TRW & Co · Banking and finance
Taking Security in England: Debentures, Charges and Registration
Lenders in England usually take security through a debenture: one deed granting fixed charges over specific assets and a floating charge over the rest. A debenture fixed and floating charge package only works if it is registered within 21 days, the fixed charges are backed by real control, and the lender understands how it ranks in an insolvency.
Key pointCalling a charge fixed does not make it fixed. If the company can freely use the asset or its proceeds, the courts will treat the charge as floating, and preferential creditors, the prescribed part and insolvency expenses will come first.
At a glance
21 days to register
A charge created by a UK company must be delivered to Companies House within 21 days beginning with the day after creation, under section 859A of the Companies Act 2006.
Unregistered charges are void
A charge not registered in time is void against a liquidator, administrator and creditors, and the secured money becomes immediately payable, although the debt itself survives.
Substance over labels
Following Spectrum Plus, a charge over book debts is floating unless the lender genuinely controls the proceeds, usually through a blocked account.
Floating charges rank lower
Floating charge realisations bear insolvency expenses, preferential creditors and the prescribed part for unsecured creditors before the charge holder is paid.
Administration is the main tool
A qualifying floating charge holder can appoint an administrator out of court under Schedule B1 to the Insolvency Act 1986, after notice to prior charge holders.
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The short answer: how lenders take security in England
Most English lenders take security over a company's assets through a debenture: a single deed in which the company grants fixed charges over specific assets and a floating charge over everything else. The debenture fixed and floating charge structure gives the lender priority over unsecured creditors, a right to enforce if the borrower defaults, and in most cases the power to appoint an administrator.
Three points decide whether the security works when it is needed. The charge must be registered at Companies House within 21 days. A charge described as "fixed" must be backed by real control over the asset, or a court may treat it as floating. And the lender must understand how its security ranks against other creditors, including preferential creditors and the prescribed part set aside for unsecured creditors.
This guide explains each of these points under the law of England and Wales, and how enforcement works. Scotland has a different system of security over moveable property, and Northern Ireland has its own land registration rules.
The legal framework
Security in England combines statute and long-established common law and equity. The main sources are:
- The Companies Act 2006, Part 25, which requires charges created by UK companies to be registered at Companies House.
- The Insolvency Act 1986, which sets the ranking of floating charges against preferential creditors and the prescribed part, allows certain floating charges to be avoided, and gives a qualifying floating charge holder the power to appoint an administrator.
- The Law of Property Act 1925, which gives a mortgagee by deed a statutory power of sale and power to appoint a receiver, usually extended by the debenture itself.
- The Financial Collateral Arrangements (No.2) Regulations 2003, which relax formalities and some insolvency rules for security over cash and financial instruments where the collateral taker has possession or control.
- Land registration rules, under which a legal charge over registered land must be registered at HM Land Registry to take effect as a legal charge.
Fixed versus floating charges
A fixed charge attaches to a specific asset immediately. The company cannot deal with that asset without the lender's consent. Fixed charges are typically taken over land, shares in subsidiaries, intellectual property, material contracts and plant and machinery.
A floating charge hovers over a changing class of assets, such as stock, receivables and cash. The company can use and dispose of those assets in the ordinary course of business until the charge "crystallises", usually on enforcement or insolvency, when it fixes on the assets then held.
Why labels do not decide the question
The court looks at the substance of the arrangement, not the words used. In National Westminster Bank plc v Spectrum Plus Ltd [2005] UKHL 41, the House of Lords held that a charge over book debts expressed to be fixed was in fact floating, because the company was free to use the proceeds in its ordinary bank account. A lender that wants a fixed charge over receivables must control the proceeds, for example through a blocked account.
