Print Options

(1) A firm may grant a floating charge over the whole or a specified part of its undertaking and assets.

(2) A floating charge shall be an equitable charge on the whole or a specified part of the firm's undertaking and assets both present and future, so however, that the charge shall not preclude the firm from dealing with such assets until,

(a) the security becomes enforceable in accordance with the provisions of the charge and the chargee, pursuant to a power in that behalf in the instrument of charge, appoints a receiver or manager or enters into possession of such assets; or

(b) the Court appoints a receiver or manager of such assets on the application of the chargee; or

(c) the firm goes into liquidation.

(3) On the happening of any such event as is specified in the immediately preceding subsection, the charge shall be deemed to crystallise and to become a fixed equitable charge on such of the firm's assets as are subject to the charge; and if a receiver or manager is withdrawn with the consent of the chargee or the chargee withdraws from possession before the charge has been fully discharged, the charge shall thereupon cease to be a fixed charge and shall become a floating charge.

(4) A fixed charge on any property shall have priority over a floating charge affecting that property unless the terms on which the floating charge was granted prohibited the firm from granting any later charge having priority over the floating charge and the person in whose favour such fixed charge was granted had actual notice of that prohibition at the time when the charge was granted to him.

(5) After a floating charge has been granted over any part of the undertaking and assets of a firm no payment or return shall be made to any partner by the firm out of any assets subject to the charge, except to the extent agreed by the chargee, and if any such payment or return is made without such agreement the security of the chargee shall become immediately enforceable.