Lloyd's Maritime and Commercial Law Quarterly
REGISTRATION OF COMPANY CHARGES: THE NEW LAW
By G. McCormack*
The law relating to registration of company charges has been the subject of a considerable overhaul by the Companies Act 1989. Part IV of the Act of 1989 basically re-enacts with many significant changes Part XII of the Companies Act 1985 on the registration of charges.1 These modifications will be discussed in detail in this article but first it is necessary to say something to set the matter in context.
The background
The requirement to register with the Registrar of companies details of certain charges created by a company was first introduced by s. 14 of the Companies Act 1900.2 The statutory provision followed the recommendation of the Davey Committee on Company Law Reform, which reported in 1895.3 The idea behind the obligation to register was explained by Cozens-Hardy, M.R., in Re Yolland, Husson and Birkett Ltd.4 He said:5
I approach section 14 of the Companies Act 1900 as one is bound to do, by considering what was the mischief which had to be remedied.
It was that companies were allowed to issue debentures, charging very frequently all their present and future assets and there might be no means of ascertaining, at all events for a considerable time, whether any debentures were issued; and therefore for the protection of the
* Faculty of Law, University of Southampton. In the footnotes, “Companies Act” is abbreviated to “C.A.”.
1. Part IV has to be read in the light of the regulations made, and to be made, thereunder; on which see infra, text to fns. 144–148. According to s. 215, Part IV comes into force on such day as the Secretary of State may appoint by order made by statutory instrument. Different days may be appointed for different provisions and different purposes. It should be noted that this article does not purport to deal with Scottish law too although incidental reference will be made thereto.
2. See generally W. J. Gough, Company Charges (1978), at p. 208.
3. C. 7779, paras. 46–50. See also Professor Aubrey Diamond’s report for the Department of Trade and Industry, A Review of Security Interests in Property (1989), at p. 98.
4. [1908] 1 Ch. 152.
5. Ibid. 156. See also the statement of the President of the Board of Trade at the second reading debate on the Companies Bill of 1900 (Parliamentary Debates, 4th Series, Vol. 84, col. 1143). The observations are reproduced in Gough, supra, fn. 2, at p. 209. He said:
“Another evil which at present exists is that when it comes to the winding up of some companies it is found that the whole of the available assets of the company are mortgaged, and there is nothing at all to divide amongst the unhappy creditors. The only remedy which can be applied to this particular evil is to take care that publicity is given to any mortgages which exist. It is therefore provided that any mortgages shall be registered with the Registrar of Joint Stock Companies and be open to public inspection, and that any mortgages not so registered shall be invalid.”
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