Floating charge

A charge (www.practicallaw.com/A34644) taken over all the assets or a class of assets owned by a company or a limited liability partnership (www.practicallaw.com/2-107-6762) from time to time as security for borrowings or other indebtedness. The advantage of a floating charge is that before insolvency it allows the charged assets to be bought and sold during the course of a company's or limited liability partnership's business without reference to the chargeholder. The floating charge crystallises if there is a default or similar event. At that stage, the floating charge is converted to a fixed charge (www.practicallaw.com/A36112) over the assets which it covers at that time. If default occurs, depending on when the floating charge was created, the chargeholder may be able to appoint an administrative receiver (www.practicallaw.com/A35781) or an administrator (www.practicallaw.com/2-107-6366).

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