Debenture + Charge
Debenture + Charge
Debenture + Charge
NHAS 1
Debenture
• Definition: S 2 CA 2016 – includes debenture
stock, bonds, sukuk, notes and any other
securities of a corporation whether constituting a
charge on the assets of the corporation or not
• S 171 (1) – Subdivision 10 (on debentures) shall
be applicable to an offer made to public, including
an offer made to any section of the public with
regards to:
a. An offer or invitation in respect of shares or
debentures made by an unlisted recreational
club; and
b. An offer or invitation to deposit money with
or lend money to a corporation.
NHAS 2
1
1/1/2023
Debenture
NHAS 3
TYPES OF DEBENTURE
(a) Debenture may be issued to single
individual, institution such as bank.
NHAS 4
2
1/1/2023
NHAS 5
NHAS 6
3
1/1/2023
Charge
• Debentures are usually secured by a mortgage or
a charge over the borrowing of company’s
property.
• A company may give any type of security in the
form of charge, mortgage or pledges.
• Definition of charge: S 2 - including a mortgage or
any agreement to give or execute a charge or
mortgage whether upon demand or otherwise.
• No definition of mortgage has been provided by
the CA 2016
NHAS 7
TYPES OF CHARGES
Charges
Fixed Floating
NHAS 8
4
1/1/2023
FIXED CHARGE
• One that attaches to a specific property
owned by the borrowing company.
The company may not deal with the asset so
charged except with the consent of the
chargor.
• The property may or may not be owned by the
company or that is in existence at the time of
creation of the charge.
• Fixed charge on future property is recognised
under equity.
NHAS 9
FLOATING CHARGE
• A charge that floats over specified categories of assets of
company. Eg company’s inventory, stock-in-trade.
• A company is at liberty to dispose of the subject matter
of the charge in the ordinary course of business.
• If the company defaults, the D/H intervenes to enforce
the debenture or the company is wound up. The charge
ceases to be ‘floating’ and attaches to the existing items
of property owned by the company. The floating charge
is said to crystallize and become fixed.
NHAS 10
5
1/1/2023
FLOATING CHARGE
NHAS 11
NHAS 12
6
1/1/2023
CRYSTALLIZATION OF FLOATING
CHARGES
– A floating charge may crystallize by the
intervention of the holder of the charge upon
occurrence of one or more series of events which
are usually set out in the charge document.
– Eg: winding up, cessation of trading or disposal of
the undertaking with a view to cessation of
trading – Hubbuck v Helms (1887) 56 LJ Ch 536
– Government Stock Investment Co v Manila
Railway [1897] AC 81
NHAS 14
7
1/1/2023
CRYSTALLIZATION OF FLOATING
CHARGES
– A floating charge may crystallize over all the assets
subject to it (most common), or just some of them
if the lender so decides (rare).
– Upon crystallization:
• the chargor’s ability to deal with the assets is
restricted.
• The charge becomes fixed from the moment.
– To take effect, the creditor needs to apply to
court to appoint receiver.
NHAS 15
CRYSTALLIZATION OF FLOATING
CHARGES
• Automatic crystallisation of floating charge
occurs when the borrowing company:
–Defaults in payment of interest for a
specified period;
–Breaches restrictions on future
borrowings;
–Allows the value of charged assets to
decline below a minimum amount;
–Ceases to deal with the charged assets in
the ordinary course of its business.
NHAS 16
8
1/1/2023
REGISTRATION OF CHARGES
• S 352(1) – a company that creates a charge over a
property or any registrable undertakings shall lodge
within 30 days from the creation of the charge a
statement of particulars of the charge in the form
and manner so prescribed by the ROC.
– United Asian Bank Bhd. v KYBB. (unreported) OS
No C98 of 1980
– Johor Para Rubber Co. Ltd. v ROC [1948] MLJ 135
– Esberger & Son Ltd v Capital & Counties Bank
[1913] 2 Ch 366
• S 352(6) – subsection (1) is not applicable to the
provided transactions.
NHAS 17
REGISTRATION OF CHARGES
• S 352(2) – any contravention to (1) shall render the
charge void.
• S 352(3) – the liability for repayment is immediate in
case of a charge becomes void under this section.
• S 353 – types of charges requiring registration
• S 352(4) –prior to the lapse of 30 days, registration of
another charge would not be allowed unless the
Court is satisfied (grounds so provided).
• S 361 – extension of time
• S 357 – register of charges is to be kept by the
Registrar
NHAS 18
9
1/1/2023
PRIORITY OF Yehh!!!!!.....
CHARGES May the best
mice
winnnn…..!!
NHAS 19
10
1/1/2023
PRIORITIES OF CHARGES
i) Registered charges have priority in order of
registration with the Registrar
- Re Benjamin Cope & Sons Ltd [1914] 1 Ch 800
NHAS 21
PRIORITIES OF CHARGES
– A registered charge has priority over an
unregistered charge unless the unregistered
charge was created first and the holder of the
registered charge had actual or constructive
notice at the time of the creation of the
registered charge of the existence of the
unregistered charge.
– Unregistered charges have priority in accordance
with their time of creation.
NHAS 22
11
1/1/2023
THE RULE
12
1/1/2023
NHAS 26
13