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Lightweight floating charge meaning
Published by a LexisNexis Banking & Finance expert
What does Lightweight floating charge mean?
A market term for a floating charge granted mainly to secure control rights in an insolvency process, not to provide meaningful asset security. In practice, it is structured so the holder qualifies as a qualifying floating charge holder, ensuring (1) prior notice of a proposed appointment of an administrator and (2) the ability to appoint an administrator out of court and nominate the insolvency practitioner. The instrument commonly purports to cover the whole or substantially the whole of the company’s property but is heavily subordinated and carved out so it has little realisable value.
“Lightweight floating charge” is not defined in legislation or case law; it is a descriptive label. Its effect depends on careful drafting, proper registration and intercreditor arrangements. In England & Wales and Scotland, the relevant framework is Schedule B1 to the Insolvency Act 1986. In Northern Ireland, similar rights arise under Schedule B1 to the Insolvency (Northern Ireland) Order 1989. In Ireland, the term is used descriptively for a floating charge intended primarily to secure notice and/or the right to appoint and select a receiver under the Companies Act 2014, rather than to create substantial security.
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View the related Practice Notes about Lightweight floating charge
PRACTICE NOTES
UK Banking, Finance, Capital Markets, Derivatives and Insolvency Law Glossary including Islamic finance
Banking & Finance glossary A Auditing and Accounting Organisation for Islamic Financial Institutions (AAOIFI) The foremost Islamic, international, autonomous, independent, not-for-profit corporate body that develops and issues accounting, auditing, governance, ethics and Shari’ah benchmarks and standards for Islamic Financial Institutions (IFIs) and the wider Islamic finance sector. Founded in Bahrain in 1991, it is backed by a number of institutional members across more than 45 countries, including central banks and regulatory authorities, financial institutions, accounting and auditing practices, and legal firms. Its pronouncements are currently applied by leading Islamic financial institutions across the world and have advanced a progressive and gradual harmonisation of global Islamic finance practice. It also delivers professional qualification programmes—notably Certified Islamic Professional Accountant (CIPA), Certified Shari’ah Adviser and Auditor (CSAA), and the corporate compliance programme—in efforts to strengthen the industry’s human capital and governance frameworks. For further details, see Practice Note: Key participants in the Islamic finance industry—Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI). Acceleration Acceleration is the formal action...
22 May
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