A. INTRODUCTION

B. THE NATURE OF THE FLOATING CHARGE

C. SCOPE OF FLOATING CHARGE

D. ENFORCEMENT OF THE FLOATING CHARGE GENERALLY

E. ENFORCEMENT THROUGH RECEIVERSHIP

F. THE FLOATING CHARGE AND OTHER INSOLVENCY PROCESSES

G. RETRENCHMENT

H. CONCLUSION

A. INTRODUCTION

The floating charge is intimately bound up with insolvency law and this chapter explores that relationship with particular reference to Scots law. The chapter commences with a discussion of the nature of the floating charge as a security in the context of insolvency law. It then turns to issues relating to the scope of the floating charge and their implications in the context of insolvency law. Thereafter, it considers enforcement of the floating charge, particularly through the process of receivership, and the charge's interaction with other insolvency processes. Finally, it examines the retrenchment brought about by the Enterprise Act 2002. It concludes with an assessment of how well, or otherwise, the law has been able to accommodate the floating charge into the insolvency framework and what this tells us about the nature and operation of the floating charge.

B. THE NATURE OF THE FLOATING CHARGE

Like other securities, the floating charge is intended to give its holder an advantage over other creditors on the insolvency of the granter, insolvency generally being considered the ‘acid test’ of a security. Insolvency law generally, although not invariably or completely, respects pre-existing rights including security rights. In many ways, however, the floating charge is different from other types of security, and this means that it is not always possible to treat it in the same way as other securities on insolvency.

First, at the risk of stating the obvious, the floating charge is floating. Unlike other securities, at least those created consensually, the floating charge does not in itself confer a real right in the property subject to the security: it floats over that property until something causes it to attach.