At last we have the final judgement as to whether book debts dealt with in the normal way in which banks deal with them are floating or fixed charge assets. Although Spectrum can only have been decided on its own specific facts it is generally accepted that most Bank Debentures will be treated the same way.

The House of Lords has found that book debts are floating charge assets..

But does it matter? When Brumark first suggested that this was the case, the result would have been that liquidators could use the proceeds of the debts to pay their remuneration.  However, in 2004 Leyland Daf changed this providing that the charged assets constituted a separate fund and that liquidators remuneration could only be taken after payment of the floating charge holder.

Now that book debts have been found to be floating charge assets, the liquidators' remuneration and expenses are still subordinated to them.  Originally the fact that book debts were a floating charge asset could have been of great advantage to the liquidators but after Leyland Daf it seems that the judgement in Spectrum is valuable only to preferential creditors who are the only parties likely to benefit from it.

The H M Revenue and Customs have recently issued a statement confirming that they will not allow liquidators to take their remuneration out of funds available for payment of preferential creditors.

However there may be a way round this problem:

To find out more contact Edward Judge edwardj@sghlaw.com, Ian Grier iang@sghlaw.com or Dan Sejas daniels@sghlaw.com

Daniel Sejas 020 7264 4451 daniels@sghlaw.com

Ian Grier 020 7264 4450 iang@sghlaw.com

Edward Judge 020 7264 4452 edwardj@sghlaw.com