Fixed charge: Difference between revisions
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A fixed charge is a type of [[charge]]. That is fixed. It doesn’t, so to say, ''[[floating charge|float]]''. | |||
A [[fixed charge]] encumbers asset it secures from day one. To benefit from a fixed charge you need to have control over the assets - if the debot can deal with the secured assets as it pleases without your knowledge and control, your charge may fail. On a good day it might get [[recharacterised]] as a floating charge — but don't bank on it and note that there are certain formal requirements to perfect a floating charge which you are likely not to have done, seeing as you were thinking what you had was a fixed charge. | A [[fixed charge]] encumbers asset it secures from day one. To benefit from a fixed charge you need to have control over the assets - if the debot can deal with the secured assets as it pleases without your knowledge and control, your charge may fail. On a good day it might get [[recharacterised]] as a floating charge — but don't bank on it and note that there are certain formal requirements to perfect a floating charge which you are likely not to have done, seeing as you were thinking what you had was a fixed charge. | ||
Revision as of 13:56, 10 October 2017
A fixed charge is a type of charge. That is fixed. It doesn’t, so to say, float.
A fixed charge encumbers asset it secures from day one. To benefit from a fixed charge you need to have control over the assets - if the debot can deal with the secured assets as it pleases without your knowledge and control, your charge may fail. On a good day it might get recharacterised as a floating charge — but don't bank on it and note that there are certain formal requirements to perfect a floating charge which you are likely not to have done, seeing as you were thinking what you had was a fixed charge.
Why take a fixed charge?
A fixed charge is better than its poor relation the floating charge:
- practically, because you do (right?) keep control over the asset and can prevent the debtor salting it away, and
- legally, because it ranks ahead of a floating charge in the debtor’s insolvency (well - it would do: the first in time prevails, and by definition, a floating charge only fixes when it crystallises, imeaning a floater is always last to the party).
However, it does require the security holder to have control of the charged asset. If she doesn’t her fixed charge conceivably fail.
Fixed charges are good for
- Buildings
- Plant
- immovable forces
Custody assets (where the charge holder is the Custodian)
Fixed charges are not so good for
- Stock in trade
- Consummables that are in the debtor’s possession