The distinction matters because floating charge realisations are subject to the claims of preferential creditors, the prescribed part and insolvency expenses, while fixed charge realisations are not.
| Feature | Fixed charge | Floating charge |
|---|---|---|
| Assets covered | Specific, identified assets | Changing pool of assets such as stock, receivables and cash |
| Company's freedom to deal | Not without lender consent | Free to deal in the ordinary course until crystallisation |
| Ranking against preferential creditors | Ahead of them | Behind them |
| Prescribed part | Not affected | A portion of net realisations is set aside for unsecured creditors |
| Avoidance under section 245 | Not applicable | Can be invalid if created shortly before insolvency for past value |
| Appointment of administrator | Not on its own | Holder of a qualifying floating charge may appoint out of court |
What a debenture fixed and floating charge package contains
A typical all-assets debenture contains:
- a covenant to pay all sums due under the finance documents (often "all monies");
- a legal mortgage over identified real property and fixed charges over other property, shares, intellectual property, equipment, book debts and bank accounts;
- assignments by way of security of insurance policies and key contracts;
- a floating charge over the whole of the company's undertaking and assets not otherwise effectively charged;
- a negative pledge and restrictions on disposals;
- crystallisation events, including notice from the lender and certain insolvency events;
- a further assurance clause and a power of attorney in favour of the lender;
- enforcement provisions, including appointment of receivers and administrators.
Where a group borrows, each guarantor usually grants its own debenture fixed and floating charge security, and shares in subsidiaries are charged so that the lender can take control of the group on enforcement. In acquisition and leveraged finance deals, the security package is defined in the LMA facility agreement and supported by an intercreditor agreement.
Registration at Companies House: the 21-day rule
Under section 859A of the Companies Act 2006, a charge created by a UK company must be delivered to Companies House for registration within 21 days beginning with the day after the date of creation. Delivery is made with a statement of particulars and a certified copy of the charging instrument. Where a debenture fixed and floating charge package is contained in one deed, a single filing normally covers all the charges in it, and the lender's solicitors usually handle it.
The consequences of missing the deadline are severe. Under section 859H, an unregistered charge is void against a liquidator, an administrator and creditors of the company, and the secured money becomes immediately payable. The debt survives, but the security does not.
If the deadline is missed, the court can extend the period under section 859F where the failure was accidental or due to inadvertence, would not prejudice creditors or shareholders, or it is otherwise just and equitable. Courts usually grant the extension subject to the rights of anyone who acquired an interest in the meantime, and are reluctant where insolvency is imminent. The alternative is to take and register a fresh charge, accepting any loss of priority and new hardening periods.
Diarise the 21-day deadline on the date the debenture is dated, not the date it is circulated. Where a debenture is signed in counterparts or held in escrow, agree the date of creation in writing, because the registration clock starts the day after the charge is created.
Priorities between creditors
Priority between competing charges depends on their type, the order of creation and, in some cases, notice. As a general rule, a fixed charge ranks ahead of an earlier floating charge over the same asset unless the floating charge contains a negative pledge and the later chargee had notice of it. Between two fixed charges, the first in time usually prevails, subject to registration and land registry rules.
Lenders and borrowers often regulate priority by contract through a deed of priority or intercreditor agreement. These agreements are common where a business has both a senior lender and an asset finance provider, or a senior lender and a mezzanine or shareholder lender.
In an insolvency, a debenture fixed and floating charge holder recovers in the following broad order: fixed charge realisations go to the fixed charge holder after the costs of realising them. Floating charge realisations bear the expenses of the insolvency, then preferential creditors under section 175 of the Insolvency Act 1986, including HMRC as a secondary preferential creditor for certain taxes, then the prescribed part for unsecured creditors under section 176A, which is subject to a statutory cap currently set at £800,000 for more recent charges.
Floating charges created shortly before insolvency
Under section 245, a floating charge created within 12 months before the onset of insolvency, or two years where the chargee is connected with the company, is invalid except to the extent of new money, goods or services provided at the same time or afterwards. For unconnected lenders, the charge is only at risk if the company was unable to pay its debts at the time or became unable to do so as a result. Taking a floating charge to secure an existing unsecured debt is therefore risky.
