Part 7 – Charges and Debentures
4 Chapters – Sections 408 to 427
Part 7 Chapter Overview
Chapter 1 – Interpretation
Chapter 2 – Registration of charges and priority
Chapter 3 – Provisions as to debentures
Chapter 4 – Prohibition on registration of certain matters affecting shareholders or debenture holders
Part 7 Summary
This chapter contains the law governing charges and debentures. It brings a number of changes to the current law regarding the registration and de-registration of charges. It also clarifies the rules relating to priority of charges.
What is new?
All charges are now registerable charges so there can be no hidden charges and the Act now faciliates not only the company registering a charge but anyone that is interested in a charge
The Act states that the Registrar will have no jurisdiction to accept or register an order of any authority affecting a shareholder or debenture holder of the company or any notice of such.. The Registrar however must keep a register of all charges registered in relation to each company under S.414
What is different?
Some of the old registration provisions of previous legislation has not been reflected in the new act. Specifically in the 1963 Act there was a listing of categories of charges that needed to be registered which has not carried into the new legsilation The definition of a charge will no longer include a mortgage or charge over an interest in cash, bank accounts, or other deposits, shares or financial instruments. This brings the definition into line with the EU Directive on Financial Collateral Arrangements.
There will be two separate procedures for the registration of charges, the old one stage process and a new two stage process. Under the new 2 stage process the key date for charge registration is the date of receipt of the notification of the intention to register the charge. Under the new legislation if a number of charges are registered the priorty of charges lies with the earliest registered.
What are the Key Points?
- New two stage procedure to register a charge
- Change in definition of a charge
What do accountants need to do?
Familiarise themselves with the new definition and procedures. Consider the implications of priority ranking for client borrowings.
What do companies need to do?
Update internal procedures to ensure that obligations in relation to charges will be met.
