| Summary: | 碩士 === 東吳大學 === 法律學系 === 102 === The concept of the floating security, originated from the floating charge in UK, is the current trend of legislation of personal property securities worldwide. In the middle of 19th century, larger companies like railway, canal and public utility undertakings could raise their capital by issuing shares, whereas smaller unincorporated companies could only raise money by loans. When the lenders required securities to secure payments, the smaller companies had to transfer the ownership or possession of the secured property to the lenders because the forms of security recognized by common law were only the mortgage of land or goods and the pledge of goods. Moreover, common law merely recognized that the secured property was present and ascertained at the time the mortgage or the pledge was created. In practical circumstances, the value of land and fixed assets of companies was not enough to settle the financial distress. For those reasons, British lawyers designed a form of security, namely a floating charge, for the smaller unincorporated companies raising money. The conception of the security was based on that if a company was as a going concern, its most of assets, like raw materials, manufactured goods, semi-manufactured goods, stock in trade, and debts payable to it, would be circulating in the ordinary course of its business. Even though its most assets were constantly changing in the ordinary course of business, the company could make profits and collect proceeds to discharge its debts. This security was namely “floating charge”.
Floating charges take effect in equity only. Hence, the agreement of a floating charge covering the company’s undertaking including present and future assets is purported to give the debtor company (the chargor) the power to deal with the assets for carrying on its business free from interference by the chargee before the floating charge crystallised. The company’s after-acquired assets automatically fall within the terms of the floating charge so that the chargee’s interests are still protected. And then, the loan will be repaid with the company’s profits and proceeds. In other words, the purpose and the basically social function of floating charges are the lender and the debtor company can both gain advantages in the way of the security.
It is not deniable that the floating charge was the remarkable creation in 19th century in UK but the empirical results of practice of floating charges over a hundred years, especially for last decades, show that floating charges are vulnerable to priorities. The complex problems relating to floating charges, especially priorities issues, can only be resolved through the courts, and to distinguish between fixed and floating charges has gradually become overladen with case law. For protecting their interests, debenture holders take fixed securities over real property and fixed assets and floating charges only over circulating assets. Nowadays, as a result, floating charges have become the securities over personal property in practice.
Key words:
floating charge, undertaking, in the ordinary course of business, perfection, priority, crystallisation,
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