Summary

The provisions of Part XII, Chapter II Companies Act 1985 were applicable in England, Wales and Scotland, the distinct chapters merely providing the process of registration in each jurisdiction.

Facts

Application by the administrators of the claimant company, incorporated in Scotland, for directions on whether a debenture granted by the company on 11 June 2001 in favour of the defendant ('Ableco') was void for non-registration under s.410 Companies Act 1985. On 22 February 2002, administrators of the company were appointed by the Court of Session. The company supplied business and management consultancy services and was a subsidiary of two US companies that on 5 February 2002 filed for Chapter 11 protection under the US Bankruptcy Code. By a guarantee and debenture of 11 June 2001 ('the debenture') the company charged ('the charge') subsidiary shares held by it in a wholly-owned English subsidiary ('CCL') to Ableco by way of collateral security. The charge was registered with the registrar of companies for England and Wales and a Slavenberg letter was received from the registrar. The charge was not registered in Scotland. The administrators contended that: (i) Part XII Chapter II of the Act, concerning registration of charges created by companies registered in Scotland, was part of the law of Great Britain; and (ii) the charge was a floating charge and thus was void against the company in administration because pursuant to s.410 of the Act the charge had not been registered. Ableco submitted that: (a) any registration requirement under Scottish law of the place of incorporation of the chargor was irrelevant to the validity of the English law charge in England. Section 410 Part XII Chapter II of the Act had no application in an English court; and (b) the charge was a fixed charge and therefore valid against the administrators notwithstanding the effect of s.410 of the Act.

Held

(1) Each chapter was complementary to the other and provided a uniform code marking out the process of registration. The law of England in Chapter I and Scotland in Chapter II made it plain to all that if a charge fell within the prescribed categories it had to be registered in Scotland. The charge here concerned shares in an English company and the Act required that charge to be registered with the registrar of companies in England. Chapters I and II of Part XII were parts of the law of England, Wales and Scotland even though the application required differed for each jurisdiction. Each provided a comprehensive and uniform code of registration. The provisions of Chapter II could be applied in each jurisdiction. Both Chapters of Part XII were part of the law of England and Wales and part of a complementary code. That decided, it did not follow that an English or Scottish company should register charges in both jurisdictions. (2) The instrument of charge and the intention of the parties should be considered to ascertain the nature of rights and obligations granted to each other regarding charged assets, Re Brumark Investments Ltd (2001) 2 AC 210 considered. The characterisation of the charge was a matter of law. (3) Although clause 3 of the debenture referred generally to subsidiary shares, it was plain from the definition of "subsidiary shares" in the debenture that at the time it was created the only shares intended to be covered were specifically CCL shares. That was not inconsistent with a fixed charge. (4) The company was not trading in shares and its shares in CCL were not part of its circulating capital. Therefore the company did not need to deal with them as part of its business. (5) The shares did not remain under the management and control of the chargor in a manner that the company was free to trade in them, Re Coslett (Contractors) Ltd (1998) Ch 495 considered. The company did not need the shares to operate its business. (6) That clause 3 also charged distribution rights did not alter the character of the shares as fixed. The intention of the parties was to charge the "entire bundle of rights making up the shares". (7) That the debenture was different to precedents made no difference to the characterisation of the debenture. (8) The charge over the CCL shares was fixed and did not require registration as a fixed charge under s.410 of the 1985 Act and was valid as against the administrators.

Order accordingly. Permission to appeal refused.