LAW

Company Law-Case Study

Company Law-Case Study

Blue Hard Bank

Identify

In this case crystallization is an issue, Blue Hard Bank plc has a floating charge over the company's entire undertaking for a loan of £16 million contained in a debenture issued on 6 July 2009 and expressed to be an 'all monies clause'. They also have a floating charge over the company's (IL) entire undertaking obviously which includes subsidiaries. Charge contained typical automatic crystallization clauses stating, inter alia, that any attempt to create a charge ranking pari-passu with or in priority to the floating charge would lead to automatic crystallization of the charge at a point in time immediately before the creation of the other charge. Other causes of crystallization were stated to include cessation of business and the giving of notice of crystallization by the charge.

Principle

Principally, floating charge results in crystallization, in this case Blue Hard Bank can consistently deal with assets subjected to the security in the ordinary course of business, the scope of Blue Hard bank ordinary course of business can be equated with their memorandum of association, If Blue bank plc scope of power can be continued to use it assets, which are subject of a floating charge, Moreover if Blue Bank authorises its objects it will trigger business cessation, and the core reason may be the floating charge to crystallise.

Apply

In this case charges are contractual, and these charges are for the parties so that they can determine the crystallising events, unfortunately, the absence of provision will result in the application of three crystallising events. It includes the intervention by the holder, who holds the charge to take control over the security; holder can appoint a receiver under charging terms. There is a possibility that both parties in this case agrees for additional crystallising of events, such as floating charge includes the provision which may entitle holder to generate crystallization, by serving a notice affecting Blue Bank.

Conclude

There are both advantages and disadvantages for Blue Hard Bank Plc for raising capital through loan rather than share capital, but the advantages are more important. Raising capital through debt or loan through mortgage gives individuals and companies the ability to buy property such as office space, manufacturing facilities and warehouses. When company take out a commercial mortgage to purchase a property, company legally take ownership of that property asset. As a general rule, property prices tend to rise over the long term in ...