Caesar's School of Music Wanted to Substantially Expand Its Operations

question 48

Multiple Choice

Caesar's School of Music wanted to substantially expand its operations.To do so, it required a loan of $2 million.Its banker agreed to that loan only on the condition that Caesar's grant security over all of its assets.That included both physical assets, such as guitars and tubas, and intangible assets, such as accounts receivable.It also included all the assets that the company held when the loan was created, as well as any assets that it subsequently acquired.Caesar's accepted those terms.Assuming that the general rules governing floating charges apply here, which of the following statements is TRUE?

• A)If and when the floating charge crystallizes, it will become entirely impossible for the company to sell any of its assets.
• B)If the parties use a floating charge, then the interest rate that the borrower is required to pay will fluctuate according to the bank's general lending rate.
• C)The floating charge will crystallize as soon as the company receives the loan money from the bank.
• D)If the company sold an asset after the floating charge crystallized, the purchaser acquires the property subject to the bank's security if this is not a PPSA jurisdiction.
• E)The concept of a floating charge was abolished when the PPS legislation was enacted.