FLOATING CHARGE

                                                           FLOATING CHARGE

As name suggest a floating charge is not attached to any definite property. Floating charge is crated on property which is fluctuating in nature from time to time e.g., stock-in-trade and is thus necessarily equitable. The property on which floating charge is created is free to deal as it sees fit until the holders of charge take steps to enforce their security.

 “The essence of a floating charge is that the security remains dormant until it is fixed or crystallized”. But a floating security is not a future security. It is a present security, which presently affects all the assets of the company expressed to be included in it. On the other hand until the property is fixed it covers all the assets of the company which are expressed to be included in it. The holder of such charge cannot fix that a particular assets are specifically mortgaged to him. The assets are mortgaged in such a way that the mortgagor i.e. the company can deal with them without the concurrence of the mortgagee.

The advantage of a floating charge is that the Company may sell, mortgage or lease such property in the ordinary course of its business if it is authorized by its memorandum of association.