Practicing Success
Under what circumstances may a floating charge be created on unsecured debentures? |
It is created by default It is always created as a standard practice It is created to secure a higher interest rate It is created when assets are sold |
It is created by default |
A floating charge on unsecured debentures is typically created by default. This means that if the company defaults on its obligations, including the repayment of unsecured debentures, the debentureholders may have the option to convert their unsecured position into a secured one by placing a floating charge on the company's assets. In essence, if the company fails to meet its financial obligations, debentureholders may take legal action to secure their claims against the company's assets through the creation of a floating charge. This is often a protective measure that allows debentureholders to recover their investments in case of default, even though the debentures were initially issued without any specific charge on assets. |