Which of the following best describes a floating- charge debenture?
A)Holders are entitled to the total proceeds from the sale of pledged assets.
B)A specific corporate asset is pledged as security.
C)Holders are entitled to the proceeds from the sale of unpledged assets.
D)Several corporate assets are pledged as security.

Question

Quizplus · Accepted Answer

A floating charge debenture does not tie the borrowing to specific assets. Instead, it covers assets that are current and circulating, allowing the company to use and sell them in the ordinary course of business. When the company defaults, or another triggering event occurs, the floating charge "crystallizes" into a fixed charge on whatever unpledged assets are available at that time, giving the debenture holders a claim to those assets' proceeds.

Which of the Following Best Describes a Floating- Charge Debenture