Advice on Debenture Minutiae ?

[Paul-59]

Hi all
I have a question regarding the establishment of a debenture (UK).

The debenture was to secure a cash loan secured on our asset.

I understand that the money should be transfered at the same time as the debenture is created, which presumably means the date on which it is signed, or within 14 days.

I further understand that the signed debenture must be registered at companies house within 21 days.

Is my understanding correct, particularly the two different time periods - 14 - 21 days?

In the event that above time periods have not been complied with (particularly the 14 day requirement) what are the consequences at law?

There is a rgeat deal more to this which I may need your help with, it's a murky affair...

Regards

Paul

 

[Mark T Jones]

To the best of my knowledge a debenture can be registered at any time, before or after the event

 

[Paul-59]

According to my research:
Companies Act 2006: UK Public General Acts2006 c. 46Part 25 CHAPTER A1 Company chargesSection 859E
a charge msut be registered within 21 days. If not registered the security implied by the debenture is void.

What I can't find within the legislation is reference to the 14 day period which seems to be related to the timing of transfer of funds. See: 'hbgadvisory' website - under 'what is a debenture - how do I know...

Whilst the debenture I am refering to was registered at Companies House in compliance with the legislation - within 21 days of creation, it was created months after funds transfered. I wonder if that voids the security?

Paul

 

[eteb3]

The hgbadvisory page looks completely useless to me: the English is weird (way weirder than any UK-trained lawyer would use), and it looks like it's been AI'd - perhaps from 10 different US jurisdictions, given the purported author's name. That's my best theory for why you have two timeframes there.

What must be registered is a charge securing a debenture, not the debenture itself (even though loosely people talk about registering the debenture). Great that it's been registered correctly.

The charge isn't necessarily void for having been created after the liability arose: security is a collateral contract, so runs alongside the primary liability and need not be directly related to it. (eg, "I mortgage to you my house for any liability I may ever have towards you between now and the day we agree the mortgage is discharged")

However, as with any contract, either consideration must be given, or it must be made by deed.

Charge by way of deed is typical. (You'll need to check the deed was correctly executed, of course.)

If the charge was created under a simple contract, then consideration is needed. If the charge is created at the same time as the liability, consideration is whatever gave rise to the liability.

But if the charge is created after the liability, further consideration must be given. Consideration can be nominal, but must be present (eg, the chargee could pay £1, or agree to extend the term of the loan by 1 day).

Of course it all turns on the detailed provisions, so you should get legal advice if there's any serious amount riding on this.

 

[Paul-59]

Thank you for your comprehensive reply. I can't pretend to understand it entirely, I am not an accountant or lawyer and never will be.

I am hoping to find fault with the debenture under discussion and a way to void it as I am subject to disturbing and unreasonable behaviour by the lender which is beginning to take a toll.

I have seen the 14 day thing on a few websites but I guess articles like this are geerally scraped or as you say created by AI.

I can't afford a lawyer so I am left to find out what I can and hope to use it effectively. One hears of lawyers offering a 'free' half hour but that evaporates when it is a business probelem and not a juicy divorce or whatever. A lovely world we live in.

Thanks again, much appreciated

Enjoy the rest of your Sunday
Paul

 

[eteb3]

Sorry to be obscure!

I am hoping to find fault with the debenture under discussion

The debenture is the loan agreement. The charge is the security. These are separate things.

Think of the loan by which you bought your house, which is separate from the security the bank holds (right to repossess the property). If the house is destroyed the debt is unaffected.

If the company’s debenture can be challenged then any charge is beside the point: the charge can only be used to enforce a valid debt.

If the charge can be challenged then the lender has less scope to enforce repayment (but the loan and the obligation to repay remains)

 

[Paul-59]

Thank you for the clarification.

I am trying to force the lender to the negotiating table instead of him standing on the sidelines threatening me with receivers etc.

I have entirely played the game, he just plays games.

Thanks again
P

 

[Gyumri]

Whilst the debenture I am refering to was registered at Companies House in compliance with the legislation - within 21 days of creation, it was created months after funds transfered. I wonder if that voids the security?