Enforcement options
Enforcing a debenture fixed and floating charge package follows a broadly similar sequence whatever the assets involved.
- Confirm the event of default. Check that a default has occurred and is continuing under the facility, and review any standstill or intercreditor restrictions.
- Make demand. Serve a valid demand on the borrower and any guarantors. Under an "all monies" debenture, the security becomes enforceable once demand is made and not met.
- Choose the enforcement route. Options include appointing a receiver over specific property, exercising a power of sale, appropriating financial collateral or appointing an administrator under the qualifying floating charge.
- Appoint the office-holder. A qualifying floating charge holder can appoint an administrator out of court under paragraph 14 of Schedule B1, after giving notice to any prior qualifying floating charge holder.
- Realise the assets. The receiver or administrator sells the charged assets, subject to duties to obtain the best price reasonably obtainable in the circumstances.
- Distribute and claim any shortfall. Proceeds are applied in the statutory and contractual order, and any shortfall can be claimed from the borrower or from guarantors.
Administrative receivership has largely been replaced by administration for floating charges created since the Enterprise Act 2002 reforms took effect in 2003, subject to limited exceptions in capital markets and project finance. Fixed charge receivers, often appointed over property under the Law of Property Act 1925, remain common. Our restructuring and insolvency team advises lenders and boards on these choices, and our guide to administration vs liquidation explains the procedures.
Illustrative scenario: a fixed charge that was really floating
This scenario is illustrative only. It does not describe a real client or matter.
A lender takes a debenture fixed and floating charge package from a trading company. The debenture describes the charge over receivables as fixed, but the company continues to bank customer payments into its ordinary operating account and use them freely.
The company enters administration. The administrator, applying the reasoning in Spectrum Plus, treats the receivables charge as floating. As a result, the receivables realisations are applied first to administration expenses, preferential creditors (including HMRC for certain taxes) and the prescribed part, and the lender recovers much less than it expected.
A blocked account arrangement, or a more realistic expectation that the receivables charge would be floating, would have avoided the surprise.
Risks and common mistakes
Late or defective registration
The most common and most costly mistake is failing to deliver the charge to Companies House within 21 days. The charge becomes void against an insolvency office-holder and creditors. Errors in the statement of particulars or a missing certified copy can also cause problems.
Lenders should control the filing, check the Companies House record once registered and keep the registration certificate with the security documents.
Fixed charges without control
Describing an asset as subject to a fixed charge does not make it so. If the company is free to deal with the asset or its proceeds, the charge is likely to be floating, with the ranking consequences that follow.
For receivables and bank accounts, use blocked or controlled accounts. For equipment, keep schedules up to date and restrict disposals in practice, not only on paper.
Taking security for old debt close to insolvency
A floating charge given to secure existing debt within the hardening period can be invalid under section 245, and any security given to a creditor who is connected or who is preferred can be challenged under section 239 as a preference.
Lenders should provide new money at the time security is taken where possible, and document the commercial reasons for the security. Directors should take advice before granting security when the company is under financial pressure.
Missing land and asset-specific formalities
Registration at Companies House does not perfect every type of security. A legal charge over registered land needs to be registered at HM Land Registry, charged shares may need stock transfer forms and share certificates, and some intellectual property can be recorded at the relevant registry to protect priority.
A security checklist that lists every asset, the perfection step required and who will carry it out avoids gaps.
The cross-border angle
An English debenture fixed and floating charge package is expressed to cover assets wherever they are situated, but security over assets abroad generally needs to comply with local law to be effective there. Lenders financing groups with subsidiaries or property outside the UK often take local-law security alongside the English debenture.
For groups with operations in Bangladesh, mortgages and charges over Bangladeshi assets are governed by Bangladeshi law, including registration with the Registrar of Joint Stock Companies and Firms for companies registered there. TRW & Co's London and Dhaka offices coordinate English and Bangladeshi security packages, and our UK–Bangladesh trade and finance team advises on cross-border lending.
