Floating charge: A child of equitable circumstance and its hybrid disposition

Abstract

The recent global economic recession has further brought to the fore the need for  secured credit transaction in the economy as well as the law governing credit taking.  Nigeria and indeed many countries across the globe had a fair share of this global  challenge. As a corollary, banks and other financial institutions dealing on credit  became more conscious in their credit dealings with the aim of minimizing their  exposure to any risk especially as it relates to non-repayment of loans advanced to the  debtors. Floating charge, which is a creation of equity, has remained one of those mechanisms adopted by the Banks in securing the loans and ensuring their repayment. Despite its extensive use in modern commercial transactions, the floating charge  mechanism and its underlying concepts and law have been plagued with controversies,  uncertainty and unnecessary complexity. This paper is aimed at dissecting the laws  behind the floating charge mechanism, especially in relation to the distinction between fixed and floating charges and its importance in dealing with charges over book debts.

Key words: Floating charge, Fixed charge, Debenture, Secured Debenture