Floating charges normally crystallise (i.e. convert into a fixed charge) under two events, namely the appointment of a Receiver or the appointment of a Liquidator.
In other jurisdictions it has been held that floating charges can crystallise upon the happening of other events, such as the company being in default etc.
The issue of crystallisation has not yet been tested in the Irish courts. A leading authority, Ronan Keane, suggests that "The courts here will probably incline to the view that such automatic crystallisation would present problems for other creditors who would have had no actual notice of the terms of the debenture."
Section 99 of the 1963 Companies Act sets out the steps necessary to register a valid charge. If Form C1 (previously Form 47) does not specify that a floating charge is capable of being converted into a fixed charge (outside of the two normal crystallisation events of Receivership and Liquidation) then our view is that the purported fixed charge would be void against a Liquidator. Another leading authority, William Johnston, suggests that notice of automatic crystallisation should be inserted on Form 47 so that the public would be aware of the possibility of crystallisation.
For further information please contact Jim Stafford or Tom Murray on 01 661 4066 or stafford@liquidation.ie
or murray@liquidation.ie