A floating charge is a form of security (i.e. collateral, not to be confused with a security such as a bond or stock) for borrowing or other indebtedness, which can be granted by companies to lenders in the United Kingdom and certain other Commonwealth jurisdictions. It enables a company to offer security to a lender utilising assets and material which are subject to change on a day to day basis, such as stock (in the sense of goods kept on hand for sale) or work in progress. Individual items move into and out of the charge as they are bought and sold or utilised in the ordinary course of the company's business. The floating charge 'crystallises' if there is a default or similar event specified in the security documentation. At that stage the floating charge is converted to a fixed charge over the specified class of assets held by the company at that time.

A floating charge is not as effective as a fixed charge but is more flexible. They are generally expressed so as to grant security over all of a company's assets.

Analogous concept in the United States

The analogous concept in the United States to the floating charge is the floating lien.

Analogous concept in Quebec civil law

When the new Civil Code of Quebec replaced the Civil Code of Lower Canada in 1994, a concept analogous to the floating charge was introduced into Quebec's civil law under the name floating hypothec.

See also

• Debenture
• Security interest
• Lien

External links

• Floating charges - www.accaglobal.com
• Float charges and Liquidation - www.liquidation-goods.com

Finance | Law