Apparently that renders the debenture unenforceable although it is not an area of the law that greatly interests me!

https://www.thegazette.co.uk/insolvency/content/102414

 

[eteb3]

I know that’s the official Gazette, but even the first paragraph is incorrect.

CA 2006 s 738 Meaning of “debenture”
https://www.legislation.gov.uk/ukpga/2006/46/section/738

A debenture need not be secured; a secured debenture is not the charge that secures it

 

[ChrisCallaghan]

The debenture was to secure a cash loan secured on our asset

I can't afford a lawyer

What's at stake here? What is the asset at risk?

My point being that challenging the legality of any charge and/or debenture is a complex matter at the best of times, as highlighted by the responses you have received on this thread. Size and will often wins out, i.e. a large lender may simply ignore any claims you make that challenge a charges legality/validity without a qualified legal opinion.

Have you contacted any commercial/corporate solicitors to obtain quotations for services?

 

[Lisa Thomas]

My understanding is that the funds need to be advanced before the debenture. Anything advanced after creation will be invalid and not secured under the debenture.

Your solicitors should be able to assist with ensuring everything is done properly. I can recommend one, if you do not have one.

 

[Gyumri]

.

 

[Paul-59]

Hi all

OK here is the full messy story - or a full as I can make it without identifying anyone.

The asset is a sailing yacht. For the avoidance of doubt I am not a rich yachtie, I have sailed all my life, I grew up on a houseboat - it is what I am.

Around the boat I have formed a small business. It is supposed to be a side-hussle but I have been ill since 2019 (when the loan was taken out) involving four surgeries, the first July 2020, the most recent four weeks ago. I am also doing a small amount of consultancy/compliance work in an unrelated field but I live a hand to mouth existence. I am on universal credit.

The lender was a client who offered to re-finance the boat as the existing lending had draconian terms. By late 2019 the boat side of things was doing badly after two very good years - bills were going unpaid.

The loan was pitched as a 'soft loan', mates rates etc. At the time I was ill with heart problems and stressed. The lender made great efforts to befriend me. Lots of restaurant meals and chats about cars, boats and mental health. He is a medical professional. He had to step away from medicine for a number of years due to mental health problems.

He started chasing money a couple of years ago with increasingly aggressive telephone calls. With his agreement payments were suspended during Covid19. Mostly payments have been interest only. The golden combination of my poor health, Covid 19, cost-of-living-crisis etc has meant that the boat has generated little money to offset fixed costs such as mooring fees.

I made an offer in May this year (2024) to pay down just the capital. Offer ignored other than another obnoxious phone call from lender.

Late July I received a demand from his lawyers for £36,500 or hand over the boat.

After a letter from me to his lawyers setting out the facts this was reduced to £12,000 + 12 monthly payments of £400.

Lender's lawyers threatening receiver who can seize boat 'without further reference to me'.

I have made an offer of £5,000 for immediate payment to settle. I should point out that he has received quite a chunk of money already, I can extract the figures if reqd.

I would like to find fault with debenture to remove threat of seizure of vessel and bring him to the negotiating table.

The loan funds were advanced over a period from July 2019 to October 2019. Debenture registered at Companies House 29 Nov 2019. A further advance August 2020 which I believe the lender has rolled into the total amount.

The lender is playing this for pain, not the return of his outstanding balance. This is a hate thing. He is threatening to take away my way of life.

I should probably mention that I have issues involving ADHD and autism which while relatively mild in the grand scheme of things do not help when dealing with this sort of unpleasantness.

I hope the above baring of my soul brings some meaning to what I am asking. While I am open to any useful input my focus is on this idea that the debenture has to be registerd within 14 days of loan being made. If it is correct can anyone quote the legislation?

Thank you all for contributing to this conversation. It is hugely appreciated.

Paul

 

[eteb3]

Sorry to hear of your difficulties.

