What are fixed and floating charges company law?

A fixed charge is a charge which relates to specific assets of a company. A company cannot dispose the property without the consent of the charge holder. The nature of a floating Charge is that the asset on which the charge is created is not an identified asset at the time of creation of the charge.

When can a floating charge be granted?

A floating charge can convert, or ‘crystallise’, into a fixed charge if certain events occur. The document containing the floating charge, usually a debenture, will allow for the floating charge to crystallise over all of the assets subject to it, or just some of them if the lender wishes.

Is a floating charge better than a fixed charge?

While a fixed charge protects the lender, the floating charge gives more scope for the company to sell, transfer or dispose of their assets, without seeking approval from the bank. However, it’s impossible to attach a fixed charge on all company assets, hence the use of floating charge assets.

What does a charge against a company mean?

A charge, or mortgage, refers to the rights a company gives to a lender in return for a loan. The rights are often in the form of security given over a company asset or group of assets.

What is a fixed charge against a company?

A fixed charge is a charge or mortgage secured on particular property, e.g. land and buildings, a ship, piece of machinery, shares, intellectual property such as copyrights, patents, trade marks, etc. A floating charge is a particular type of security, available only to companies.

Who can give floating charges?

A floating charge is a particular type of security, available only to companies. It is an equitable charge on (usually) all the company’s assets both present and future, on terms that the company may deal with the assets in the ordinary course of business.

What sort of assets may be subject to a floating charge?

A floating charge allows all the company’s assets, such as stock in trade, plant and machinery, vehicles, etc., to be charged. The special nature of the floating charge is that the company can continue to use the assets and can buy and sell them in the ordinary course of business.

What is fixed charge in taxi?

The taxi charges in a city consist of a fixed charge together with the charge for the distance covered. For a distance of $10$ km, the charge paid is $Rs. 105$ and for a journey of $15$ km, the charge paid is $Rs. 10$ and the charge per kilometer is $Rs.

What is the effect of crystallisation of a floating charge?

Upon crystallisation of a floating charge, the floating charge attaches to all existing assets that are within the scope of the charge and becomes fixed. The main consequence of crystallisation is that the chargor’s authority to dispose of or to deal with those assets without the consent of the chargee comes to an end.