Fixed vs floating charges: understand what assets the lender can control

A secured business lender can take fixed security over specific assets and a floating charge over a changing pool of company assets. The labels affect what the company can do with the assets during normal trading and how the lender's rights can operate after default or insolvency.

A fixed charge attaches to identified assets

Fixed security commonly covers assets such as land, certain machinery, intellectual property or specifically controlled accounts. The company can face restrictions on selling or dealing with the asset without lender consent.

The exact legal effect depends on the security document and the lender's degree of control, not simply the heading used in the debenture.

A floating charge can cover changing working assets

Floating charges are designed for asset classes that change during normal trading, such as inventory or receivables. The business can generally deal with those assets until specified events occur.

On default or another crystallisation event, lender rights can become more restrictive under the document and insolvency law.

One debenture can contain both fixed and floating security

Business banks often use an all-assets debenture containing fixed charges over specified assets and a floating charge over the remainder.

Read the security schedule rather than saying only that the bank "has a debenture". Management should know which assets require consent before sale or further security.

Bank-account security depends on control and wording

A lender can take security over cash accounts, but whether that security operates as a fixed charge can depend on the control the lender has over withdrawals.

Do not assume an account described as charged remains freely usable. Review the bank mandate and security document before moving restricted cash.

Company charges normally need Companies House registration

Companies House generally requires registration of company charges within 21 days beginning the day after creation, using the applicable filing process.

Keep the certificate of registration with the debenture and facility agreement. Refinancing advisers will check the public charge register.

Existing charges can affect new borrowing

A new lender can require first-ranking security and therefore need releases, priorities or intercreditor arrangements with existing lenders.

Search the Companies House charge record before promising assets to a new bank. An old satisfied loan can still show an unreleased charge that delays completion.

Worked example: a bank has a fixed charge over a factory and a floating charge over inventory and receivables. The company can continue selling stock in normal trade, but it cannot sell the factory and give the proceeds to shareholders without addressing the bank's fixed security.

Security can also influence asset-finance decisions. A leasing company or inventory financier may need consent from a debenture holder even where the new lender believes it is financing a separate asset class.

Keep a security register alongside the debt schedule. Directors should know not only how much the company owes but also which assets each lender can claim and what consents are required for ordinary strategic transactions.

Review disposal proceeds before selling a fixed-charge asset. The lender can require sale proceeds to repay debt or be reinvested under agreed conditions. A director should not assume that selling secured machinery creates free cash for dividends or unrelated expansion.

Floating-charge coverage can also affect day-to-day financing. Invoice financiers, inventory lenders and equipment lessors often review existing debentures because an all-assets floating charge can conflict with their security. Early lender consent avoids a finance deal collapsing during legal completion.

After refinancing, make sure old fixed and floating charges are formally released or marked satisfied. A historic charge can remain visible at Companies House after the debt is repaid and can delay future property sales, asset finance or new bank security.

Read negative pledge clauses alongside actual charges. A company can be restricted from granting new security even where the existing lender has only a floating charge over some assets. That can affect future asset finance and should be checked before promising collateral to another provider.

Keep security values current for board decisions. A fixed charge over a property worth £10 million at origination can have very different practical significance after market movement or redevelopment. The legal charge remains, but the amount of lender protection and refinancing headroom can change materially.

Review charge descriptions after asset reorganisations. If a company transfers intellectual property, property or machinery within the group, the existing security can still attach or require lender consent. Corporate restructuring should include a security review so the group does not move assets in breach of financing documents.

Before granting new security, check whether asset descriptions overlap. A lender financing one machine may believe it has asset-specific security while the bank's all-assets debenture already reaches the same equipment. Resolve priority before funds are drawn.