Lloyd's Maritime and Commercial Law Quarterly
Will the Law Commission sink the floating charge?
Louise Gullifer *
The Law Commission has put together a coherent and attractive scheme for the reform of the law relating to security over personal property. This paper looks at the place of the floating charge within the scheme, and seeks to illustrate some of the conceptual dilemmas posed, as well as some of the problems thrown up by the staged enactment of the scheme. It appears to be envisaged that under the first layer of the scheme, a system of notice filing for the registration of company charges, the floating charge would remain but in altered form. Many of the current problems surrounding the floating charge would disappear, although some uncertainties would remain. The ultimate fate of the floating charge under a restatement of the law of security is much less certain. The options available under such a restatement are examined, and the problems with abolishing the floating charge are discussed.
There are various layers to the Law Commission’s scheme for reform of the law relating to security over personal property:1
the inner layer could be enacted on its own, with different outer layers added on later, though it would clearly be advantageous for the entire scheme to become law at the same time. The various layers are as follows:
- 1. A system of notice filing for the registration of company charges.
- 2. Extension of that system to all transactions which have the function of security.
- 3. Extension of the entire system to security created by unincorporated businesses and individuals.
- 4. A restatement of the law of security, which would apply to all transactions falling within 1, 2 and 3.
The scheme itself, based heavily on the systems introduced in the United States, Canada and New Zealand, is very much to be welcomed. It is possible to make a case for retaining and improving the status quo2
and until recently this was the favoured option of the banks and other big lenders.3
To the extent that such arguments are based on criticism of existing
* Fellow, Harris Manchester College, Oxford.
1. Registration of Security Interests: Company Charges and Property other than Land
: LCCP No. 164 (2002).
2. G. McCormack, ‘‘Personal Property Security Law Reform in England and Canada’’ [2002] J.B.L. 113.
3. See responses to the DTI Consultation Paper: Company Law Reform: Proposals for Reform of Part XII of the Companies Act 1985
(1994). Opposition to reform was much weaker in the response to the Company Law Review Steering Group’s Consultation Paper Company Law for a Competition Economy: Registration of Company Charges
(2000): see Modern Company Law for a Competitive Economy: Final Report (2001)
, para. 12.15.
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