Abc Co. Analysis

In this essay I will discuss the priority of creditors regarding the case study with ABC co and its various creditors. I will indicate the issues, discuss the law, and as a result I will conclude with what each creditor would receive if there was a default on behalf of ABC co. In additions I would also create a second conclusion indicating the amounts each of the creditors would receive if there was a bankruptcy situation.

April 1

        On this date ABC co and Paul’s Printers Inc created a finance agreement allowing ABC co to purchase a printer on credit. This type of credit is called a Purchase Money Security Interest (PMSI). This gives the creditor a special right over the particular item in the case of a default or bankruptcy, the creditor than can claim the item and sell it to get paid back its loan. In this case no other creditor has the right over the particular printer because the creditor would not then risk giving a printer on credit if it has the risk of not being paid back if it could be claimed by another creditors.

April 30

        On this date ABC co (debtor) received attachment. An attachment is something of value received by the debtor, which starts the process of securing a loan. In this case the debtor received that printer it signed a financing agreement for.

May 15

        On this day ABC co creates another loan agreement with another creditor which is the Royal Bank of Canada (RBC). The second financing agreement is created, therefor the second creditor has second priority of the assets even though there is a all present and after acquired property agreement and general security agreement. The printer in this case belongs to Paul’s Printers so they have priority on this item in the event of a breach of contract or bankruptcy. RBC would only get paid with the access money from the sale.

May 18

        On this day ABC co creates a third finance agreement and attachment when it used its credit card to purchase office supplies and equipment.

May 20

        Royal Bank of Canada registered its financing agreement with the debtor at the Personal Property Registry. This is called securing a loan, a secured loan is when there is collateral used in the loan. If there is a default the creditor then can claim the item used to secure the loan. Also the loan agreement is perfection when it is registered.

May 30

        Paul’s Printers also registered its financing agreement at the Personal Property Registry. They have achieved perfection on the loan when it is registered. They have also secured the loan by claiming a right on the collateral, which in this case is the printer.

Nov 1

        ABC co has breached the contract by not making its monthly instalments to Paul’s Printers, therefor the creditor can claim its right on the printer which was used as security. If the printer was taken into the possession by the creditor then ABC co would be breaching a second contract since it is required to maintance possession of the printer by RBC.