Part XII
List of provisional
proposals and consultation questions
12.1
We set out below a summary of our provisional proposals and
questions on which we invite the views of consultees. We would be grateful for
comments not only on the matters specifically listed below, but also on any
other points raised by this Consultation Paper. It would be very helpful if,
when responding, consultees could indicate either the paragraph of the summary
that follows to which their remarks relate, or the paragraph of this Consultation
Paper in which the issue was originally raised.
12.2
We ask whether consultees agree with the criticisms we have
made of the current registration scheme, and, where they do not so agree, we
ask them to explain why. (Paragraph 3.48.)
Part IV - Notice-filing for company charges
Scope of the notice-filing scheme
12.3
We provisionally propose leaving possessory securities out of
the scope of the notice-filing system, save where the creditor’s possession is
constructive and results from the debtor attorning to the creditor. We invite
views on whether a pledge of goods that subsequently are delivered to the
debtor under a trust receipt should cease to be perfected if the debtor remains
in possession of the goods for more than 15 days. (Paragraph 4.17.)
12.4
We propose that notice-filing should not apply to security
created by operation of the law. (Paragraph 4.18.)
12.5
We provisionally propose that under a notice-filing system for
company charges a financing statement should contain at least:
(1)
the names of the debtor and secured party (although we ask
consultees for their views on whether the creditor should be identified at
all);
(2)
the Companies House registration number of the debtor and,
where appropriate, the secured party;
(3)
a brief description of the secured property, including, where
appropriate, an indication that the proceeds of the secured property are
included (we ask consultees for their views regarding the level of detail to be
given in order to identify the secured property). (Paragraph 4.29.)
12.6
We would be grateful for the views of consultees (particularly
from those who have experience of using notice-filing systems in other
jurisdictions) on any matters which they think should be included in the
required particulars in addition to those we have discussed. (Paragraph 4.28.)
12.7
We provisionally recommend that any register under a
notice-filing system should be operated on an electronic basis. We would
welcome the views of consultees as to the practical and economic impact that
operating an electronic system would have. (Paragraph 4.34.)
12.8
We would welcome consultees’ views on our provisional
proposals to allow for estoppel in relation to seriously misleading (whether
intentionally or not) and/or spuriously filed financing statements. We also ask
whether consultees think that there should be a provision to allow the awarding
of damages where loss has been caused by the provision of false information.
(Paragraph 4.46.)
12.9
We would welcome consultees’ views on whether there should be
criminal sanctions relating to the provision of false particulars or other
information. (Paragraph 4.47.)
12.10
We welcome the views of consultees on whether a person must
actually have been misled in order for an error to be seriously misleading, and
whether that person should actually have been prejudiced by such an error.
(Paragraph 4.49.)
12.11
We provisionally consider that the absence of a conclusive
certificate is unlikely to deter lenders. (Paragraph 4.50.)
The consequences of not filing
12.12
We ask consultees whether they agree with our provisional view
that there should not be a criminal sanction for failing to file a financing
statement (in other words, that participation in the system should be
voluntary). (Paragraph 4.54.)
12.13
We are provisionally of the view that the effect of a failure
to file should be invalidity against an administrator and liquidator, and a
loss of priority against a subsequent secured creditor who files first. We
would welcome consultees’ views. (Paragraph 4.58.)
12.14
We are provisionally of the view that the debtor company, and
anyone else with an existing interest in the company’s property, should be
entitled to obtain further information about the security agreement. We have no
view as to whether this should include a copy of the agreement itself, or just
a more detailed summary of the information it contains, and we would welcome
the views of consultees on the question. (Paragraph 4.63.)
12.15
We welcome consultees’ views on whether an error made in the
details by a person who is responding to a request for information should give
rise to an estoppel. (Paragraph 4.65.)
12.16
We welcome consultees’ views on whether the requirement to
register all charges on the company’s own register should be abolished.
(Paragraph 4.71.)
12.17
We provisionally propose that there should not be a general
requirement to provide further information or a copy of the security agreement
to a member of the public upon request, but we would welcome consultees’ views.
(Paragraph 4.73.)
12.18
We provisionally propose that a creditor should not be
required to file within a certain time after creation of the security interest.
