Floating charge
The security identifies a class, such as inventory, even though individual assets within it change during operations. The agreement and applicable law determine permitted dealings and events that cause crystallisation or restrict the company’s freedom. It is not simply a right to take control of unspecified assets. Registration, priority, avoidance and insolvency consequences require current jurisdiction-specific analysis. A floating charge can provide a lender with security while leaving operational flexibility, but its existence does not guarantee sufficient realisable assets or full repayment.
Worked example
A business buys and sells stock in the ordinary course within the terms of security over its inventory class. A relevant event may change how that security operates; the stock items need not remain identical throughout.
Common mistake
Assuming no assets or class need be identified, or treating every floating charge as having the same priority as a fixed charge.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | FM | Supporting | September 2026–June 2027 |