It is common for lenders (creditors/mortgagees) to take security of a charge over the debtors/borrowers’ assets to protect their exposure to debtors/borrowers.
Section 262 of the Corporations Act requires certain charges over company assets to be registered with the Australian Securities & Investments Commission (‘ASIC’). These charges include:
- Floating Charges;
- Charges on personal chattels;
- Charges over goodwill and patents or trademarks;
- Charges over book debts; and
- A charge over crops, wool or stocks.
The charge gives the lender tangible security over the property of a company should the loan fall into default. It is a form of insurance.
A mortgage is different and does not require registration with the ASIC.
A fixed and floating charge over all of a company’s assets would also cover any real property owned by the company.
Charges must be lodged with the ASIC within 45 days of creation and claw back provisions apply in cases of bankruptcy or insolvency.
Understanding and navigating the legal intricacies surrounding charges in financial agreements often requires professional guidance. A business lawyer can provide expert advice and legal support, ensuring compliance with regulatory requirements and safeguarding the interests of all parties involved.
