PROBLEMS OF ENFORCEMENT OF FLOATING CHARGE IN NIGERIA

Abstract

Finance is a very fundamental requirement for any business. Sequel to this, companies are allowed to borrowmoney for the purpose of executing their businesses in accordance with the statutory provisions and theirmemorandum and articles of association. Lenders in order to ensure that they recoup their money where theborrower company is unable to pay their debts will normally demand the security which they can dispose torecoup their money. This gave rise to charges on the property of such companies. There are two major forms ofcharges, fixed charge and floating charge. This article examines the problems of the enforcement of a floatingcharge in Nigeria. The paper vigorously demonstrates that there are certain statutory provisions which constituteproblems in the enforcement of floating charge in Nigeria. These include preferential creditors which affect thepriority of floating charges, defective floating charge which affects its validity, the requirement of applications tocourt for direction by the receiver/manager for every steps he takes in the performance of his function, cost ofliquidation which diminishes the assets available for the floating charge holders. It is recommended that floatingcharge as a form of security should be preserved sequel to its freedom for the debtor to dispose of the propertysecured in ordinary course of business and .the attachment of the charge to after acquired property of the companyfalling within the description of the security.