Floating Charge

Companies Act, 2013 — Section 77

A charge over a company's fluctuating assets (stocks, receivables, cash) that "floats" over the assets until it "crystallises" upon default, at which point it attaches to the specific assets then in existence. Banks often take a floating charge alongside a fixed charge (mortgage) to capture all assets of a company.

In practice, a floating charge is how a bank captures the moving parts of a company, stock-in-trade, receivables, and cash that change daily, without freezing the borrower's ability to trade. The charge hovers over the class of assets and only fixes onto specific items when it crystallises, typically on default or the borrower ceasing business. Until then the company can deal with the assets in the ordinary course, which is what makes working-capital finance workable. The discipline lies in registration: under Section 77 of the Companies Act, 2013, a charge created by a company must be registered with the Registrar of Companies, usually within the prescribed window, failing which the charge is void against a liquidator and other creditors, leaving the bank as an unsecured claimant in insolvency. Banks therefore pair a floating charge over current assets with a fixed charge over immovables and register both promptly. Well-advised lenders confirm timely ROC registration so the charge survives a later liquidation.