Fixed and floating charges, and debentures, explained

Last updated 2026-09-04.

A charge is security a company gives to a lender over its assets, rather like a mortgage over a house. If the company fails to pay, the lender can look to the charged assets to get its money back. Registered charges are a completely normal part of business borrowing, but in an insolvency they matter enormously, because they set the order in which people are paid and decide who ranks ahead of a buyer. There are two main types.

Fixed charges

A fixed charge is security over a specific, identified asset, such as a particular property, a piece of machinery or a vehicle. While the charge is in place, the company cannot sell that asset freely without the lender's agreement, because the lender's security is attached to it. In an insolvency, the holder of a fixed charge has a strong, prior claim on that specific asset. If you want to buy an asset that carries a fixed charge, the money from the sale generally has to go to the charge holder first, so you need to know the charge is there and whether the holder will release it.

Floating charges

A floating charge sits over a changing pool of assets rather than one named item, typically things like stock, raw materials and the general run of the business that come and go day to day. While the company is trading normally, it can buy and sell those assets freely, because the charge floats above them. When a set event happens, usually insolvency, the floating charge crystallises, meaning it fixes onto whatever assets are in the pool at that moment. From then on those assets are subject to the security in the same way a fixed charge would be.

Debentures

A debenture is simply the document that creates and records the security a lender holds over a company. A typical bank debenture contains both a fixed charge over specific assets and a floating charge over everything else, giving the lender security across the whole business. When people talk about a bank having a debenture over a company, this is what they mean. The debenture, and the charges in it, are registered on the public record so anyone can see that the security exists.

Why the order matters

In an insolvency, assets are shared out in a strict legal order, and charges are central to it. Broadly, the costs of the insolvency come first, then fixed charge holders are paid from the assets they are secured against, then preferential creditors, then a ring fenced amount for unsecured creditors, then floating charge holders from the remaining floating assets, then the general unsecured creditors, and finally shareholders. Fixed charge security therefore sits near the front of the queue, and floating charge security a good deal further back. Our guide on what happens to a company's assets in liquidation sets out the full order.

How to use this when buying

Before you get attached to an asset, find out what is secured against the company and whether it is outstanding. A property subject to a fixed charge may need the charge holder to agree to release it before a sale can complete. Stock and general assets caught by a crystallised floating charge feed the floating charge holder before the unsecured creditors. Knowing the secured position up front tells you whether a deal is simple or tangled, and feeds straight into the number you offer. You can read the registered charges on any company in its company record, and see what each one covers in the paid asset assessment.

Common questions

Company information, not advice. This is a general explanation of how charges work, not advice on any specific case.