(Paragraph 4.75.)
12.19
We provisionally propose that there be no time limit for
filing a financing statement, although we invite consultees’ views on whether
‘last-minute filing’ by creditors or connected persons should be permitted, and
if so what cut-off period is appropriate. (Paragraph 4.80.)
12.20
We provisionally propose that a registration be effective for
the period indicated on the financing statement. (Paragraph 4.86.)
Changes to the information filed
12.21
We provisionally propose provisions allowing the debtor to
demand that a change in an inaccurate financing statement be made, or an
outdated financing statement be removed, by the secured party within a certain
period, failing which the debtor may make the change. (Paragraph 4.92.)
12.22
We ask whether consultees agree with us that there should be
provision for the original financing statement to be amended following the
transfer of a creditor’s interest over a registrable security interest.
(Paragraph 4.96.)
12.23
We would welcome the views of consultees as to whether they
think that, on a transfer by the debtor of its interest, the creditor should be
given a short period from the transfer (or, if it had not consented to the
transfer, from when it knows the facts) in which to file against the
transferee. (Paragraph 4.100.)
12.24
We ask whether consultees agree with our provisional proposal
that the signature of both the chargor and chargee on the financing statement
should not be required but that:
(1)
the person filing should be required to confirm that the
filing is being made with the consent of the chargor;
(2)
there should be a mechanism to ensure that the chargor is
aware of the filing after it has been made; and
(3)
there should be a criminal sanction on a party who
deliberately (or possibly recklessly) provides false or inaccurate information.
We also ask
consultees whether damages should be available for a party that has suffered as
a result of this (and, if so, whether this should depend on proof of
negligence). (Paragraph 4.108.)
Advance filing and multiple transactions
12.25
We provisionally propose that it should be possible to file a
financing statement before or after a security agreement is made. (Paragraph
4.110.)
12.26
We provisionally propose that, where no security agreement
exists, the debtor, or any person with an interest in the charged property,
should be able to give a written demand to the secured creditor to change a
filed financing statement, failing which the person making the demand can make
the change itself. (Paragraph 4.113.)
12.27
We provisionally propose not to require an indication of
whether the charge has actually been created at the time of filing, but we
would welcome the views of consultees on this point. (Paragraph 4.115.)
12.28
We ask consultees whether they agree that an important
advantage of notice-filing would be that it would permit a single filing to
cover a series of security transactions between the same parties. (Paragraph
4.117.)
Floating charges
12.29
Do consultees agree with our provisional views that a floating
charge should no longer give a company authority to create subsequent fixed
charges that automatically get priority over an earlier floating charge; and
that the financing statement should indicate whether the charge is fixed or
floating (or both)? (Paragraph 4.142.)
12.30
We ask consultees whether they agree with our provisional
recommendation:
(1)
not to require inclusion of the nature of the charge and/or
whether there is an automatic crystallisation clause in the financing
statement, and
(2)
to register the fact that a floating charge has crystallised
pursuant to an automatic crystallisation clause. (Paragraph 4.144.)
12.31
We ask consultees whether they agree that, if our
provisional proposal that charges over assets such as shares and other
investment securities that are ‘controlled’ by the secured party (or in the
case of certificated shares, if the certificates are in the secured party’s
possession) should be treated as perfected without the need for registration,
priority between registrable and unregistrable charges should depend on the
date of perfection. (Paragraph 4.148.)
12.32
We provisionally propose that priority as between competing
charges, each of which is registrable but neither of which has been registered,
should be determined by the date of attachment. (Paragraph 4.149.)
12.33
We provisionally propose not to make the registration of a
subordination agreement necessary for the agreement to be effective, and ask
whether registration of a subordination agreement should be made possible.
(Paragraph 4.150.)
12.34
Where the security agreement has been changed but the changes
not yet recorded in the financing statement we provisionally think that the
priority position of the security interest should not be altered. (Paragraph
4.151.)
12.35
We provisionally propose to allow the tacking of further
advances where these are contemplated by the security agreement and are covered
by the financing statement. (Paragraph 4.154.)
12.36
We provisionally propose that a purchase-money interest should
have priority over an already registered non-purchase-money security.
(Paragraph 4.160.)
