In a commercial finance arrangement the party providing the finance will usually take a debenture over the assets of the company or limited liability partnership (LLP) receiving the finance.

This provides the finance provider with enforceable security such that if the repayment obligations of the borrower are not met the financier can liquidate those assets in order to raise the money to be repaid. A debenture usually contains two types of charges

  • a floating charge; and
  • a fixed charge.

A floating charge typically charges all the assets of the company or LLP, and the business is allowed to sell or transfer those assets freely, in the ordinary course of its business, without the chargeholder’s consent. This is convenient for both parties from an operational perspective as it allows the business to trade efficiently on a day to day basis.

However, in the event of a default under the finance agreement, the floating charge will “crystallise” into a fixed charge over all of the assets owned at the time of the default. This means that the business must refer to the finance provider whenever they want to dispose of any of those assets.

A qualifying floating chargeholder can appoint an administrator. If you don’t have a qualifying floating charge, then you must use an in-court process to appoint an administrator.


At Francis Wilks & Jones we specialise in preparing, reviewing and negotiating all forms of fixed and floating charge. Contact us today whether you are seeking advice about taking or enforcing a charge. We are the experts and can help with all of your fixed or floating charge security needs.

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