Under a fixed charge, what is the debtor's ability to deal with the asset charged?

Under a fixed charge, what is the debtor's ability to deal with the asset charged?

• A. The asset is charged to the creditor and the company may retain use but cannot dispose of it freely.
• B. The asset is owned by the creditor immediately.
• C. The asset remains completely unencumbered.
• D. The asset is released from the charge immediately.

Answer: (A)

Under a fixed charge, the security attaches to a specific asset while the owner remains the debtor. The debtor can still use the asset in its ordinary course, but it cannot dispose of or deal with it freely without the chargee’s consent. The creditor doesn’t own the asset, but has a secured interest that takes priority if the asset is realized. So the correct description is that the asset is charged to the creditor and the company may retain use but cannot dispose of it freely.

Under a fixed charge, the security attaches to a specific asset while the owner remains the debtor. The debtor can still use the asset in its ordinary course, but it cannot dispose of or deal with it freely without the chargee’s consent. The creditor doesn’t own the asset, but has a secured interest that takes priority if the asset is realized. So the correct description is that the asset is charged to the creditor and the company may retain use but cannot dispose of it freely.