12.37
We invite views as to whether in the case of inventory the
holder of the purchase-money interest should have to give notice to other
secured parties who have filed in order to preserve the priority of the
purchase-money interest. (Paragraph 4.162.)
Proceeds
12.38
We ask whether consultees agree with our provisional views
that:
(1)
where an asset subject to a security is dealt with or
otherwise gives rise to proceeds, the security should extend to the proceeds;
(2)
the proceeds should be treated as continuously perfected (and
therefore having the priority of the original financing statement) where there
was a financing statement covering the original secured asset and either
(a)
the proceeds are money or similar property (and we ask
consultees whether they have views as to the extent of this provision); or
(b)
the proceeds would either come within the description of the
property originally subject to the security, or the financing statement covers
proceeds of the original property;
and
(3)
where the proceeds are not continuously perfected, they should
be temporarily perfected for a short period, allowing a new financing statement
to be filed in respect of the proceeds, in which case, priority will be that of
the original financing statement. (Paragraph 4.172.)
Purchasers
12.39
We provisionally recommend that such an unregistered charge
should be ineffective against any person who for value acquires an interest in
or right over property subject to the charge and we consider that questions of
actual knowledge should be as irrelevant for this purpose as they are for purposes
of priority. (Paragraph 4.177.)
12.40
We invite comment from consultees on whether a buyer of
capital equipment should be expected to search the register. (Paragraph 4.182.)
12.41
We invite views on whether a consumer who buys goods (other
than stock-in-trade, which is covered above) that are subject to a registered
charge should take free of the charge unless she knows of the charge.
(Paragraph 4.183.)
12.42
We provisionally propose that a buyer should not be bound by
security interests in goods (other than those that are uniquely identifiable)
created by prior owners. (Paragraph 4.185.)
12.43
Where a financing statement identified an asset by serial
number or other identifying mark, we would provisionally propose an exception
to our previous proposal that the purchaser should not be bound by security
interests created by prior owners. We invite consultees’ views. (Paragraph
4.188.)
12.44
We provisionally propose that persons acquiring ownership or
possession of goods in the ordinary course of business under a hire-purchase
agreement, lease, contract for work and materials or contract of barter should
take free from a security interest in the same circumstances as buyers.
(Paragraph 4.189.)
12.45
We ask whether consultees agree with our provisional view that
the validity of charges that should be registrable in specialist registers
should be determined by the rules of that register. (Paragraph 4.191.)
12.46
We ask whether consultees agree with our provisional view that
a purchaser of investment securities should take free of the security unless she
knows of it and that sale would be in breach of the agreement. (Paragraph
4.193.)
12.47
We ask whether consultees agree with our provisional view that
a factor or other person purchasing book debts should be expected to check the
register and should not be protected merely because it does not know that the
subsequent sale is in breach of the agreement. (Paragraph 4.196.)
12.48
We ask whether consultees agree with our provisional view that
the priority rules of a notice-filing system should not disturb the protection
currently given to a holder in due course. (Paragraph 4.198.)
Charges registrable in specialist registers
12.49
We invite views from consultees on our provisional proposal to
exclude all charges registrable in a specialist register from the notice-filing
system. We would welcome views on whether the specialist registry should
forward information about charges created by a company to the Company Charges
Register for public notice. (Paragraph 4.211.)
12.50
We ask whether consultees agree with our provisional view that
a printed search result should be receivable in evidence as prima facie proof
of its contents, including the date of registration and the order of
registration as indicated by the registration number. (Paragraph 4.214.)
12.51
We ask consultees whether the registrar should be liable in
damages for breach of any duty or obligation imposed by the notice-filing
system, to the extent of reasonably foreseeable loss or damage caused to those
who can reasonably be expected to rely on performance of the duty or
obligation. (Paragraph 4.219.)
12.52
We ask consultees for their views on whether there should be a
provision to the effect that a person failing to discharge any duty or
obligation imposed by the notice-filing system should be liable for reasonably
foreseeable loss or damage caused to those who can reasonably be expected to
rely on performance of the duty or obligation. (Paragraph 4.221.)
