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In brief, in response to Ed Brewer, in English Law, fixed charges are preferable to floating charges as the latter come below fixed charges and preferential creditors (employees for their salaries, expenses of the liquidation, treasury and social security (though the last two elements could cease to be preferred under planned legislation)) in liquidation. The only advantage in having a floating charge is the power to appoint an administrative receiver (although the planned legislation may take away this power too).

A fixed charge can be created over receivables if the chargor does not remain free to deal with them as he pleases but is obliged to pay them into a specially designated bank account (Siebe Gorman v Barclay's Bank [1979] 2 Lloyd's Rep 142). The decision in New Bullas (not followed in Brumarck) created the possibility of creating a fixed charge over the receivables but a floating charge over the proceeds. The chargor would be required to pay into the specially designated account (and so would not be free to deal with the receivables in the ordinary course of business) but could then deal with the funds in the account in the ordinary course of business. The Privy Council in Brumarck said that this didn't make sense: if you are free to deal with the money paid into the account, you have a mere floating charge.

Best regards

Matthew Scully

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