Avoiding invalid floating charges under section 245 of the Insolvency Act 1986
Avoiding invalid floating charges under section 245 of the Insolvency Act 1986

The following Restructuring & Insolvency practice note provides comprehensive and up to date legal information covering:

  • Avoiding invalid floating charges under section 245 of the Insolvency Act 1986
  • Coronavirus (COVID-19)
  • Avoiding floating charges—the conditions required
  • What is a floating charge and are fixed charges caught?
  • Timing and insolvency
  • Consideration
  • Revolving credit facilities
  • Setting aside avoidable floating charges

Coronavirus (COVID-19)

This content contains guidance on subjects impacted by the Coronavirus Act 2020 and related changes to court procedures and processes as a result of the Coronavirus (COVID-19) pandemic, including the Temporary Insolvency Practice Direction 2020. For further information, see Practice Notes: Coronavirus (COVID-19)—Changes to the court process in insolvency proceedings and The Temporary Insolvency Practice Direction Supporting the Insolvency Practice Direction (October 2020). For related news, guidance and other resources to assist practitioners working on restructuring and insolvency matters, see: Coronavirus (COVID-19)—Restructuring & Insolvency—overview.

Avoiding floating charges—the conditions required

Under section 245 of the Insolvency Act 1986 (IA 1986), there are provisions for liquidators and administrators to set aside certain floating charges. For a floating charge to be declared invalid, certain conditions as set out in this Practice Note must be satisfied.

Broadly speaking, a floating charge will be avoided if:

  1. the company has entered either administration or liquidation

  2. the charge is a floating charge

  3. the floating charge was created at the relevant time

  4. in certain circumstances, the company was either insolvent at the time or as a cause of the floating charge

  5. the consideration provided was not provided at the time (or subsequently to) and in consideration for the creation of the charge

The overall aim of the section is to prevent creditors from obtaining an unfair advantage over other creditors (like trade creditors) at a

Related documents:

Popular documents