Checklist for lenders and borrowers
Before signing, or relying on, a debenture fixed and floating charge package, work through these points:
- Map the assets to be secured and decide which can realistically be subject to a fixed charge.
- Draft the debenture to match the facility, including crystallisation events and enforcement powers.
- Confirm board authority and execute the debenture as a deed.
- Deliver the charge to Companies House within 21 days and check the register entry.
- Register legal charges over land at HM Land Registry and complete share and account perfection steps.
- Agree priorities with other secured creditors in a deed of priority or intercreditor agreement.
- Consider whether a personal guarantee from directors or shareholders is also required.
Our banking and finance team acts for lenders and borrowers on security packages, registration and enforcement, and our real estate finance team advises on property security. To discuss a transaction, contact our London office.
Frequently asked questions
01What is a debenture in UK law?
In everyday banking practice, a debenture is a security document, executed as a deed, by which a company grants a lender fixed charges over specific assets and a floating charge over its whole undertaking. The term also has a wider statutory meaning covering any document that acknowledges or creates a debt. When lenders refer to taking a debenture, they usually mean an all-assets security package supporting a loan, which must be registered at Companies House within 21 days.
02What happens if a charge is not registered within 21 days?
The charge is void against a liquidator, an administrator and other creditors of the company, and the money it secures becomes immediately payable. The lender keeps its contractual claim for the debt but loses its security in an insolvency. The court can extend the period under section 859F of the Companies Act 2006 where the failure was accidental or would not prejudice creditors, but relief is usually given subject to rights acquired in the meantime.
03What is the difference between a fixed and a floating charge?
A fixed charge attaches to identified assets and prevents the company dealing with them without the lender's consent. A floating charge covers a changing pool of assets, such as stock and receivables, that the company can use in the ordinary course of business until the charge crystallises. Fixed charge holders are paid ahead of preferential creditors, while floating charge realisations bear expenses, preferential claims and the prescribed part first.
04What is the prescribed part?
The prescribed part is a portion of the net realisations from floating charge assets that an insolvency office-holder must set aside for unsecured creditors under section 176A of the Insolvency Act 1986. It is calculated by a statutory formula and is subject to a cap, currently £800,000 for floating charges created after the most recent increase. It does not apply to fixed charge realisations, which is one reason lenders seek fixed charges where they can.
05Can a director's loan to their company be secured by a floating charge?
Yes, but the risks are higher. A floating charge given to a connected person, such as a director, can be invalid if created within two years before the onset of insolvency, except to the extent of new money or value provided at or after the time of the charge. Security granted to a director for an existing debt shortly before insolvency may also be challenged as a preference. Directors should take independent advice before taking such security.
06How does a lender enforce a debenture?
After an event of default and demand, the lender can usually appoint an administrator under its qualifying floating charge, appoint a receiver over specific property, exercise a power of sale or, for financial collateral, appropriate the collateral. The choice depends on the assets, the borrower's prospects and the lender's objectives. Office-holders owe duties when selling assets, and intercreditor agreements may restrict when and how enforcement can start.
Sources and official materials
- Companies Act 2006, Part 25 — Registration of company charges
- Companies Act 2006, section 859A — The 21-day delivery period
- Companies Act 2006, section 859H — Consequences of failing to register
- Insolvency Act 1986, section 245 — Avoidance of certain floating charges
- Insolvency Act 1986, section 176A — Prescribed part for unsecured creditors
- Insolvency Act 1986, Schedule B1 — Appointment of administrators by floating charge holders
- Financial Collateral Arrangements (No.2) Regulations 2003 — Security over cash and financial instruments
General information only, current as at 21 October 2026. It is not legal advice and does not create a solicitor–client relationship. It reflects the law of England and Wales unless stated otherwise; Scotland and Northern Ireland have separate legal systems, and the law changes frequently. Check current official sources and take advice on the facts of your matter.