Difference Between Fixed Charge And Floating Charge
Question 3 (a)
(i) There are four differences between a fixed charge and a floating charge. One of the differences is a fixed charge is a charge which attaches to specific identifiable assets. The examples of specific identifiable assets are factory, building and land. On the other hand, a floating charge can be created on asets whch are presnt and futur. Floating charge does not attach to specific asset which changes from time. It is a chage on clas of aset instead on a specfic aset according to Krishnan, Rajoo and Vergis (2015). For instance, a compny my chrge stok in trad or bok debt. The following difference is in fixed charge, the chargor, which is the company is unable to del wth the chrge property, such as disposing it wthout …show more content…
Crystallization only happens in a floatng charge. Crystallization is the conversion from a floatng chrge to a fxed chrge. The event of crystallization occurs only when the compny go into liquidaton or stops to cary on its busness, the court or debenture holders apoint a recever and when a specfic evnt has occurred for automatc crystalization.
(ii) A fixed charge and a floating charge are required to be registered because under Section 352(1) of Companies Act 2016, a charge which is created over the property of the company must regstered witin thirty days frm the creaton of the chrge. According to Section 352(2) of Companies Act 2016, if the chrge is no regstered within thirty dys of creaton, it becomes not effective aganst te liqudator ad any credtor of the compny. When it becmes vod, the mony secur undr te unregstered chrge shal imediately bcome payble as stated in Section 352(3) of Companies Act 2016. Hence, the charge becoms unscured if te compny is winding up or hs anoother credtors. Creditors will not be able to enfrce te chage create and wil nt have priorty over the proceds frm te sale of chargd asets. Section 352(10) of Companies Act 2016 provides that the company and every officer who did not register the charge within thirty days wil be lable with a fne not exceedng RM50,000 and with a furthr fine nt exceedng RM500 per day durng when the ofence continues after …show more content…
is unable to make a fixed or floating charge over the printing machine. Syarikat MAYA Bhd. does not have ownership over the printing machine because the machine is on lease from Neo Finance Bhd. Syarikat MAYA Bhd. only has the right to use the printing machine for a specified period of time, but has to return it back to Neo Finance Bhd. after the end of the leasing period stated in the contract.
(iii) Syarikat MAYA Bhd. can create a floating charge over several tons of printed papers to obtain long-term loans from the various banks. The several tons of printed papers are stock in trade for Syarikat MAYA Bhd. because the company runs a printing business. However, the banks may not consider it as stock in trade since several tons of printed papers will become obsolete and has no value during the repayment period. Therefore, the banks might not accept several tons of printed papers as a floating charge.
(iv) Syarikat MAYA Bhd. will be able to obtain long-term loans from the banks by creating a floating charge over its future assets, which are several computers and fax machines. After settling the outstanding amounts of several computers and fax machines which were bought on credit from Seng Eng Sdn. Bhd., the ownership of the assets will then transfer to Syarikat MAYA
(i) There are four differences between a fixed charge and a floating charge. One of the differences is a fixed charge is a charge which attaches to specific identifiable assets. The examples of specific identifiable assets are factory, building and land. On the other hand, a floating charge can be created on asets whch are presnt and futur. Floating charge does not attach to specific asset which changes from time. It is a chage on clas of aset instead on a specfic aset according to Krishnan, Rajoo and Vergis (2015). For instance, a compny my chrge stok in trad or bok debt. The following difference is in fixed charge, the chargor, which is the company is unable to del wth the chrge property, such as disposing it wthout …show more content…
Crystallization only happens in a floatng charge. Crystallization is the conversion from a floatng chrge to a fxed chrge. The event of crystallization occurs only when the compny go into liquidaton or stops to cary on its busness, the court or debenture holders apoint a recever and when a specfic evnt has occurred for automatc crystalization.
(ii) A fixed charge and a floating charge are required to be registered because under Section 352(1) of Companies Act 2016, a charge which is created over the property of the company must regstered witin thirty days frm the creaton of the chrge. According to Section 352(2) of Companies Act 2016, if the chrge is no regstered within thirty dys of creaton, it becomes not effective aganst te liqudator ad any credtor of the compny. When it becmes vod, the mony secur undr te unregstered chrge shal imediately bcome payble as stated in Section 352(3) of Companies Act 2016. Hence, the charge becoms unscured if te compny is winding up or hs anoother credtors. Creditors will not be able to enfrce te chage create and wil nt have priorty over the proceds frm te sale of chargd asets. Section 352(10) of Companies Act 2016 provides that the company and every officer who did not register the charge within thirty days wil be lable with a fne not exceedng RM50,000 and with a furthr fine nt exceedng RM500 per day durng when the ofence continues after …show more content…
is unable to make a fixed or floating charge over the printing machine. Syarikat MAYA Bhd. does not have ownership over the printing machine because the machine is on lease from Neo Finance Bhd. Syarikat MAYA Bhd. only has the right to use the printing machine for a specified period of time, but has to return it back to Neo Finance Bhd. after the end of the leasing period stated in the contract.
(iii) Syarikat MAYA Bhd. can create a floating charge over several tons of printed papers to obtain long-term loans from the various banks. The several tons of printed papers are stock in trade for Syarikat MAYA Bhd. because the company runs a printing business. However, the banks may not consider it as stock in trade since several tons of printed papers will become obsolete and has no value during the repayment period. Therefore, the banks might not accept several tons of printed papers as a floating charge.
(iv) Syarikat MAYA Bhd. will be able to obtain long-term loans from the banks by creating a floating charge over its future assets, which are several computers and fax machines. After settling the outstanding amounts of several computers and fax machines which were bought on credit from Seng Eng Sdn. Bhd., the ownership of the assets will then transfer to Syarikat MAYA