What is a floating charge?

Alex BeardsleyFounder & Director

|Updated October 2026

A floating charge is a form of security a company can grant over a class of its assets that changes from day to day, such as stock, raw materials, cash and the debts owed to it, without stopping the company from using and replacing those assets in the ordinary course of business. The charge "floats" over whatever is in the class at any moment. On a defined event, such as a default or the appointment of an administrator, it crystallises: it fastens on the assets then in the class and becomes, from that moment, a fixed charge over them.

A fixed charge, by contrast, attaches to specific assets from the day it is created, and the company cannot sell or deal with those assets without the lender’s consent. Most lenders to a company take both at once, in a single document called a debenture: fixed charges over the assets that can be held still, a floating charge over the rest.

Fixed charge against floating charge

The test is control. Under a fixed charge the lender controls the asset: the company needs consent to sell it, and the proceeds of a sale go to the lender. Under a floating charge the company controls the assets until crystallisation: it sells stock, collects debts and spends the money as it trades. The label a document gives a charge does not settle which it is; the courts look at what the lender actually controls, which is why a charge over book debts counts as fixed only where the proceeds are paid into an account the lender controls.

Only a company or an LLP can grant a floating charge. An individual trading alone cannot, apart from a farmer’s agricultural charge under the Agricultural Credits Act 1928, which is one of the practical differences between lending to a limited company and lending to a sole trader.

Crystallisation

The debenture lists the events on which the floating charge crystallises: the company defaulting, the lender giving notice, an administrator or receiver being appointed, the company ceasing to trade or going into liquidation. From crystallisation the lender’s charge is fixed over the assets then in the class, and the company can no longer deal with them freely. Assets the company acquires afterwards may or may not be caught, depending on the wording.

Registration

Like any charge created by a company, a floating charge must be delivered to Companies House for registration within 21 days beginning with the day after its creation (Companies Act 2006, section 859A), and a charge not registered in time is void against a liquidator, an administrator and the company’s creditors (section 859H). The register shows whether a charge contains a floating charge and whether it contains a negative pledge, the covenant not to grant further security without consent, which is the line every later lender checks first.

What a floating charge is worth on insolvency

Less than a fixed charge over the same value, by law. Floating-charge realisations are applied first to the expenses of the administration or liquidation and to the preferential creditors, which since 1 December 2020 include HMRC for VAT and the taxes a company collects on behalf of others. Then a prescribed part is set aside for the unsecured creditors under section 176A of the Insolvency Act 1986: 50% of the first £10,000 of net floating-charge realisations and 20% of the remainder, capped at £800,000 for charges created on or after 6 April 2020. Only after that does the floating-charge holder receive the balance. A fixed-charge holder is paid from its own assets ahead of all of it.

That order is why a lender prices fixed security and floating security differently, why it takes fixed charges over everything it can, and why the holder of a qualifying floating charge, one covering the whole or substantially the whole of the company’s property, has the right to appoint an administrator out of court under paragraph 14 of Schedule B1 to the Insolvency Act 1986.

Where a floating charge appears in business finance

Inside the debenture a bank or term lender takes with a secured loan or an overdraft. Inside an asset-based lending facility, where the lender funds against stock and debts. And as the thing an invoice financier asks about first, because a bank’s existing floating charge over book debts has to be released or ranked behind the financier before invoices can be assigned to it. The debenture answer explains the whole document; the secured business loans page explains the forms of security.

We work with UK limited companies and LLPs only, for business and commercial purposes. Enquiring does not affect your credit score. If you apply to a lender, it runs its own credit search, which may be recorded on your file.

Frequently asked questions

Related pages

• What is a debenture?
• Secured business loans: the security explained
• What is a legal charge?
• Invoice finance: factoring and discounting
• Personal guarantees explained
• Business funding glossary

Sources

Checked 26 October 2026 against the legislation as published on legislation.gov.uk. This page explains the law in general terms and is not legal advice.

1. Companies Act 2006, section 859A: charges created by a company
2. Companies Act 2006, section 859H: consequence of failure to register
3. Insolvency Act 1986, section 176A: share of assets for unsecured creditors
4. Insolvency Act 1986, Schedule B1, paragraph 14: appointment of administrator by holder of floating charge
5. Finance Act 2020, section 98: HMRC as a secondary preferential creditor from 1 December 2020
6. Companies House: CapExpand Ltd 14433858