floating charge

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A charge over the assets of a company; it is not a legal charge over its fixed assets but floats over the charged assets until crystallized by some predetermined event. For example, a floating charge may be created over all the assets of a company, including its trading stock. The assets may be freely dealt with until a crystallizing event occurs, such as the company going into liquidation. Thereafter no further dealing may take place but the debt may be satisfied from the charged assets. Such a charge ranks in priority after legal charges and after preferred creditors in the event of a winding-up. It must be registered (see register of charges).

Subjects: Financial Institutions and Services.

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