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In finance, a floating charge is a security interest over a fund of changing assets of a company or other legal person.Unlike a fixed charge, which is created over ascertained and definite property, a floating charge is created over property of an ambulatory and shifting nature, such as receivables and stock.
Floating charges are similar in effect to fixed equitable charges once they crystallise (usually upon the commencement of liquidation proceedings against the chargor), but prior to that they "float" and do not attach to any of the chargor's assets, and the chargor remains free to deal with or dispose of them.
the relevant floating charge is enforceable (i.e. the holder is entitled to call in the security), and; the company is neither in liquidation nor has a provisional liquidator been appointed, and; neither an administrator nor an administrative receiver is already in office. Subsequent to the appointment of an administrator under a qualifying ...
Although the case is cited as the genesis of the floating charge in English law, that phrase is not used in the judgment. In Re Colonial Trusts Corporation (1879) 15 Ch D 465 Sir George Jessel MR first referred to security as being "floating security", [ 5 ] and this phrase was contrasted with a fixed charge, until it came to eventually be ...
Romer LJ said a charge is "floating" if it (1) is a charge on present and future assets (2) the class of assets changes in the ordinary course of business, and (3) the company can deal with the assets in business as usual. [1] The term “floating” is one that until recently was a mere popular term. It certainly had no distinct legal meaning.
If you don't lock in your rate, you're "floating" it. This means your final rate could end up higher or lower than today's rates, depending on financial market changes before your loan closes.
Legislation relating to voidable floating charges is intended to prevent abuse of a security interest which catches literally all of the assets of the company, and could be used by person to strip out all of the assets from a company in difficulty from the unsecured creditors. However, if the holder of the floating charge has inserted new money ...
Some legal systems operate a hybrid approach; in the United Kingdom preferential creditors have priority over secured creditors whose security is in the nature of a floating charge, but creditors with fixed security take ahead of the preferential creditors generally.