Fixed and floating charges are used to secure borrowing by a company. Such borrowing is often done under the terms of a debenture issued by the company. Charges on a company’s assets must be registered at Companies House and may also need to be registered in some other way, e.g., a charge on land and buildings must also be registered at the Land Registry.
Fixed charge prevents the loan form dealing with the property charge without the consent of the charge holder. The company has no right to deal with the property, but subject to certain exceptions. A floating charge is a charge on property which’ is constantly changing, e.g., stock.
Fixed Charge is formed on a fixed asset, no issue if they are tangible or intangible. Unlike the Floating Charge covers the current assets of the company, which varies from time to time.
Fixed charge
- Fixed charge refers to a charge that can be ascertained with a specific asset while creating it.
- Registration of charge – voluntary.
- Non-Current Asset type.
- The company has no right to deal with the property, but subject to certain exceptions.
Floating charge
- Floating charge refers to a charge that is created on the assets of circulatory nature.
- Registration of charge – compulsory.
- Current Asset type
- The company can use or deal with an asset, until crystallization.