So the company owns the boat. Are you the only shareholder? Does the company do anything else, or just owns the boat?

my focus is on this idea that the debenture has to be registerd within 14 days of loan being made

• There is no requirement to register a debenture at Companies House. The charge must be registered within 21 days or it's void.
• There is no requirement for a company to keep a register of debentures (this is an in-house document) but it usually does. If it does, the register must be open to public inspection and directors have 14 days to tell Companies House where the register is kept. s. 743(2)

That's it afaik. @Michael Loveridge may be able to give a more confident answer.

To challenge his claim you will need a lawyer, or very good knowledge of taking security. If you really must DIY, you could try this. But you need a lawyer.

Staving off the threat of the boat going into receivership will not let the company off repaying: he can still serve a statutory demand on the company for any sums outstanding, and then wind up the company.

The new details make me want to ask: is this a fixed charge over the boat or a floating charge over the whole of the company's property? And it sounds like the company may be unable to pay its debts, so it may be insolvent, and assuming you're a director that puts you in deep do-do unless you do something about that. There are insolvency practitioners on here who give free initial advice.

I'll repeat the advice regularly given on the forum: always best to keep the emotion and the personalities out of it. From his pov I guess he would say he lent you some 10s of 1000s of pounds, and it's not unreasonable to want it back. He took security for exactly this situation: a good chap finds himself unable to repay: though it's through no fault of his own, it was a loan not a gift.

If eventually he gets the boat, the longer it goes on now the less you'll get from the sale proceeds. If you sold the boat now to get the money, you'd have a lot more control. Invest the money and buy another boat when you're fitter?

 

[Mark T Jones]

Whilst I have sympathy with your circumstances, I'm actually leaning towards your lender here - They advanced a loan on soft terms and now want to be repaid - though you both appear to guilty of pretty sloppy admin and communication.

The first, obvious question is what is the boat worth, & why can't you sell & settle?

As @eteb3 has said, extract focus on fact & detail, not opinions and emotions.

 

[Paul-59]

Hi
Apologies for incorrect use of terminology.
Charge was registered at Companies House within the 21 days.

I am only shareholder.

Charge is a fixed charge secured on boat.

Boat value is not great. By the time he has paid the VAT and cost of preparing boat for sale he will not get his money back. He will also have to fund the seizure of the vessel and any associated costs. I won't get anything.

I believe he will sit on the sidelines busily sabre rattling until the end of time.

While I take onboard what you say about emotion & personalities the fact is he isn't being logical, he is unwell and hateful. I have made a couple of excellent offers which would have seen him get his money back over time - but he'd rather cause distress. Which renders stone cold logic irrelevent.

Regards
Paul

 

[fisicx]

Charge was registered at Companies House within the 21 days.

This is very confusing.

What is the company? Is the boat registered as an asset of the company?

As you have no money and only survive because of universal credit the chances of you seeing a successful outcome are virtually zero. The simplest solution is to give the lender the boat and you move into alternate accommodation. If you stay on the boat it's just going to get worse and worse.

 

[eteb3]

Oh, Paul is living on the boat?

If it's his home then I'd say speak to the CAB/Shelter/etc ASAP because he may have a personal right to occupy, regardless of the company's financial trouble. That may ramp up the downside for the lender and help in the negotiation.

 

[Paul-59]

Hi all

Yes I accept this is a mess. Yes I was personally in a mess when I signed up to it. I thought I was being helped by a 'friend'. If it was a straightforward bank loan (for example) on which I had efaulted then at this stage I would roll over - but it aint.

To answer questions raised:

The company is a regular Ltd Co, VAT registered. Established 2013. Boat in my possesion since 2009.

Vessel is an asset of the Co.

I am not living on the boat.

The loan is supposed to run to May next year.

Re insolvency: there is enough money to tick over during the off-season. Bear in mind this was peddled as a soft loan. The payments have been varied several times with the lenders agreement. Is that OK with a debenture/charge? There is a separate 'loan agreement' which says nothing about varying charges.