12.53
We welcome consultees’ views on whether to transfer all
existing registrations to a new Company Charges Register or whether to keep the
existing information on the present register. We ask whether consultees agree
that there is no need to re-register previously registered charges. (Paragraph
4.232.)
Conclusion on notice-filing
12.54
We ask consultees whether they agree with our provisional
proposal that a system of notice-filing should replace the current registration
scheme for company charges. It would be particularly helpful if consultees
could explain the practical and economic impact they envisage our provisional
proposals having. We also ask consultees whether there are any additional
matters that they consider should be dealt with as part of a notice-filing
system applicable to company charges. (Paragraph 4.236.)
12.55
Our provisional view is that a notice-filing system applicable
to charges should make all charges registrable unless excluded, rather than
identifying only those charges that are to be registrable. (Paragraph 5.6.)
Proposed exceptions
12.56
We provisionally propose that the question of whether a
retention of title clause creates a registrable charge should be left to the
courts. (Paragraph 5.12.)
12.57
We ask consultees whether they agree with our provisional view
that charges given to secure the issue of debentures should not be specifically
excluded from being registrable, even if in practice this method of raising
capital is rarely used. (Paragraph 5.15.)
12.58
We provisionally propose that the deposit of a negotiable
instrument by way of security to secure the payment of a book debt should
continue to be exempt from registration. (Paragraph 5.17.)
12.59
We provisionally propose that all charges over shares, and
charges over rights to dividends when this forms part of a charge over the
shares concerned, should be treated as perfected if the secured party has
possession of the certificate or has control by being registered as owner.
(Paragraph 5.28.)
12.60
We invite the views of consultees on whether, under a
notice-filing system, it should be possible to perfect a charge over shares by
filing a financing statement as an alternative to either taking possession of
the certificates or taking control. If so, should a charge protected by
possession or control have priority over one protected by even an earlier
filing? (Paragraph 5.35.)
12.61
We provisionally propose that charges over insurance policies
should in general be registrable. (Paragraph 5.39.)
12.62
We provisionally propose that neither charges on goods nor on
insurance policies on goods should be registrable where the goods are abroad or
at sea, or are imported goods before they are delivered to a buyer or deposited
in a warehouse, factory or store. (Paragraph 5.40.)
12.63
We would therefore propose to make it clear that contractual
liens over sub-freights are not charges and therefore are not registrable.
(Paragraph 5.42.)
12.64
We provisionally propose that a charge over a bank account in
favour of the bank itself should be possible only if the bank takes ‘control’
of the account; and that it should be exempt from registration. (Paragraph
5.51.)
12.65
We provisionally propose that a charge over a bank account in
favour of a party other than the bank itself should also be possible only if
the third party takes ‘control’ of the account; and that it too should be
exempt from registration. (Paragraph 5.52.)
12.66
We ask consultees whether they agree that:
(1)
charges over money obligations, including contingent
obligations, ought to be made registrable; but that
(2)
‘charge-backs’ and charges over bank accounts should be
possible only if the account is under the control of the secured party. The
charge should then be treated as perfected without filing. (Paragraph 5.53.)
Charges created by trustee companies and ‘market
charges’
12.67
It is our provisional view that charges created by a trustee
company over trust property should be registrable against the trustee company
unless the charge is on the list of charges that are exempt from filing.
(Paragraph 5.65.)
12.68
We provisionally propose that if the chargor company is acting
as a trustee, that should be entered on the financing statement. We invite views
on whether, if the trustee company is charging the assets at the direction of a
corporate beneficiary, the beneficiary should be identified on the financing
statement. (Paragraph 5.75.)
12.69
It is our provisional view that it is not necessary to state
in the financing statement whether a charge is a “market charge” but we would
welcome the views of consultees. (Paragraph 5.77.)
12.70
We provisionally propose that if (contrary to our main
provisional recommendation) Lloyds’ trust deeds are to be brought within the notice-filing
system, each corporate member should be obliged only to file a financing
statement listing the members’ and premium trusts that it has created; and, for
the third class of trust, describing (in the general terms required for any
financing statement) the assets that the standard form trust deeds require to
be held in trust for each class of business, and the names of the trustees. It
should state that the trust is for the purposes of insurance at Lloyds. We
invite consultees’ views. (Paragraph 5.86.)
