The paper "Debentures and Business Law " is an outstanding example of an essay on business. There are various ways through which organizations obtain capital, these range from, shareholding to credit facilities. As a source of getting capital, debentures have been very key elements in the business set-up. It goes without saying that debentures have played a significant role and therefore they have been instrumental, in the acquisition of funds for the daily operations of a business. It is rather important to first begin by looking at what a debenture is and then form a basis of the discussion with regards to the case of I-Sports Limited.
Topham (p. 142) defines a debenture as a document issued by a firm or organization to act as its evidence for a charge created by the same company in return for a loan. There are other various meanings that have emanated from the use of this term. However it does not matter how one puts it, the most important thing that one needs to know here is that this term simply means a “ security” for the funds given out by one entity (Loaner) to another (Loanee). Debentures can be said to exist in two forms, for instance, there are debentures that are payable to a registered holder, and secondly, there are debentures that are payable to a bearer.
Another common distinction is that debentures can be secured as well as unsecured. By this I mean to say that in secured debentures, the assets of an organization cannot be sold to recover the funds in case of liquidation, on the other hand, a secured debenture allows for an organization’ s assets to be sold enabling the recovery of the funds.
Looking at the debentures issued by I-Sports Ltd one can clearly see that these are a good example of secured debentures. These debentures are issued in exchange for floating charges as part of the securities by the borrower. There is however a difference between floating charges and fixed charges on assets (Marsh, Souls, p.128). Floating charges are given second priority to fixed charges as well as other creditors. This is to say therefore that in the event of I-Sports Company winding up, preference will be given to creditors with fixed charges on assets.
Therefore Fishtight will receive second priority.
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