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Fixed charges and priorities in insolvency

  • 05-04-2012 1:03pm
    #1
    ldxo15wus6fpgm
    Closed Accounts Posts: 1,359 ✭✭✭


    I'm having a little trouble working something out.
    I know that creditors that hold a fixed charge over an asset of a company don't really come into the system of priorities unless they opt to because they can just take the asset themselves without waiting for a liquidator to come along and give it to them.
    But what about when a company has given more than one creditor a fixed charge over the same asset? What happens then?

    I suppose it's akin to someone somehow taking two mortgages out on their house from separate banks without each bank knowing of the other's mortgage, and then the person defaulting on both at the same time.

    Would it be based on time - as in the person who gave the credit first gets the asset - or something else? Does either even take priority - do they split the asset in proportion to the amount of credit given?

    EDIT: Even pointing me to a case on this would be very appreciated if you can't be bothered explaining! :)


Comments

  • #2
    Delancey
    Closed Accounts Posts: 5,451 ✭✭✭Delancey


    As I understand it in a situation where a fixed charge has been taken on an asset more than once then the priority benefit goes to the party who first took the charge.
    This serves to underline the importance of charges being registered as soon as they are taken , this will copper fasten a claim as well as serve to alert others that any charge they subsequently attempt to take may prove to be worthless.

    Alas , I can't quote case law on this point .


  • #3
    Robbo
    Moderators, Social & Fun Moderators, Society & Culture Moderators Posts: 10,572 Mod ✭✭✭✭Robbo


    Delancey wrote: »
    As I understand it in a situation where a fixed charge has been taken on an asset more than once then the priority benefit goes to the party who first took the charge.
    This serves to underline the importance of charges being registered as soon as they are taken , this will copper fasten a claim as well as serve to alert others that any charge they subsequently attempt to take may prove to be worthless.

    Alas , I can't quote case law on this point .
    Off the top of my head, in Monolithic Building Corporation assets were charged twice. The second creditor got his registration in and was golden, despite being having notice (type unknown) of the competing charge.

    Late registration under Section 106 needs to be considered as well, as Monolithic pre-dates the 1963 Act.

    If this headache lifts, I'll dig out Courtney.


  • #4
    ldxo15wus6fpgm
    Closed Accounts Posts: 1,359 ✭✭✭ldxo15wus6fpgm


    Much appreciated both of you! :D
    Robbo wrote: »
    If this headache lifts, I'll dig out Courtney.

    I could get access to Courtney's book, any particular chapter I should read? I've read through everything I could find that seemed relevant but obviously I must have missed something!


  • #5
    Robbo
    Moderators, Social & Fun Moderators, Society & Culture Moderators Posts: 10,572 Mod ✭✭✭✭Robbo


    Skyla Future Vagrant wrote: »
    Much appreciated both of you! :D

    I could get access to Courtney's book, any particular chapter I should read? I've read through everything I could find that seemed relevant but obviously I must have missed something!
    The chapter on Corporate Borrowings is where it's at.


  • #6
    ldxo15wus6fpgm
    Closed Accounts Posts: 1,359 ✭✭✭ldxo15wus6fpgm


    I went through again and I've now realised that the first people to register the charges would get the land etc. Thanks very much for that!
    :)


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