ExpertACCA · Question 60 · Syllabus E: Capital and the financing of companies
Scenario: Global Logistics Ltd is facing financial difficulties. It has a fixed charge over its warehouse in favour of Alpha Bank, and a floating charge over its fleet of trucks in favour of Beta Bank. The company owes £50,000 to its employees for unpaid wages. The directors are considering putting the company into administration to rescue it as a going concern.
What happens to Beta Bank's floating charge if the company enters liquidation?
Scenario: Global Logistics Ltd is facing financial difficulties. It has a fixed charge over its warehouse in favour of Alpha Bank, and a floating charge over its fleet of trucks in favour of Beta Bank. The company owes £50,000 to its employees for unpaid wages. The directors are considering putting the company into administration to rescue it as a going concern.
What happens to Beta Bank's floating charge if the company enters liquidation?
Answer options:
It becomes void and unenforceable.
It crystallises and becomes a fixed charge over the assets in the class at that moment.
It is automatically upgraded to rank ahead of Alpha Bank's fixed charge.
It remains a floating charge, allowing the liquidator to sell the trucks freely.
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