Floating charge meaning

This checklist sets out the factors to consider when a company is proposing to grant a floating charge. This checklist proceeds on the basis that an English or Welsh company will grant a floating charge to a lender situated in England or Wales. The company granting the floating charge is the ‘chargor’. The entity receiving the floating charge is the ‘chargee’. The document recording the floating charge is the ‘security document’. For detailed guidance on the nature of floating charges and how they differ from fixed charges, see Practice Note: Fixed and floating charges. For the advantages and disadvantages of taking a floating charge, see Practice Note: Floating charges—advantages and disadvantages. For in-depth considerations when taking a floating charge, see Practice Note: Floating charges. A floating charge may form part of the security package created by a debenture—see Practice Note: Key features of debentures. Debentures typically also include other security interests, such as mortgages, assignments and fixed charges. A floating...

Administrator appointed by the court Where the court appoints an administrator under paragraph 11 of Schedule B1 to the Insolvency Act 1986 (IA 1986), following an application by the company, its directors and/or one or more creditors, the title deeds should include certified copies of: the administration order; and any further order(s) under IA 1986, Sch B1, paras 91–95 appointing a new administrator after the death, resignation or removal from office of the original or any later administrator Administrator appointed by holder(s) of qualifying charge, the company or its directors Where the administrator is appointed by the holder(s) of a qualifying floating charge (IA 1986, Sch B1, para 14) or by the company or its directors (IA 1986, Sch B1, para 22), the title deeds should include certified copies of: the notice of appointment: in a form complying with IA 1986, Sch B1, para 14 and the Insolvency (England and Wales) Rules...

What is form MR01 (Particulars of a charge) and when do you use one? A charge granted by a company registered in the UK must be filed at Companies House unless an exception in section 859A(6) of the Companies Act 2006 (CA 2006) applies (see: Which company charges are registrable at Companies House?). Missing the filing window can have serious consequences, so it is essential to complete registration within the required period. Form MR01 (Particulars of a charge) is the Companies House document used to record a company charge where the charge is: created, or evidenced, by an instrument dated on or after 6 April 2013 made by a UK-registered company If a company charge is not created or evidenced by an instrument, you should instead use form MR08 (Particulars of a charge where there is no instrument) to register it at Companies House. For details of other Companies House forms for registering company charges, see: ...

This Flowchart sets out the conditions that must be satisfied for a floating charge to be avoided. This flowchart outlines the criteria that must be met to have a floating charge set aside successfully...

Re The Sustainable Bathroom Company Ltd [2023] EWHC 2065 (Ch), [2023] All ER (D) 60 (Aug) What are the practical implications of this case? This ruling reassures appointing creditors, their professional representatives and the insurers behind them. Although the judge accepted that the director’s complaints about the creditors’ behaviour had merit, the court still held the administration appointment to be effective. Running through the judgment is the principle that debentures exist to secure indebtedness in favour of creditors, and that this substantive reality ought to trump technical imperfections of form—save, perhaps, where adherence to substance would visit serious injustice on the debtor. What was the background? The applicant was the founding director of a modest enterprise manufacturing electric bamboo toothbrushes supplied to Aldi. To finance the procurement of stock from China, the company entered into a funding arrangement with a financier, agreeing in return to share its profits. To enable the structure, incoming receipts were to be paid to...

Restructuring & Insolvency weekly highlights—6 June 2024 In this issue: Key R&I law developments Insolvency litigation Restructuring Corporate insolvency processes The office-holder Daily and weekly news alerts New content Key R&I law developments Digital Markets, Competition and Consumers Act 2024 This Act introduces regulation of competition within digital markets, revises the Competition Act 1998 and the Enterprise Act 2002 with additional competition law measures, and enhances consumer protection by providing and extending rights, together with related purposes. Certain provisions took effect on 24 May 2024; the remainder will commence on a day set by Regulations made by the Secretary of State. See: LNB News 04/06/2024 9. Insolvency litigation Monies paid to a bankrupt’s son were after-acquired property (Hyde v Djurberg) It is uncommon for a bankrupt to receive a significant payment that a trustee in bankruptcy may claim as after-acquired property. Rarer still is an instance where such a payment is received...

Re Avanti Communications Ltd [2023] EWHC 940 (Ch) This marks the first substantial judgment on the divide between fixed and floating charges since the House of Lords’ landmark ruling in Re Spectrum Plus [2005] UKHL 41, which reclassified an apparent fixed charge over book debts as floating because the chargor could freely deploy the charged assets and the security holder therefore lacked the requisite control to constitute a fixed charge. The designation of security as ‘fixed’ or ‘floating’ under English law now carries even greater weight given HMRC (the UK tax authority) ranks as a preferential creditor for certain taxes in insolvency—ie those taxes sit behind fixed charge realisations but ahead of floating charge realisations. That characterisation had a decisive effect on the order of payments in Avanti’s administration: as the charge was properly treated as fixed, the secured creditors recovered in full; had it instead been treated as floating, part of the proceeds would have been payable to HMRC (as preferential creditor) and to unsecured creditors up to...

