chapter  12
32 Pages

Directors’ duties

Debentures are, in general, subject to the same principles as ordinary mortgages. Every trading or commercial company has an implied power to borrow for the purposes of its business. The House of Lords held that the company had no right to redeem the mortgage early as the equitable doctrine that provided for early redemption did not apply to mortgages granted by companies. Debentures and shares have certain similarities. They are both collectively termed securities. Dealings in debentures on the Stock Exchange are carried out in much the same way as dealings in shares. The debenture may be secured by a fixed charge. The second type of security is called a floating charge. A floating charge does not attach to the property that is the subject of the charge until the charge crystallises. The Court of Appeal held that the company had the power to create a second specific floating charge with priority over the first general floating charge.