We frequently get asked by our client how they can ascertain whether or not their debenture contains a charge and what a debenture charge means.
The debenture will detail if there are any charges required to secure a loan. A lender may choose to secure their loan with a fixed or floating charge in the debenture. Our experts briefly explain below that a debenture can create either one of the following charges:
- a fixed charge, is a charge over the assets of the company which are not then able to be disposed of in the ordinary course of business. A fixed charge in a debenture is usually, but is not always, over tangible assets, such as the property, land or business premises but could be over goodwill and Intellectual Property. Should the company ever look to sell these assets, they must receive explicit consent from the debenture holder; and/or
- a floating charge, is a charge over the changing assets owned by a company, for example stock and raw materials. Floating charge assets are able to be bought and sold by the company in the ordinary course of its business and unlike a fixed charge, the business can sell these assets without the consent of the debenture holder.
A lender benefits greatly by attaching a charge to the debenture loan because it will enable the lenders move higher up the pecking order in terms of repayment, placing them above unsecured creditors of the borrower.
Our team of solicitors at Francis Wilks & Jones have extensive and expert knowledge and are here to help you with any issues you might be facing. Our knowledge on debentures is very broad and we have dealt with hundreds of enquiries on debentures. Our practical daily experience and legal expertise means that we can assist whatever the nature of query in relation to debentures.