Statutory Decrystallisation of the Floating Charge: Implications for Business Sustainability
- Friday Okafor Onamson
AbstractThis paper analyzes the provisions of the Nigerian Companies and Allied Matters Act 2004 which, against the grain of general law rules on decrystallisation of floating charge, provides that a crystallised floating charge can decrystallise or refloat where the creditor withdraws from possession after the debtor has commenced payment or if the receiver, with consent of the creditor, is withdrawn. The analysis is relevant because the provision has dire implications for business sustainability since parties engage in debt transaction to sustain the going concern basis of their businesses. Bearing in mind that uncertainty pervades the boundaries between fixed and floating charge, the paper asks what is the priority status of a decrystallised floating charge as against a floating charge created prior to refloatation; and what is the relationship between the decrystallised floating charge and a fixed charge that predated the decrystallisation on the one hand and a fixed charge created post refloatation on the other hand. Using the case law and existing literature the paper showed that the statutory provision for decrystallisation of floating charge not only failed to clarify the general law rules on decrystallisation of floating charge, but it has cast a veil of uncertainty over the rights of parties to a debt transaction secured by floating charge. Since the provision can impact on the health of businesses, it behoves on the parties to be proactive in crafting debts contracts creating an interest secured by floating charge.
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