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Examination Timing: 00H01M59S

TechCraft Ltd has created a fixed charge in favour of its bank over machinery owned by the company and used in its factory. The company is solvent, and the fixed charge has been correctly registered at Companies House. TechCraft Ltd now wishes to sell some of the machinery and seeks legal advice on how to proceed. 

What advice should the company receive in relation to the sale of the machinery?

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A fixed charge grants the chargeholder (the bank) a specific security interest over the asset (machinery) that prevents the company from dealing with the asset without the chargeholder’s consent. This type of charge is typically used to secure significant borrowing and ensures that the chargeholder has a priority claim over the asset. Even though the company is solvent and the charge has not crystallised, the company cannot sell the machinery without the bank's consent because the fixed charge restricts the company's ability to dispose of the charged assets freely. 

Key Point: Fixed charges provide chargeholders with a specific interest in an asset, restricting the chargor's ability to deal with the asset without consent. This ensures the chargeholder's priority and security over the asset, and any sale of the asset requires the chargeholder's approval.

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