What is the difference between fixed charge and floating charge?

A fixed charge is a mortgage on a specific fixed-asset (such as a parcel of land) to secure the repayment of a loan. In this arrangement the asset is signed over to the creditor and the borrower would need the lender's permission to sell it. The lender also registers a charge against the asset which remains in force until the loan is repaid.

A floating charge is mortgage on an asset that changes in quantity or value from time to time (such as an inventory), to secure the repayment of a loan. In this arrangement, no charge is registered against the asset and the owner of the asset can deal in it as usual. If a default occurs, or the borrower goes into liquidation, the floating asset 'freezes' into its then current state 'crystallizing' the floating charge into a fixed charge and making the lender a priority creditor. A floating charge is not as effective as a fixed charge but is more flexible.

Floating Charge

Why is the distinction between fixed and floating charges important?

1. A floating charge holder can appoint an administrator and may also appoint an administrative receiver if the floating charge was created before 15 September 2003

2. A fixed charge holder can only appoint a fixed charge receiver over the secured assets eg the charged real estate

3. On a debtor s insolvency, the holder of a fixed charge will get paid out of the proceeds of sale of the assets subject to that fixed charge before all other creditors. A floating charge holder only gets paid out after certain payments are made to other creditors which can greatly affect the amount it receives

Fixed charge is charge on mortgage secured property or assets like Machinery, Building, Goodwill, Patent, Copyright. In fixed charge , the borrow can't buy or sell the property of without terms and condition of lender. Conversely, floating charge borrow can sell or buy without the permission lender.

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RE:

What is the difference between fixed charge and floating charge?

Please cite definition and two examples as well.

http://www.answers.com/topic/floating-charge

http://www.legalserviceindia.com/company%20law/com...

http://www.companylawclub.co.uk/topics/faq073.htm

i hope this will help you