Floating Charges and Liquidation | Understanding Who Gets Paid First

A floating charge gives a lender security over changing business assets such as stock, receivables and other circulating assets. If a company enters liquidation, this can affect how money from those assets is distributed.

The floating-charge holder does not automatically receive all available funds. Insolvency costs, preferential creditors and the prescribed part for unsecured creditors may reduce the amount available to the lender.

Directors should understand which company assets are secured, whether charges are fixed or floating, and whether any personal guarantees have also been given.'


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