considered to have the. It is imperative for the book debts to be collected notwithstanding any dispute as to the entitlement to the proceeds between the official receiver as liquidator and the chargeholder.
However, the house of lords also discussed the power of the court to make rulings as to the law that were prospective only to mitigate potential harshness when issuing a. A restraint on the alienation of book debts, it said, will not create a fixed charge if the collection and use of their proceeds are unfettered. It held, somewhat controversially, that it was possible to separate a book debt from its proceeds, and that it was possible to create a fixed charge over the book debt but only a floating charge over the proceeds. The judgement of sir andrew morritt, the vice chancellor, in re spectrum plus limited 2004 ewhc 9 ch spectrum plus was delivered on 15 january. A company obtained an overdraft facility from a bank, with the bank taking what was purported to be a fixed charge over the companys book debts as security for the overdraft. Brian ltd ta east coast print and publicity and re east coast car parts ltd 2015 iesc 62 laffoy j. In that earlier case, slade j had held that a charge over book debts which required the company to pay the proceeds of the. If you re debt free other than your student loans and youve been saving up for a down payment, it. There is no specific formula for calculating where we should be along the debt spectrum. Since the house of lords decision in re spectrum plus ltd 2005 2 ac 680, a fixed charge is only capable of being created over book debts if. Book debts and the need for careful drafting of security documents. How to buy a home when you have student loan debt curbed. If your child has been diagnosed with autism spectrum disorder, you may feel overwhelmed and unsure about their future.
The house of lords judges gave their decision in national westminster bank plc v spectrum plus limited and others 2005 ukhl 41. Find articles on credit, personal loans and debt relief from aarp. Spectrum plus house of lords decides that the bank. Review of the implications of the supreme court judgment. Book debts b most signifcant feature for identfying the foatng charge re new bullas trading ltd possible to create a fxed charge over book debts while they were uncollected and a foatng charge over proceeds afer collected fxed charge over book debts, foatng charge over proceeds agnew v commissioner inland revenue disapproved re new. The terms were that its security was a fixed charge, but a floating charge when proceeds were collected the same as drafted as in re new bullas trading ltd. By permitting the chargor to collect the debts for its own use and benefit, the debenture in re brightlife failed the control test required for creating a fixed charge over book debts. The debenture granted by spectrum plus limited to natwest was, in material terms, no different to that. The following are examples of what constitutes a book debt.
While subsequent irish decisions re wogans drogheda ltd 1993 ir 157 and re holidair ltd 1994 ir416, have arguably relaxed the test for the valid creation of a fixed charge over book debts, it continues to be best practice, when purporting to take a valid fixed charge over book debts, to ensure that in both form and in substance, the. Fixed and floating charges over a companys book debts. Re spectrum plus ltd 2005 ukhl 41 was a uk company law decision of house of lords that settled a number of outstanding legal issues relating to floating charges and recharacterisation risk under the english common law. Re spectrum plus ltd 2005 ukhl 41 was a uk company law decision of house of lords which settled a number of outstanding legal issues relating to floating charges and recharacterisation risk under the english common law.
Brumark investments ltd gave security over debts to its bank, westpac. Cited national westminster bank plc v spectrum plus ltd. Hoffmann j held that in reality, the charge on book debts was a floating charge, but had crystallised a week before, and so took priority over other debts. If you re a small entrepreneur, understanding the different types of debt is critical. Appeal from national westminster bank plc v spectrum plus ltd. How debt and taxes can make smart entrepreneurs rich. Spectrums account was always overdrawn but it used the proceeds of the debts as and when it was necessary. Spectrum brands undergoes a major transformation in 2018 what investors need to know the midcap consumer brands specialist has cut major deals at a dizzying pace this year. Book debt meaning in the cambridge english dictionary. The lords unanimously upheld the vice chancellors first instance decision and found that the banks debenture created a floating charge over book debts as opposed to a fixed charge. The case was cited by the house of lords with approval by lord scott in re spectrum plus ltd 2005 ukhl 41 at paragraph 87 in relation to the recharacterisation of a charge described as a fixed charge over book debts as a floating charge.
Related contenta recent house of lords decision on how to characterise security over book debts will have wide implications for banks and insolvency practitioners. The application before me was issued by the bank on 10th july 2003. Re armagh shoes ltd categorisaton of a charge as fxed or. Following re manurewa transport ltd crystallisation clauses were a necessary incident of parties freedom to contract and policy objections should be dealt with by parliament. Chargor was free to collect debts for its own account and to use proceeds in its business. The charge was over all present and future book debts and the terms of the charge provided that the company should not sell factor discount or otherwise charge or. Yes, you can take a fixed charge over book debts, but if you want to it to be enforceable, you must have practical control of the item, and a legal right to stop the chargor walking off with it. National westminster bank plc v spectrum plus limited and. The case concerned whether a charge over book debts contained in a banks debenture was fixed or floating. However, the house of lords also discussed the power of the court to make rulin. But there were no restrictions on spectrums operation of the account. Fixed and floating charges over a companys book debts the debenture granted by spectrum plus limited to natwest was, in material terms, no different to that relied upon by barclays bank in the siebe gorman decision.
He held that the charge granted to the bank over spectrums book debts. The debt spectrum is an essential tool to gauge our investment risk. How the debt spectrum works a different perspective on money. Spectrum plus, a manufacturer of dyes, paints and related products, operated current and overdraft accounts with natwest. Judgment was handed down on 26 may 2004 by the court of appeal in the case of re spectrum plus limited. Re spectrum plus ltd wikimili, the free encyclopedia. Spectrum brands undergoes a major transformation in 2018. When spectrum went into liquidation, natwest argued that the charge was a fixed charge over book debts and proceeds.
The second is to construe statutory expression floating charge to ascertain whether that expression ap. Fixed charges on book debts re spectrum plus limited. The spectrum case concerned a charge that had been granted to spectrum plus ltd the company to natwest the bank to secure an overdraft of. Judgments national westminster bank plc respondents v. A company is able to charge its book debts as security. Since the house of lords decision in re spectrum plus ltd 2005 2 ac 680, a fixed charge is only capable of being created over book debts if the money received is paid into a blocked designated account over which the lender has control both on paper and in practice. Get the best triple play deals on cable tv, high speed internet, and home phone service for a low monthly price includes free hd and no contracts. Re spectrum plus limited international corporate rescue.
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