A floating
charge is a form of security granted to a creditor
over general assets of a company which may change
from time to time in the normal course of business
(e.g. stock). The company can continue to use the
assets in its business until an event of default
occurs and the charge crystallises. If this happens,
the secured creditor can realise the assets to
recover his debt, usually by appointing an
administrative receiver, and obtain the net proceeds
of sale subject to the prior claims of the
preferential creditors (e.g. Customs & Excise or
Inland Revenue).
(Please Note: The
definitions are not intended to be exhaustive
summaries of the Law. They are based on material
from The Insolvency Act 1986 , and other Acts
dealing with this subject.)
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