On Priority Contention Between The Floating Charge And The Fixed Security

In accordance with the British statute law and jurisprudence which best reflects the system characteristic of the floating charge, the American Uniform Commercial Code which leads the trend of world security interest and Chinese Real Right Law, we try to inquire into the rules of the priority contention between floating charge and fixed security in Britain, US and China through comparative and standard analyzing to improve our understanding and application of Chinese Real Right Law, and put forward perfect proposal for the future legislation of Chinese Real Right Law.The thesis is divided into five chapters.The first chapter defines the difference between floating charge and fixed security and the concept of priority contention between floating charge and fixed security. The crucial feature that distinguishes the floating charge and the fixed security is that a floating charge allows the charger to control and manage the charged assets and withdraw them from the charged security without the chargee's consent. However, a floating charge does not have the direct potency to the specific property and has not conflicted with the implementation of a fixed security before crystallization, only when the crystallized floating charge has qualified to compete the priority with the fixed security. The chargee has entirely different right before and after the floating charge's crystallization. The effect of fixed security is also fairly different created before and after the crystallization of a floating charge. The rules of priority contention between floating charge and fixed security are entirely different.The second chapter surveys the rule of priority contention between floating charge and fixed security not created in the ordinary course. According to Companies Act 2006 (UK), the priority depends upon not only whether it is perfected but the time attaching, which applies to the same rules with priority contention in fixed securities. In Uniform Commercial Code (US), the floating charge is regarded as ordinary security interest and applies to the same rules with it. In the Chinese Real Right Law, the floating charge is regarded as ordinary hypothec and applies to the same priority contention rules with ordinary hypothecs or ordinary hypothec and pledge too. The legislation of our country reflects the characteristics of the floating charge, abides by the common rules of legislation, and conforms to the trend of legislative developing. In Britain, there exists 21 days perfection of company charges and the confusions in priority contention of ordinary charges. In US, the priority contention in security interests is "according to the attachment time without perfection", which disobeys the principles of security. In our country, the priority contention order in ordinary hypothecs depends upon public announcement, which is simple and united. And the theory "To recourse equally without public announcement" is more up to the principle. And we should define the priority contention between hypothec and pledge in accordance with time of public announcement.Chapterâ…¢analyses the rule of priority contention between floating charge and fixed security created in the ordinary course. In the British jurisprudence, a fixed security will have priority if created in the ordinary course under the circumstances of competing with a floating charge; and in American Uniform Commercial Code, buyers of the collateral in the ordinary course have priorities to floating charge and the buyer consists of secured party. In Chinese Real Right Law, we defined that floating charge can not confront buyers of the collateral in the ordinary course, but we didn't define that buyer consists of secured party clearly. In Chinese Real Right Law, we only enumerate the "seriousness" to reflect the "lightness", i.e, the floating charge can not confront the fixed security created in ordinary purchases, but it is necessary to explicit the position of the fixed security.In Chapterâ…£we demonstrate the rule of priority contention between floating charge and fixed security under negative pledge clause and automatic crystallization. The "ostensible authority" theory is adopted in Britain, i.e, the floating charge will have priority if the latter fixed security regardless of the negative pledge clause or the automatic crystallization clause or the automatic crystallization. If unknown, the latter fixed security will have priority. It is only the legal existence of registered content that can construct notice. The negative pledge clause and automatic crystallization clause is only the legal registered cases in Scotland according to Companies Act 2006. In US, there is no regulation about the negative pledge clause and automatic crystallization, but buyers of the collateral in the ordinary course must be good faith in the courses. If the fixed security regardless of the negative pledge clause or the automatic crystallization clause or the automatic crystallization, it is good faith and fixed security will have priority, and vise verse. In Chinese Real Right Law, buyers of the collateral in the ordinary course must not be good faith in the courses. And we should define "good faith" of buyers in the future legislation and adopt "ostensible authority" theory in current practice.In the last chapter we discussed the rules of priority contention between floating charge and purchase money security interests. We didn't have definite regulations on purchase money security interests in Chinese Real Right Law. The priority contention between floating charge and purchase money security interests will occur under the circumstances that the floating charge has priority to the fixed security. Our country should profit from Uniform Commercial Code of US in the future legislation, i.e, the purchase money security interests have priority to other charges co-existed; if the priority contention between floating charge and purchase fmoney security interests occurred, we could refer to the British judicature practice in current judicial practice, i.e, the court should define the sequence between floating charge and the purchase money security interests in accordance with whether the unsecured property is obtained by the charger before the purchase money security interests.