Crystallisation of floating charges
Crystallisation of floating charges

The following Banking & Finance practice note provides comprehensive and up to date legal information covering:

  • Crystallisation of floating charges
  • The effect of crystallisation
  • Impact of crystallisation on priority
  • Are future assets covered by a crystallised floating charge?
  • What steps should the parties take following crystallisation?
  • Are there registration requirements?
  • Crystallising events
  • Crystallisation by law
  • Crystallisation—no intervention
  • Crystallisation—chargee's intervention
  • More...

The key feature of a floating charge is that, until it crystallises, the chargor is entitled to deal with the charged assets in the normal course of business without any further consent from the chargee. By contrast, a fixed charge requires the chargee to exercise a significant degree of control over the charged asset.

This Practice Note examines:

  1. the effect of crystallisation of a floating charge

  2. types of event that trigger or may trigger crystallisation, including automatic crystallisation, and

  3. partial crystallisation

For further detail on the nature of fixed and floating charges, see Practice Note: Fixed and floating charges. For information on the advantages and disadvantages of floating charges, see Practice Note: Floating charges—advantages and disadvantages. For information on how to take a floating charge, see Practice Note: Floating charges. See also Security—frequently asked questions.

The effect of crystallisation

Impact of crystallisation on priority

Upon crystallisation of a floating charge, the floating charge attaches to all existing assets that are within the scope of the charge and becomes fixed. The main consequence of crystallisation is that the chargor's authority to dispose of or to deal with those assets without the consent of the chargee comes to an end.

The fact that the chargor no longer has authority to deal freely with the assets means that the position of a floating chargeholder as regards third parties (such as purchasers and other

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