A charge is a form of security offered to a lender in return for the lender providing a loan to the business. The security offered to the lender may be over a particular asset or may be over several or the whole of the business' assets.
There are two types of charges - 'fixed' and 'floating' charges. Fixed charges are granted to lenders in respect of certain assets. The owners of the asset(s) subject to the fixed charge cannot deal with it, for example sell it, in most circumstances without the prior consent of the charge holder being sought.
A floating charge is a charge granted over assets that are constantly changing, such as stock. It could be granted over the whole business itself. The business can still deal with the assets as it wishes unless it becomes insolvent or in breach of other events specified in the charge agreement (see 'what is a debenture').
If your business becomes insolvent then the charge holders will be paid out of the proceeds of sale of the business before other creditors.
A member of our specialist Business Law team can provide advice as to the content of your charge document.
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