FIXED OR SPECIFIC CHARGE

                                                       FIXED OR SPECIFIC CHARGE

A charge is called fixed or specific when it is created against an asset which is ascertained or definite e.g., land, building or plant and machinery. A fixed charge, therefore, is a security created on certain specific property. The company gives up its right to dispose off that property unit against which charge is created. In other words, the company can deal with such property, subject to the charge without affecting the charge holder’s interest and the charge holders gets priority over all subsequent transfer. There is one exception that when an asset is transferred which is previously charged and the transferee purchase that asset in good faith in that case the transferee will get the priority over the charge holder interest. In the winding-up of the company, a debenture holder secured by a specific charge will be placed in the highest ranking class of creditors.