Floating Charge - Definition - Law Dictionary Home Dictionary Definition floating-charge

Definition :

Floating charge. This term is not a legal term, but it is well understood and is used in Acts of Parliament, e.g., the (English) Finance Act, 1915, s. 27, and may be said to denote a security which is an equitable charge on the assets for the time being of a going concern. It allows of the business being carried on and the property comprised in it being dealt with in the ordinary course of business, until the undertaking charged ceases to be a going concern, or until the creditor in some way or other intervenes, See Government Stock, etc., Co. v. Manila Ry. Co., 1897 AC 86, per Lord Macnaghten.

The charge becomes fixed and enforceable by the charges as soon as the company goes into liquidation, even for the purpose of reconstruction [Crompton & Co., 1914, 1 Ch 954]. Under the (English) Companies Act, 1929, s. 88, all floating charges must be registered in the Register of Charges.

The subsidiary shares, rather than circulating in the ordinary course of the claimant's business, are part of its long-term structure and in such a case the fact that the charge extends to shares in future subsidiaries does not mean that the charge is floating charge, Atlantic Medical Ltd. (in re:), (1993) BCLC 386. See also Arthur D Little Ltd. (in administration) v. Ableco Finance LLC, (2003) LR 217 (Ch): (2002) EWHC 701 (Ch).

Cover a fluctuating body of assets which circulate in the course of the operation of a business, such as book debts, and such charges remain under the management and control of charger who has the right in the ordinary course of business to deal freely with the assets without the consent of the charger; Yorkshire Woolcombers Association Ltd. (in re:), (1903) 2 Ch 284; Agnew v. Commr of Inland Revenue, (2001) 2 AC 710; National Provincial Bank of England Ltd. v. United Electric Theatres Ltd., (1910) 1 Ch 132. See also Arthur D Little Ltd. (in administration) v. Ableco Finance LLC, (2003) LR 217 (Ch): (2002) EWHC 701 (Ch).