1. What does s.860 of the CA 2006 say?

    Why does it matter?
    A company that creates a charge to which this section applies must deliver the prescribed particulars of the charge, together with the instrument (if any) by which the charge is created or evidenced, to the registrar for registration before the end of the period allowed for registration.

    • - Other people can do this and get repaid for doing so
    • - Not doing so is an offence

    • It applies to the following charges:
    • - charge on land or any interest in land, other than a charge for any rent or other periodical sum issuing out of land
    • - a charge created or evidenced by an instrument which, if executed by an individual, would require registration as a bill of sale,
    • - a charge for the purposes of securing any issue of debentures
    • - a charge on uncalled share capital of the company
    • - a charge on calls made but not paid
    • - a charge on book debts of the company
    • - a floating charge on the company's property or undertaking
    • - a charge on a ship or aircraft, or any share in a ship,a charge on goodwill or on any intellectual property.

    When doing due diligence there should be a register of these charges. If there is not it may be void (s874)
  2. What does section s874 CA 2006 say?
    • (1) If a company creates a charge to which section 860 applies, the charge is void (so far as any security on the company's property or undertaking is conferred by it) against
    • - a liquidator of the company
    • - an administrator of the company, and
    • -a creditor of the company,unless that section is complied with.

    (2) Subsection (1) is subject to the provisions of this Chapter.

    (3) Subsection (1) is without prejudice to any contract or obligation for repayment of the money secured by the charge; and when a charge becomes void under this section, the money secured by it immediately becomes payable.
  3. What is a 'reliance letter'?
    A simple letter to a third party stating that the third party in question is entitled to rely on the relevant report.

    • Such letters are seen as a quick alternative to negotiating a detailed collateral warranty or relying
    • upon the Contracts (Rights of Third Parties) Act 1999.
  4. Is a 'reliance letter' a contract?
    This depends on its terms.

    The normal rules of construction will apply, but in most cases the courts will be able to find that a reliance letter will establish a contract. This is due to the fact that, where one party relies on a promise to his detriment, this will be sufficient for a court to establish consideration and thus find the existence of a contract.
  5. Can a reliance letter give a third party a claim in contract and a claim in tort?

    However, in these circumstances the scope of the duty of care will usually not be greater than that taken contractually. Given the preference for relying on contract as opposed to tort, the third party relying upon the letter should strive to ensure that it takes effect as a contract. As ever, clear drafting is paramount.
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