Legal Question of the Day

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3 September 2026

A manufacturing company purchased an industrial production machine using credit provided by an equipment supplier. As security for all amounts owing, the company granted the supplier a fixed charge over the machine.

Four years later, the company sought additional finance from a commercial lender. Before advancing the loan, the lender was expressly informed by the company’s finance director that the supplier already held a fixed charge over the machine. The lender nevertheless advanced the money and took a second fixed charge over the same machine.

The supplier had never registered its charge at Companies House. The lender registered its charge within the applicable statutory period.

Eight months later, the company entered administration. Substantial amounts remain owing to both creditors, and the machine is valuable enough to satisfy only one of their secured claims.

Which creditor has priority in respect of the machine?

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The supplier, because an earlier fixed charge always takes priority over a later fixed charge over the same asset. The supplier, because the lender had actual notice of the earlier fixed charge when it took its security. The lender, because the supplier’s unregistered charge is void against the administrator and creditors, whereas the lender’s fixed charge was duly registered. The lender, because registration of a fixed charge automatically gives it priority over all earlier proprietary interests in the charged asset. The supplier, because failure to register a fixed charge affects only its enforceability against the company and not its priority against another secured creditor.

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