Charges by oversea companies and charges over
assets in other jurisdictions
12.71
We would therefore provisionally propose that any
notice-filing system should apply to those oversea companies that have
registered their place of business, whether they ought to have done so or not.
(Paragraph 5.93.)
12.72
We provisionally propose that a charge that has been created
by an oversea company on property that was then outside the United Kingdom, but
which is subsequently brought into the United Kingdom, should also be registrable.
(Paragraph 5.94.)
12.73
It is our tentative view that a charge created by a company
registered in England and Wales over assets in Scotland should be registrable
in England and Wales if the same charge would be registrable were the assets in
England. However we invite views. Before commenting on this point, consultees
may want to consider the reciprocal question of charges created by companies
registered in Scotland over property in England and Wales. (Paragraph 5.113.)
12.74
We tentatively propose that charges created by Scots companies
over assets in England and Wales should continue not to be registrable in
England and Wales, but we invite views. (Paragraph 5.120.)
Unregistered companies
12.75
We provisionally propose that charges created by unregistered
companies should be within the notice-filing scheme we have proposed.
(Paragraph 5.122.)
12.76
We ask consultees whether they agree with our provisional view
that if there is to be a functionally-based notice-filing system, the approach
taken by the overseas systems as to the meaning of ‘security interest’ should
be followed, so as to apply, in general, to transactions that secure payment or
performance of an obligation. (Paragraph 7.20.)
Common forms of quasi-security
12.77
We ask whether consultees agree with our provisional proposal
that transactions of hire-purchase and conditional sale should be registrable
against the hirer or buyer company. (Paragraph 7.23.)
12.78
We provisionally agree that retention of title clauses should
be registrable. (Paragraph 7.24.)
12.79
We provisionally agree that the interest of a seller who has
shipped goods to a buyer under a negotiable bill of lading or its equivalent to
the order of the seller should not be regarded as a security interest, unless
the parties have evidenced an intention otherwise. (Paragraph 7.26.)
12.80
We ask consultees for their views on whether a consignment
should be registrable under a functional system only if it secures payment or
performance of an obligation, or whether it should be registrable whatever its
purpose. Should a consignment be expressly stated to be a purchase-money
security interest? (Paragraph 7.29.)
12.81
We ask consultees for their views on whether all leases should
be registrable (if over a certain minimum period) or whether only those leases
that perform a security function should be registrable. (Paragraph 7.34.)
12.82
We ask whether consultees agree with our provisional views:
(1)
that sales of receivables, for example under a factoring or
block discounting agreement or as part of a securitisation, should be
registrable; but
(2)
that there should be an exception to the requirement to
register when book debts are sold as part of a larger transaction (such as the
overall sale of the business), and
(3)
that there should be an exception also in the case of
negotiable instruments. (Paragraph 7.45.)
Quasi-securities that should not be registrable
12.83
It is our provisional conclusion that transfers of shares and
investment securities under a ‘repo’ should not be registrable. (Paragraph
7.50.)
12.84
We ask whether consultees agree with our provisional proposal
that rights of set-off should be excluded from the need to register under a
notice-filing system. (Paragraph 7.52.)
12.85
We ask whether consultees agree with our provisional view that
special purpose trusts should be outside the requirement to register (either
because no security arises, or alternatively any security arises through
operation of law). (Paragraph 7.54.)
12.86
We ask consultees whether secured parties who have given new
value should, to the extent of that value, be given priority over existing
perfected security interests. (Paragraph 7.74.)
12.87
We ask consultees whether they think that previous security
interests (including quasi-security) that would be registrable under a
notice-filing system, but which are currently not registrable ought to be
registered within a certain period following the commencement of any new
notice-filing system. (Paragraph 7.80.)
12.88
We would welcome the views of consultees on whether, if the
company’s own register of charges is to be kept, it should include registrable
quasi-security interests. (Paragraph 7.82.)
12.89
We ask whether consultees agree with our provisional view that
there should be no exclusion from the need to register in the case of small
transactions. (Paragraph 7.85.)