The outcome of an administration will frequently hinge on the worth of the company’s assets and the administrator’s capacity to handle those assets freely so as to secure the best possible result for creditors as a whole. The administrator is granted extensive powers to deal with property, including assets encumbered by various forms of security and quasi-security (for example, hire purchase or retention of title arrangements). A key advantage of administration is the protection created by the moratorium against enforcement by creditors, which permits the administrator to proceed without the constraints the company may have experienced before administration. The administrator may intend to sell or otherwise deploy charged property in order to meet one of the purposes of the administration, while, by contrast, a creditor may wish to enforce its security and recover what it is entitled to from a company it regards as at risk. These competing requirements need to be held in balance between administrator and creditor...

Practice Note This Practice Note sets out the principal drafting, negotiating and legal considerations for a typical bilateral debenture issued for a particular deal with a single security provider. It is equally applicable to syndicated and all monies debentures, and to arrangements involving several security providers. Here, the security provider is called the Chargor and the secured party the Lender. It also signposts answers to commonly asked questions. A debenture is commonly used when the lender seeks security over a company’s entire asset base. For introductory guidance on debentures—what a debenture entails and who may grant one—see Practice Note: Key features of debentures. For broader guidance on preparing and negotiating security documents, including selecting an appropriate precedent and early-stage considerations, see Practice Note: How to draft and negotiate security documents in loan transactions. Debentures vary in structure, yet they tend to share similar provisions and usually adopt a common core format. For ease of use, the corresponding clause references are included in our Debenture: single company chargor—bilateral—specific monies. This...

Types of security Under Scots law, the range of security interests is narrower than those available in English law. The form of protection depends on the particular class of asset being charged. This Practice Note reviews the securities obtainable over particular asset types before addressing the floating charge, a form of security that may be created by Scottish companies or limited liability partnerships. Fixed security Land and buildings The recognised fixed security over real estate assets in Scotland, available to both individuals and companies, is the standard security. A standard security may be granted over an interest in land that is recorded or registered in the General Register of Sasines or the Land Register of Scotland. Note the General Register of Sasines ceased to accept, among other matters, recording of new standard securities from 1 April 2016. From that day, a borrower granting security over a property appearing in the General Register of Sasines must first seek voluntary registration of their title in the Land Register...

This Deed is dated [ insert date ] 20[ insert year ] Parties [ Insert name of Chargor ], a company registered in England and Wales (number [ insert company number ]) whose registered office is at [ insert address ] (the Chargor); and [ insert name of Lender ] of [ insert address ] (the Lender). Recitals The Lender makes facilities available to the Chargor under various finance arrangements. The availability of those facilities is conditional upon the Chargor entering into this Deed in favour of the Lender...

For the purposes of the Legal Writings (Counterparts and Delivery) (Scotland) Act 2015, this discharge is executed and delivered on [ insert date ] 20[ insert year ] DISCHARGE by Parties 1 [ insert name of Lender/Security Agent ], a company incorporated in [ Scotland OR England and Wales ] under the Companies Acts, with registered number [ insert company number ] and having its registered office at [ insert address ] [ [ [ acting in its capacity as [ security trustee/agent ] for the Secured Parties pursuant to [ describe facility agreement or include definition ] ] ] ] (the Lender/Security Agent); in favour of 2 [ insert name of Chargor ], a company incorporated in [ Scotland OR England and Wales ] with registered number [ insert company number ], whose registered office is at [ insert address ] (the Chargor). Recitals (A) Pursuant to a [ bond and ] floating charge dated [ insert date ] (the...

This Deed is dated [ insert day and month ] 20[ insert year ] Parties THE COMPANIES named in Schedule 1 (each, a Chargor, and collectively, the Chargors); and [ insert name of Security Agent ], acting as security agent and trustee for the Finance Parties pursuant to the terms and conditions contained in the [ Facilities Agreement OR Intercreditor Agreement OR Security Trust Deed ] (the Security Agent). Recitals The Finance Parties have consented to provide loan facilities in accordance with the terms and conditions described in the Facilities Agreement (as defined below). A condition precedent to the availability of those loan facilities is that each Chargor executes this Deed to grant security in favour of the Security Agent for the Secured Obligations (as defined below)...