2 - Borrowing on the Undertaking: Scottish Statutory Companies

Summary

A. INTRODUCTION

B. NINETEENTH CENTURY LEGAL PERSONS

(1) Partnerships and common law companies

(2) Charter companies and Letters Patent Acts

(3) Statutory companies

(4) Joint stock companies and the Companies Act 1862

(5) Statutory companies and the Clauses Acts

C. THE CLAUSES ACTS

(1) Pre-1845 Private Acts

(2) Overview of Clauses Acts

(3) Companies Clauses Consolidation (Scotland) Act 1845

(4) Lands Clauses Consolidation (Scotland) Act 1845

(5) Railways Clauses Acts

(6) Tramways

(7) Commissioners Clauses Act 1847: mortgages and receivers

(8) Harbours, Docks and Piers Clauses Act 1847

(9) Burgh Harbours (Scotland) Act 1853

D. BONDS, MORTGAGES AND DEBENTURE STOCK

(1) Bonds

(2) Statutory mortgages and assignations in security

(3) Debenture stock

E. THE UNDERTAKING

F. PUBLIC PURPOSES AND PROFIT

G. ENFORCEMENT: JUDICIAL FACTORS AND RECEIVERS

(1) Personal creditors: diligence

(2) Judicial factors

(3) Management and moratorium: judicial factor for railway debenture holders

(4) A local Act example: the Greenock Harbour Trustees

(a) Background

(b) Priority and scope of the statutory assignments

(5) ‘A little more intensity to the Conveyance’: ‘Property and Works’

(6) Receivers, managers and judicial factors

H.CONCLUSIONS

A. INTRODUCTION

‘The whole method of creating a floating charge,’ said Lord Dunedin in 1908, ‘is absolutely foreign to our law.’ For Lord Cooper, the floating charge ‘is utterly repugnant to the principles of Scots law and is not recognised by us as creating a security at all. In Scotland, “equitable security” is meaningless’

Floating charges were introduced into Scots law by the Companies (Floating Charges) (Scotland) Act 1961. Prior to 1961, it is often said, it was impossible for a Scottish company to create a ‘floating charge’ over the whole or any part of its property and undertaking. The purpose of this paper is to demonstrate that the quotable dicta from Lord Dunedin and Lord Cooper, though correct in relation to the ‘equitable’ aspect of floating charges, may otherwise be taken too far. The floating charge has a number of aspects. First, it may be (though it need not be) a universal security: it may cover all of the granter's patrimonial rights. In the actual words of the statute, the company may grant a floating charge ‘over all or any part of the property (including uncalled capital) which may from time to time be comprised in its property and undertaking’.