12.90
We ask whether consultees agree that the existing law applying
to the registration of security and quasi-security interests by individuals and
unincorporated businesses is in need of reform because it:
(1)
is unnecessarily complex;
(2)
is potentially incompatible with the ECHR;
(3)
makes it difficult for businesses and individuals to create
fixed charges;
(4)
makes it impossible for unincorporated businesses to create
floating charges; and
(5)
fails to give adequate public notice of security and
quasi-security interests created by unincorporated debtors.
Where
they do not so agree, we ask them to explain why. (Paragraph 9.19.)
Non-corporate business debtors
Floating charges
12.91
We ask consultees whether they agree with our provisional view
that non-corporate business debtors (comprising sole traders, partnerships and
other unincorporated bodies) should be able to create a floating charge or
‘floating lien’. If they do agree with us, we ask them whether there are any
safeguards that they would like to see in place (such as not permitting a
floating charge to extend to property or assets not used or acquired for use in
connection with the debtor’s business, trade or profession). (Paragraph 10.7.)
Types of security interest that should be
registrable
12.92
We provisionally propose that the same types of charge should
be registrable when created by unincorporated businesses as when created by
companies. (Paragraph 10.8.)
12.93
We provisionally propose that quasi-security interests created
by unincorporated businesses should be registrable. (Paragraph 10.9.)
12.94
We provisionally propose that charges and quasi-security
interests that, under our earlier proposals, would not be registrable when
created by companies should equally be exempt when created by an unincorporated
business. (Paragraph 10.10.)
12.95
We ask consultees whether they think a system of notice-filing
that covers all forms of debtor should replace the current law in respect of
agricultural charges. (Paragraph 10.17.)
Conclusion
12.96
We ask consultees whether they agree with our provisional
view:
(1)
that the notice-filing system that we proposed for companies
should be extended to apply to security interests created by non-corporate
business debtors such as sole traders, partnerships and other unincorporated
businesses;
(2)
that, as is proposed for companies, the system should take a
functional approach to what is registrable, so that quasi-securities are
brought within it; and
(3)
the same rules on priority apply, with preference being given
to purchase-money interests. (Paragraph 10.21.)
Consumers
Security interests over after-acquired property
12.97
We ask whether consultees agree with our provisional view that
consumers should not be permitted to grant security over their after-acquired
property, except where the security is a purchase-money interest created
shortly after the goods were acquired. (Paragraph 10.26.)
Security interests over existing property
12.98
We ask consultees whether consumers should be able to create
security interests over their existing personal property. If consultees do
consider that consumers should be able to create such security interests, what
safeguards (if any) would they wish to see? (Paragraph 10.32.)
12.99
We ask consultees whether they think it better that:
(1)
security interests over consumer goods should be treated as
valid in the event of the consumer’s insolvency without filing, which would not
be possible, with concomitant rules that a purchaser would be bound by the
security interest only if he had actual knowledge of it
or
(2)
security interests over consumer goods should be fileable, so
that
(a)
an unfiled interest should not be valid in the event of the
consumer’s insolvency;
(b)
an unfiled interest should not be binding on a subsequent
purchaser unless she knew of it; and
(c)
a filed interest should bind any purchaser.
We
also ask whether, under (2) above, private purchasers (as opposed to purchasers
who are in the relevant trade) who do not know of the security interest should
take free of it even if it has been filed.
We
have a preference for permitting filing and treating a filed interest as good
against trade purchasers but not private purchasers (that is, a similar rule to
that used for motor vehicles). (Paragraph 10.50.)
12.100
We provisionally propose that:
(1)
security interests
over motor vehicles be registrable in the same way as other security interests,
whether the debtor is a company, unincorporated business or a consumer;
(2)
an unfiled interest
should not be valid in the event of the debtor’s insolvency;
(3)
an unfiled interest
should not be binding on any purchaser, whether or not she knew of it;
(4)
a filed interest
should be binding on a trade purchaser (or subsequent secured creditor, who
will take subject to it); but
(5)
a filed interest
should not be binding on a person who buys the vehicle for private use unless
she knows of the security interest. (Paragraph 10.54.)
Small transactions
12.101
We invite consultees’ views on whether the filing of small
consumer transactions should be prevented. Alternatively, if consumer security
interests should be filed, should the system provide that in the event of the
consumer’s insolvency purchasers of goods worth less than a certain limit will
take free of the security interest unless they knew of it? (Paragraph 10.58.)
