- floating charge
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A mortgage, debenture or other security documentation, is likely to create charges over particular assets as security for borrowings or other indebtedness. There are essentially two types of charge, floating and fixed. A floating charge is appropriate to assets and material which is subject to change on a day to day basis, such as stock. Individual items move into and out of the charge as they are bought and sold in the ordinary course. The floating charge crystallises if there is a default or similar event. At that the stage the floating charge is converted to a fixed charge over the assets which it covers at that time. A floating charge is not as effective as a fixed charge but is more flexible.
Easyform Glossary of Law Terms. — UK law terms.
- floating charge
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a security created by a company by debenture (in Scotland, a floating charge) over its whole assets and undertaking for the time being. The point of this form of security is that the company may continue to conduct its business, disposing of some assets and acquiring others without having to obtain the consent of the debenture holders for each disposal. In the event of a default, the charge crystallises and becomes fixed and enforceable over the assets held at that time.
Collins dictionary of law. W. J. Stewart. 2001.
- floating charge
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A charge taken over all the assets or a class of assets owned by a company from time to time as security for borrowings or other indebtedness. The advantage of a floating charge is that before insolvency it allows the charged assets to be bought and sold during the course of a company's business without reference to the chargeholder. The floating charge crystallises if there is a default or similar event. At that stage the floating charge is converted to a fixed charge over the assets which it covers at that time. If default occurs, depending on when the floating charge was created, the chargeholder may be able to appoint an administrative receiver.Related links
Practical Law Dictionary. Glossary of UK, US and international legal terms. www.practicallaw.com. 2010.
