CIMA BA4 · Chapter 13 · Question 8 of 10
Under English law, which statement about a floating charge is correct?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) It is a charge over a class of assets that changes over time, such as inventory, which the company can deal with in the ordinary course of business until crystallisation
Explanation
A floating charge hovers over a changing class of assets and allows the company to deal with them freely until an event, such as liquidation or default, causes it to crystallise into a fixed charge. A fixed charge attaches to specific assets. Fixed charges rank ahead of floating charges, and only companies and LLPs can create floating charges.
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