What is the main difference between a fixed charge and a floating charge?
Answer and explanation
Correct answer: A. A fixed charge attaches to specific identifiable assets
- Step 1: Fixed charges bind particular assets, such as land, so the company cannot dispose of them without consent.
- Step 2: Floating charges cover assets that change, such as inventory and receivables, and become fixed on crystallisation.
Answer
A fixed charge attaches to specific identifiable assets.
Why not the others: This reverses them: land suits a fixed charge and inventory a floating charge. A fixed charge holder generally ranks ahead of a floating charge holder. Both types of charge must be registered at Companies House.
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