Part b

Property Development Ltd is a company in the business of constructing buildings for residential purposes and selling the flats in the buildings to the public. Property Development Ltd has two buildings, namely, Building 1 and Building 2. Flats in the two buildings are now for sale. Last week, the company executed two debentures by way of two charges, i.e. the first charge and second charge, in favour of a bank. Under the first charge, the bank agreed to lend to Property Development Ltd HK$5 billion

with the unsold flats in Building 1 as security for repayment. Under the second charge, the bank agreed to lend to Property Development Ltd HKG $10 billion with the unsold flats in Building 2 as security for repayment. The second charge further provides, among others, that Property Development Ltd shall not sell or dispose of those flats related to the second charge without prior approval from the bank.

Required: In relation to company law, advise Property Development Ltd as to the nature of the first and the second charge.