Floating charges—advantages and disadvantages

Published by a ��Ƶ Banking & Finance expert

Practice notes

Floating charges—advantages and disadvantages

Published by a ��Ƶ Banking & Finance expert

Practice notes

Summary of advantages and disadvantages of the floating charge

This Practice Note discusses the advantages and disadvantages of taking a floating as opposed to a fixed charge, predominantly from the perspective of the chargee.

For detailed information on the nature of fixed and floating charges, see Practice Notes: Fixed and floating charges and crystallisation of floating charges. For information on how to take a floating charge, see Practice Note: Floating charges.

The table below provides a summary of the key advantages and disadvantages; each of these is discussed in more detail in the relevant section below.

Summary
Advantages of floating charge	Chargor can dispose of assets and otherwise carry on its business without the consent of the floating charge holder
	Floating charge holder can take floating charges over every asset of the company
	Floating charge holder can appoint administrator or, in some circumstances, an administrative receiver
Disadvantages of floating charge	Floating charges may be held to be invalid if created within a certain period prior to a chargor's insolvency
	costs of liquidation

Jurisdiction(s):

United Kingdom

Key definition:

Chargee definition

What does Chargee mean?

The person who has the benefit of a charge, usually a financier.

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