UC pays the rent and feeds me. I am unable to undertake significant 'game-changing' remunerative work due to illness as stated above. I am however recovering and I am generating income through consultancy/compliance work. I am eligible for pension in 12 months for what it is worth.

So yes it is a hand-to-mouth existence. I do have 'supporters' who will help financially where reasonable.

If the boat is seized the lender will be worse of than if he negotiates, by some margin. Enforcement / seizure costs money, so does making a boat saleable. He is on a hiding to nothing.

I simply want to arrive at a situation where:
a) The boat can't be seized. (it is currently out of the water for maintenance, which complicates physically seizing it, but that is not a long term solution)

b) The lender is obliged to enter into negotiation. One week ago I offered £5,000 for immediate payment in a lump sum.

On a different tack the lender is a private individual. He is not an authorised lender. I see from Jackson V Ayles and another the lender was found to be in breach because he was not authorised to carry out regulated activities. OK it is all around a mortgage but it is also a private individual lending to a company (property developer).

I am clutching at straws but equally I have totally played the game. I have comunicated, I have made offers etc. The first offer was prior to any threats of enforcement, apropos of nothing you might say. But was ignored. He tends to leave substantial time gaps between attacks. Interestingly his attacks are timed to coincide with periods when I am committed to something. First time in July it was a week-long trip away, second time, just recently it coincided with surgery. I guess he has access to my medical records (he is a GP).

As I say he is playing for pain not gain.

Regards

Paul

 

[Mark T Jones]

The starting point on every single legal thread is that we are hearing only one side of a story - in this case that side is a bit clouded with emotion.

Jackson vs Ayles isn't relevant for a number of reasons (I can't find reference to the loan being made to a limited company).

The whole 'soft loan' / no terms thing muddies it for everyone; although you have made reference the them amending the terms which suggests that there were terms, even if they were implicit. This makes the notion of 'reasonable' quite subjective.

The key question of why you are holding onto an asset which loses you money is still relevant.

In your favour (possibly) the courts do take a keen interest in how each party has attempted to resolve the matter.

 

[eteb3]

The payments have been varied several times with the lenders agreement. Is that OK with a debenture/charge?

It all depends on the terms of the charge, but generally until the loan is repaid the charge is undischarged (=continues). If the loan was ever rolled over such that it’s now a different contract, you might have a stronger case

Just checking the creditor is the company, or is it you personally? Best of my knowledge there’s nothing to stop him lending to a Ltd. If he lent to you personally, or to a partnership of 3 natural persons or less, then you can very likely have all the agreements set aside, bc in that case he would need FCA permission. That’s not necessarily inconsistent with the company putting up security for the personal loan

it is currently out of the water for maintenance, which complicates physically seizing it

I doubt it: the receiver isn’t going to sail it away even if it’s in the water, s/he’s just going to paste a judicial notice on it and tell the yard they answer to him/her.

 

[Paul-59]

Hi all

The loan was to Ltd Co.

I hang on to the asset because this is the low point of the season and also a low point in the economy - people don't prioritise sailing over food or martgage. If people closed businesses every time the economy caught a cold the western world would collapse.

Could someone tell me what a receiver would cost the lender. Asset value is circa £30k less VAT, less cost of refurb to saleable condition or dump on market - which is horribly depressed. I have just been told receiver won't do anything for less than £50k - is that right?

If the debenture/charge is voided (or whatever it's called) what is the cost of alternative legal action to seize vessel?

Can lender sit on sidelines forever making threats?

 

[fisicx]

I simply want to arrive at a situation where:
a) The boat can't be seized. (it is currently out of the water for maintenance, which complicates physically seizing it, but that is not a long term solution)

b) The lender is obliged to enter into negotiation. One week ago I offered £5,000 for immediate payment in a lump sum.

Neither of these are likely without you engaging a solicitor. In particular you can't oblige the lender to enter into negotiations.

Can lender sit on sidelines forever making threats?

Yes.

You need a solicitor. Without one this is never going to go away and your liabilities increase. If they did go to court and won you could be liable for all their legal fees.

