ACCA · Question 58 · Corporate and Business Law
SCENARIO 5: Titanium Foundry Ltd went into insolvent liquidation on 1 November. Six months prior, on 1 May, when the company was already hopelessly insolvent, the directors granted a floating charge over the company's inventory to a connected person (the CEO's brother) to secure an old, existing debt of £50,000. No new money was advanced to the company.
Under Section 245 of the Insolvency Act 1986, what is the status of this floating charge?
Answer options:
It is valid, because floating charges can be created at any time before liquidation.
It is valid, because it was registered at Companies House.
It is invalid, because it was created within the relevant time limit in favor of a connected person to secure past debt.
It is invalid, but only if the liquidator can prove the CEO's brother acted fraudulently.
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