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Floating Charge

company, fixed and stock

FLOATING CHARGE. Debentures or debenture stock, in addition to being secured by a " fixed " charge upon the company's property, may also be secured by a " float ing " charge, that is a charge upon the stock, book debts, etc., of the company, which permits the company to make use of those assets in any way in connection with its ordinary business. A charge of that descrip tion " floats " until such time as default is made in payment of interest, or the company goes into liquidation. When such an event occurs, the charge becomes " fixed," and the assets at that date become a fixed security for the debentures and may be realised for the benefit of the debenture holders.

If the debentures create a " floating " charge upon the land of the company, as well as upon the stock, book debts, and uncalled capital, the company is not pre cluded by that floating charge from selling or mortgaging the land. Some " floating "

charges, however, contain a clause to the effect that the company will not mortgage the property so as to create an equal or prior charge, but even in that case if anyone grants the company a loan against the title deeds, without any notice of the charge, he may obtain priority.

Particulars of every floating charge on the undertaking and property of a company must be delivered to the registrar of com panies for registration. (See REGISTRATION OF MORTGAGES AND CHARGES.) A debenture containing merely a floating charge does not require to be entered on the company's register of mortgages.

Where a company is being wound up, a floating charge created within three months of the commencement of the winding up may be invalid (see Section 212 of the Com panies (Consolidation) Act, 190S, under WINDING UP). (See COMPANIES.)