Conclusion
on security interests created by non-corporate debtors
12.102
Our provisional conclusion is therefore that the notice-filing
system we provisionally proposed for security interests granted by companies
should be extended to cover security interests granted by non-corporate
debtors, although there should be appropriate protection for consumers.
(Paragraph 10.61.)
12.103
We ask consultees whether they agree with our provisional
conclusions that:
(1)
it is very desirable that there be a restatement of the law on
the creation of security interests, the rights of the parties and enforcement
of security interests, that would set out the extent to which such rules should
apply to each kind of security interest (including quasi-securities); but that
(2)
as an interim measure, the notice-filing scheme proposed
earlier for security interests (including quasi-securities) created by
companies should be introduced without any provision that quasi-securities are
to be subjected to the rules governing traditional security instruments.
Alternatively, do consultees consider either that
the Regulations for company charges should include such a restatement, or that
they should include (for title-retention transactions only) a clause stating
that such transactions should be treated ‘as if’ they were true securities?
(Paragraph 11.47.)
Please note that the provisional proposals made in
this Appendix are only intended to apply if our main proposal for a
notice-filing system is rejected.
12.104
We provisionally propose that the particulars required should
not include:
(1)
whether the charge is in respect of a monetary obligation
(together with the amount secured) or other variable obligation; or
(2)
whether a floating charge includes an automatic
crystallisation clause.
We consider that there should be provision for the
registration of a crystallisation that has occurred as the result of an
‘automatic’ clause. We ask for views on the inclusion of statements as to
whether a charge is a market charge. We propose that if the chargor is acting
as a trustee, that should be indicated as one of the required particulars.
(Paragraph A.11.)
12.105
We provisionally propose that a negative pledge clause be
listed as a registrable particular. (Paragraph A.12.)
12.106
We would welcome views on whether registration of a negative
pledge clause should be voluntary or compulsory. (Paragraph A.13.)
12.107
We provisionally think that it would not be essential to have
details of commission allowance or discount. (Paragraph A.14.)
12.108
It is our provisional proposal that the particulars need not
be signed. (Paragraph A.15.)
12.109
We ask whether consultees agree with our provisional proposal
that, if reform is to take the form of amendments to the current scheme rather
than the adoption of notice-filing:
(1)
defects in the particulars submitted would not render the
registration invalid;
(2)
it should not be necessary to submit either the original or a
copy of the charge document with the particulars;
(3)
the charge would only be valid for the property or classes of
property included in both the particulars and the charging instrument; and
(4)
there should be civil liability on the applicant for loss
suffered as a result of any inaccuracy in the particulars. (Paragraph A.27.)
12.110
Do consultees agree with our provisional view that if reform
is to take the form of amendments to the current scheme rather than the
adoption of notice-filing:
(1)
registration after the 21-day period should be possible without
a court order, provided that at the time of registration there had been neither
the presentation of a winding up petition nor the convening of a meeting to
pass a resolution for a creditors’ voluntary winding up petition;
(2)
a late registered charge should be void against the
liquidator, administrator and other creditors where it is registered following
the onset of insolvency; and
(3)
that there should be a provision to prevent ‘last-minute
registration’ by connected persons? (Paragraph A.34.)
12.111
We provisionally propose that the criminal sanction for
failure to register a charge created by the company should be abolished; that
the sanction of the secured sum being repayable on demand in the event of a
failure to correctly register the charge should also be abolished; but that
chargees should be free to contract that the money should be repayable in the
event of non-registration. (Paragraph A.36.)
12.112
We provisionally propose that there should be no obligation to
file particulars of alterations; but there should be provision for the chargor
to require registration of a memorandum of satisfaction, or of a note that
certain assets have been released from the charge. (Paragraph A.38.)
12.113
We provisionally propose that there should be a mechanism to
ensure that the debtor can identify a person to whom the creditor has assigned
its interest, but that there should be no criminal penalty for failure to
provide details. (Paragraph A.39.)
12.114
We ask consultees whether they agree that, even if reform is
to take the form of amendments to the current scheme rather than the adoption
of notice-filing, a priority scheme should be introduced based on the time of
receipt for registration by the registrar. (Paragraph A.42.)
