Examination Timing: 00H01M15S
You act for a company, TrendWear Ltd, which designs and sells fashionable clothing and is seeking investment. The company owns a large building encompassing a warehouse on the ground floor, and offices on the middle and upper floors. TrendWear Ltd owns the property outright. The company already has a revolving loan facility which is secured against the company's assets. The sole shareholder of the company does not wish to dilute their ownership.
Which of the following best describes the type of security the company can offer in return for investment?
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Your selected option: C
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Since TrendWear Ltd already has a revolving loan facility secured against its assets and the shareholder does not want to dilute their ownership, offering a mortgage over the business property is the best option. A mortgage would provide security for the investment without affecting the shareholder's ownership. Issuing or transferring shares (Options A and E) would dilute ownership, while offering additional fixed or floating charges (Options B and C) would complicate the existing security arrangement.
Key Point: In investment scenarios, understanding the implications of different types of security is crucial, especially regarding the ownership structure and existing securities on the company's assets.
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