Floating Charge vs Fixed Charge on UK Companies: What Creditors Need to Know

What Is a Fixed Charge?

A fixed charge is a form of security attached to a specific, identified asset. Once a lender takes a fixed charge over an asset, the company cannot sell, transfer, or dispose of it without the lender's explicit consent. The charged asset is effectively locked in as collateral for the outstanding debt.

Fixed charges are most commonly taken over:

• Land and commercial property
• Plant and machinery
• Intellectual property and patents
• Specific, identifiable receivables under structured invoice finance arrangements

If the borrower defaults, the fixed charge holder can appoint a receiver over that specific asset and sell it to recover what is owed. Crucially, fixed charge creditors rank above almost everyone else in a UK insolvency — they are paid directly from the proceeds of their charged asset before preferential creditors and unsecured trade creditors alike.

What Is a Floating Charge?

A floating charge is security over a class of assets that fluctuates from day to day — most commonly a company's current assets: stock, trade debtors, and cash. Unlike a fixed charge, the company retains full freedom to deal with those assets in the ordinary course of business. Stock is sold, invoices are collected, cash is spent — the charge floats above the asset pool without attaching to any individual item.

When a triggering event occurs — most commonly a payment default or the appointment of an insolvency practitioner — the floating charge crystallises. At that moment it converts into a fixed charge over whatever assets happen to be within that class at the time. The charge holder can then enforce against the crystallised pool.

A floating charge must be registered at Companies House within 21 days of creation under section 859A of the Companies Act 2006. Fail to register within that window and the charge becomes void against a liquidator, administrator, or other creditors — the lender loses their priority entirely.

Priority in Insolvency: Who Gets Paid First?

The order in which creditors are paid in a UK insolvency follows strict statutory rules. The broad hierarchy is:

1. 1Fixed charge holders — paid from the proceeds of their specific charged asset
2. 2Insolvency practitioner fees and expenses
3. 3Preferential creditors — primarily employee wage arrears and holiday pay (subject to caps), plus certain pension contributions
4. 4The prescribed part — a ring-fenced fund carved from floating charge assets for unsecured creditors
5. 5Floating charge holders — from the remaining floating charge assets after the prescribed part
6. 6Unsecured creditors — trade creditors, HMRC for most tax debts, and the balance of employee claims
7. 7Shareholders — only if any surplus remains, which is rare in practice

The prescribed part — introduced by section 176A of the Insolvency Act 1986 — ensures floating charge holders cannot absorb the entire floating charge pool at the expense of trade creditors. The calculation: 50% of the first £10,000 of net floating charge realisations, plus 20% of the balance above that, subject to a cap of £800,000 (for insolvencies opened from January 2024). This can mean trade creditors receive a meaningful distribution from the floating charge pool even in a substantially charged business.

Key point for trade creditors: The prescribed part exists specifically for you. However, in a heavily indebted company with limited realisable assets, even your share of that fund may cover only a fraction of what you are owed. Prevention — knowing the security structure before you extend credit — is far more valuable than recovery after the fact.

Debentures: The All-in-One Security Package

Banks and specialist lenders in the UK rarely take a fixed or floating charge in isolation. Instead, they use a debenture — a single security document that combines:

• A fixed charge over specific high-value assets (property, plant, intellectual property)
• A floating charge over the remainder: stock, debtors, cash, and the general business undertaking

A debenture gives the lender security over effectively everything the company owns. If the company defaults, the debenture holder can appoint an administrator directly under their charge without needing a court order, and control the sale or restructuring of the business. This is why banks are typically repaid in full in administrations while unsecured trade creditors often receive pennies in the pound — or nothing at all.

How to Check the Charges Register

All charges created by UK companies must be registered at Companies House and are publicly accessible at no cost. When searching a company, the charges register is available directly from the company overview — no account required.

For each registered charge you can see:

• The charge type (fixed, floating, or both within a debenture)
• The creation and registration dates
• The charge holder — typically a bank or specialist finance provider
• A description of the assets or undertaking covered
• Whether the charge has been satisfied (discharged) or remains outstanding

Our guide to how to run a free company credit check in the UK covers the full Companies House search process, including where to find the charges tab on a company record and what to look for once you are there.

Practical tip: Always verify whether a charge is satisfied or outstanding. A bank charge that appears on the register but has never been marked as satisfied may still be enforceable — even if the company has since changed lenders. Satisfied charges are clearly marked in the register.

What Registered Charges Reveal About Credit Risk

The charges register is one of the most revealing — and most underused — free data sources in trade credit assessment. A few patterns worth watching:

Multiple recent charges can indicate a company drawing heavily on secured borrowing. New charges added within the past 12 months warrant scrutiny: is the company using invoice finance to fill cashflow gaps, or taking on asset-backed debt to fund a restructuring that may not be sustainable?

A discharged debenture replaced by a new one — for example, a charge held by one bank satisfied and a fresh charge registered by a different lender — may indicate refinancing. This can be neutral or a red flag depending on context. Cross-referencing with late filing at Companies House or evidence of deteriorating margins helps to disambiguate.

No registered charges at all is not automatically reassuring. A company carrying significant unsecured director loans, HMRC payment deferrals, and trade payable arrears may appear "clean" on the charges register while concealing substantial hidden liabilities. In an insolvency, all unsecured creditors rank equally in that scenario — but there is also no bank actively monitoring the company's health and in a position to enforce early.

Combining charge data with insolvency notices and financial ratios gives a far more complete picture than any single source. Notices in The Gazette are often the last place a deteriorating situation shows up publicly; the charges register can reveal stress signals months earlier. FinancialInsight automatically surfaces registered charges alongside liquidity ratios, Gazette notices, and director background data in a single credit dashboard — so your team spots combinations of risk signals before individual data points would trigger a review on their own.

Key Takeaways

• A fixed charge attaches to a specific identified asset; the company cannot deal with it without the lender's consent — it is the strongest form of security in UK law
• A floating charge covers a fluctuating class of assets (typically stock, debtors, and cash); it floats freely until a default triggers crystallisation, at which point it converts into a fixed charge over whatever is in the class
• All charges must be registered at Companies House within 21 days or they become void — the register is publicly accessible and free to search
• In insolvency, fixed charge holders are paid first from their specific assets; floating charge holders rank behind preferential creditors and must surrender the "prescribed part" of their pool to unsecured creditors
• A debenture combines both charge types over the entire business — trade creditors rank well below the debenture holder in any administration or liquidation
• The charges register is a fast, free signal of how secured a company's asset base already is — always check it before extending significant trade credit to a new or existing customer
• FinancialInsight integrates Companies House charge data, Gazette insolvency notices, and financial ratios into a single credit view, giving UK credit teams the complete picture before extending trade credit