Earl has been employed by Flash Co, for the past 20 years. During that time he has also invested in the company in the form of shares and debentures. Earl owns 5,000 ordinary shares in Flash Co. The shares are of $1 nominal value and are paid up to the extent of 75%. The debentures, to the value of $5,000, are secured by a fixed charge against the land on which Flash Co’s factory is built. In April it was announced that Flash Co was going into immediate insolvent liquidation, owing considerable amounts of money to trade creditors (trade payables). As a result of the suddenness of the decision to liquidate the company, none of the employees received their last month’s wages. In Earl’s case this amounted to $2,000. Required: Advise Earl as to his rights and liabilities in relation to Flash Co in regard to:
(c) his debentures. (4 marks)
参考答案：
Earl’s debentures In relation to a fixed charge, a specific asset of the company, in this instance the land on which the business stands, is made subject to a charge in order to secure a debt. If the company fails to honour the commitments to the secured debenture holders, they can appoint a receiver who will if necessary sell the asset charged to recover the money owed. In the case of a company liquidation the asset charged is realised and the sum of money raised goes to pay off the outstanding debts owed to the debenture holders. If the value of the asset that is subject to the charge is greater than the debt against which it is charged then the excess goes to pay off the rest of the company’s debts. If it is less than the value of the debt secured then the debenture holders will become unsecured creditors (payables) for the amount remaining outstanding. It should be emphasised that fixed charge holders take priority over any other creditors (payables) in the event of company liquidation. Thus in this instance, Earl is secure in the knowledge that his loans to Flash Co will be paid before any other debts and as the security is against Flash’s most valuable asset, its land, it is likely that he will receive the full amount of the loan of $E,000.