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You will recall that the holder of a
floating charge is third in the queue when it comes to repayment
of creditors following the demise of a company.
From a separate section of this website
you will know that:
- fixed charge holders get repaid
first
- preferential creditors are repaid
second
- floating charge holders are
repaid third
So, what is a floating charge?
A floating charge is merely a written
document between lender and borrower recording the terms and
registered as a floating charge with the registrar of companies.
A floating charge can exist over:
- stocks
- work in progress
- vehicles
- plant
- debtors etc
The most common holders of a floating
charge over the assets of a company is that company's banker.
Floating charges can also be held by any other creditor such
as:
- a directors loan
- money owed to a landlord
- amounts owed to a supplier
- money owed to any lender to
the company.
If you are a director of a company
and have lent money to that company why don't you improve
your security by registering a debenture? Take professional
advice to ensure that your charge is valid.
Remember, though, that if your
debenture is created after the 15th September 2003, while
that document will provide you with certain priority rights
to repayment in an insolvency situation, it will not give
you the right to appoint an administrative receiver.
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