12.115
We consider that if there are to be changes to move to a
system of priority by date of registration and to permit advance filing, this
should be done by adopting a system of notice-filing. (Paragraph A.45.)
12.116
We provisionally propose that an unregistered charge should be
void against a purchaser unless the purchaser had actual knowledge of the
charge. (Paragraph A.48.)
12.117
In relation to the position of purchasers of property that is
subject to a charge, we provisionally propose that amendments to the current
scheme should be on the same lines as we proposed earlier for notice filing,
and we ask the same question, as in paragraphs 4.173-4.198. (Paragraph A.49.)
12.118
We provisionally propose that the company’s own register of
charges be abolished. (Paragraph A.50.)
12.119
We provisionally propose that any improvement to the existing
scheme should give the registrar discretion as to the form of the Companies
Register. (Paragraph A.52.)
12.120
It is our provisional but firm view that the current scheme
for registration of company charges should be replaced by the scheme of
notice-filing described in Part IV rather than being amended in the ways that
we have outlined in Appendix A. (Paragraph A.53.)
Appendix B - A restatement of the law of security
12.121
We provisionally think that it would be sensible to require a
written agreement signed by the debtor for all non-possessory security
interests. (Paragraph B.6.)
12.122
We think that a statement that a sufficient description of the
property is required should be included in any restatement. (Paragraph B.8)
12.123
We think that attachment is so central to the notion of
security that it would be worth including such a restatement of the rules on
attachment. We ask whether, if under the security interest the debtor remains
free to dispose of assets in the ordinary course of business, judgment
creditors should be able (as at present) to seize goods before the charge has
‘crystallised’. (Paragraph B.11.)
12.124
We ask whether it would be useful to include rules on when the
secured party can require payment. (Paragraph B.15.)
12.125
We provisionally propose that there should be a provision to
enable the secured party to take possession of collateral that is ‘at risk’.
(Paragraph B.18.)
12.126
The provisions as to possession or enforcement seem to state
an obvious principle but one that should be included in a restatement. The
provisions as to seizure and disposal may be useful. We would welcome the views
of consultees. (Paragraph B.24.)
12.127
We ask consultees whether a restatement should set out the
powers and duties of receivers, and the powers of the court, more fully than
does the present legislation. (Paragraph B.33.)
12.128
We think that the provisions relating to the power of sale set
out above are so central to the remedies of the secured party that they should
be included in a restatement, and suggest that each of the points described
above should be covered. (Paragraph B.46.)
12.129
Any restatement forming part of a system that included
quasi-securities should clearly set out the rights and duties in respect of
surplus. (Paragraph B.50.)
12.130
We think that provisions on statement of account and the
payment of surplus into court would be useful. (Paragraph B.53.)
12.131
We think that foreclosure is such a central topic that it
should be covered in a restatement. (Paragraph B.57.)
12.132
We agree that the right of redemption should be included in
any restatement. (Paragraph B.60.)
12.133
We invite views on whether a restatement should include a
right for the debtor to reinstate the
security. (Paragraph B.63.)
12.134
We ask consultees whether it is desirable to set out the
powers of the court along the lines of the provisions in the Saskatchewan and
New Zealand PPSAs. (Paragraph B.67.)
12.135
We ask whether provisions setting out the measure of the
secured party’s damages when collateral is seized by a third party would be
useful in a restatement. (Paragraph B.68.)
Fixtures, crops, accessions, processed and
commingled goods
12.136
We ask whether a restatement of the law of security (which
would be largely concerned with personal property) should set out rules on
fixtures, accessions and processed or commingled goods. (Paragraph B.77.)
12.137
We ask whether the right to transfer ownership of the
collateral should be included in a restatement. (Paragraph B.81.)
12.138
We ask whether a provision preventing exclusion or limitation
of liability is needed. (Paragraph B.83.)
12.139
We ask whether consultees share our view that special rules on
service of documents would not be necessary in a restatement. (Paragraph B.85.)
General consultation question
12.140
What practical and economic impact, in financial and
non-financial terms, do consultees think our provisional proposals would have?
