History
Historically, floating charges are a fascinating concept in that they are legal devices created entirely by lawyers in private practice; there is no legislation and no judicial decision that was the genesis of a floating charge. In 1862 in an apparently unconnected decision of Holroyd v Marshall (1862) 10 HL Cas 191 it was held that equity would recognise a charge over after-acquired property as being effective to create a security interest over that property automatically upon its acquisition.
This decision lead to "a further manifestation of the English genius for harnessing the most abstract conceptions to the service of commerce." Documents came to be drafted that purported to grant security over all of the debtor's present and future property, but by contract expressly permitted the debtor to dispose of those assets, free from the charge, until such times as the debtor's business ceased. This charge came to be known as the "floating charge".
The first case in which a floating security device was tested and upheld came a mere eight years after Holroyd v Marshall in Re Panama, New Zealand and Australian Royal Mint Company (1870) 5 Ch App 318; a remarkably quick gestation by any reckoning. The Court of Appeal held that the effect of the document was that the secured creditor could not interfere with the running of the business and its dealings with its own assets until the winding up of the company, but the occurrence of that event entitled the secured creditor to realise its security over the assets and to assert its charge in priority to the general body of creditors
Any residual concern about the efficacy of such charges were comprehensively ousted by the House of Lords in Salomon v A Salomon & Co Ltd AC 22.
Read more about this topic: Floating Charge
Famous quotes containing the word history:
“The best history is but like the art of Rembrandt; it casts a vivid light on certain selected causes, on those which were best and greatest; it leaves all the rest in shadow and unseen.”
—Walter Bagehot (1826–1877)
“A great proportion of the inhabitants of the Cape are always thus abroad about their teaming on some ocean highway or other, and the history of one of their ordinary trips would cast the Argonautic expedition into the shade.”
—Henry David Thoreau (1817–1862)
“When the coherence of the parts of a stone, or even that composition of parts which renders it extended; when these familiar objects, I say, are so inexplicable, and contain circumstances so repugnant and contradictory; with what assurance can we decide concerning the origin of worlds, or trace their history from eternity to eternity?”
—David Hume (1711–1776)