On 1 April 2021, Jin Huat Pte Ltd (“JH”), a company in Singapore, borrowed S$100,000 from United Bank (“UB”). The loan was secured by a fixed charge over the company’s equipment. On 14 April 2021, JH entered into a contract to sell the company’s equipment to No Way Pte Ltd (“NW”). JH did not inform nor seek the permission of UB for the sale.
On 18 April 2021, JH borrowed S$40,000 from Mr Sean Tan, a friend of one of the directors of JH. That loan was secured by a floating charge over the book debts of JH. On 26 April 2021, JH borrowed another S$100,000 from Overseas Bank (“OB”). Pursuant to the terms of the loan agreement with OB, JH created a fixed charge over the company’s book debts in favour of OB.

Required:

(a) Discuss the characteristics of a fixed charge and advise whether JH is entitled to sell the company’s equipment without getting UB’s prior consent. (10 marks)

(b) Discuss the nature of a floating charge and the implication of the fixed charge that JH had created in favour of OB. (15 marks)

Answer rating: 100% (QA)

a A fixed charge is a form of security interest that attaches to specific assets of a company It provides the lender with a direct claim over the specific assets in the event of default or insolvency ... View the full answer