What is a floating charge?
A lender can obtain security over land such as a mortgage that would be registered with Land Victoria. It is also possible for a company to grant a security over other assets. Some of the assets (such as plant and equipment) effectively remain available to a creditor over time. These charges are “fixed” because the assets are able to be determined at any time and cannot be sold by the debtor without the consent of the creditor. Other assets, such as stock in trade, constantly come and go. A charge that is “fixed” would prevent the operation of the business. Instead, like an invisible floating net, the charge hovers over the assets until needed. Once the charge (usually a mortgage debenture) is triggered (or “crystallised”) then the assets covered by the floating charge at that moment are caught by the net and are in the control of the creditor. A floating charge ranks behind preferred creditors such as employees and is vulnerable if the company is placed into liquidation within six mon