 

[Paul-59]

Hi

I spoke to a solicitor who deals with this sort of thing.

It seems that appointing a receiver will cost lender circa £50k. So I imagine he won't do that.

It also seems to me that if I can't pursuade lender to settle nor can a sol. Even though a letter from sol will carry more weight than one from me, if there is no lawful route to obliging him to negotiate then there is no route.....

Solicitors are clever but they can't do magic. - or am I wrong?

I think this is going to drag on - which is what the lender wants. I am sure he imagines I am hopelessly stressed by all this.

 

[Mark T Jones]

Hi



Solicitors are clever but they can't do magic. - or am I wrong?

Solicitors are clever at what they do, so a solicitor specialising in financial contracts will know the ins and outs. They will need full details - no magic, just knowledge & insight

Many will offer a free consultation to assess the situation

 

[eteb3]

Also, though it can drag out for sure, there is a limit to what his solrs is allowed to do with a clearly hopeless case: by their regulator's rules, they aren't allowed to become a mere conduit for their client's empty harassment of you. Dan Neidle's experience shows this doesn't always stop them, but at least they can be held to account.

If it's got that far, that is, but guessing from afar it sounds like they're behaving properly.

You don't have to answer the phone to the lender, though. Tell him to put it all in writing to the ltd's regd address, then ignore.

 

[Paul-59]

You have raised an interesting point re sols conductv/aiding harrasment etc. Sol must be aware engaging a receiver is never going to happen due to cost, but keep threatening exactly that. They have also told some lies, nothing earth-shattering but not professional either.

Perhaps I should chat with solicitors complaints lot.

Definitely food for thought - many thanks.
Paul

 

[WaveJumper]

Well don't you just love boats - a pretty complicated thread. My take here is only the legal eagles are going to come out on top of this, how much money have both sides got to throw at this ?

As hard as it maybe unless in my book both sides sit down and have a sensible conversation (put all the shit to one side) you are both going to come out of this worse off than when you started, there needs to be a reality check.

The boat is (generally) a depreciating asset, yard / mooring fees ongoing etc etc. If it can't be resolved and its an "asset" of the Ltd and you have no PGs against you personally why not dump the company?

I am sure the IPs will have a view on that suggestion but I can't see any winners coming out of this on either side

 

[Paul-59]

I agree that this can only be sorted by negotiation, something I have acknowledged above.

I first made an offer in May this year - which was ignored.

A couple of months later lender engaged sol to, essentially, harrass me.

I have continued to respond with civility to their often mendacious communications.

Yesterday I spoke to an IP / sol who informs me that engaging a receiver (the current threat) would cost lender £50k. Something he is unlikely to do in order to seize a vessel which might be worth only £30k in current depressed market - less cost of lift/antifoul/moorings/insurance and VAT on final sale price.

Unless there is a cheaper route for lender to take than appointing a receiver to seize vessel I believe he is not well placed. I am told there is not. This I think is the pivotal fact to this whole business.

Quite what I do now I am not sure. I made an offer a week ago and have had no reply. I could have a pop at his lawyers for misconduct but I don't have a hugely strong case, they are just cheap high street lawyers doing what they do I guess, and I can't see it helping anyway.

Naturally I would like this resolved. I have poured a lot of money into this boat in the 15 years I have owned it and would like to secure it.

Regards
Paul

 

[Paul-59]

Hi all
I thought I would give you the conclusion to this affair. I am limited in the details I can provide as I was obliged to sign an NDA to put this to bed.

Essentially lender is/was engaged in professional activities in the comunity - as were/are his wife and daughter - pillars of the comunity you might say...

The lender appears to have abused his position in the course of negotiations. This was brought to his attention. I subsequently made a low offer (about 1/7th of the amount initially demanded) which he chose to accept.

So the net result is that my asset is now free of finance costs.

A big thank - you to all forum members who contributed to a happy outcome.

 

[Lisa Thomas]

Thanks for the update - pleased you were able to resolve it.