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What is the difference between fixed charge and floating charge?

Apr

23

2016

What is the difference between fixed charge and floating charge?
Fixed Charge – Fixed charge is also called specific charge .It extends over a specific property or properties of the company .In other words , when a particular or a specific property of the company is given as a security for loan , then a fixed charge is said to be created over the property .It may be noted , that charges specified in Section 125 4 b of the company act 1956 created in conformity with the provisions of the said Act over a specific property gives a right to the creditor so secured to sell the said property and claim the proceeds towards the dues payable by the company.
Floating Charges – A floating charges means a charge that I general not specific .It can be said to be a charge –
that floats over the present and future property of the company subject thereto ,that means it does not fasten on or attach to any particular or specific property;
That does not restrict the company from assigning the property , subject to charge to third persons , whether by way of sale or security
That on happening of an event or contingency crystallizes as a fixed charge .
From and above it can be noted that when the charge is floating ,the company may ,in the ordinary course of business ,deal with the property in any manner until the charge attaches .In other words a floating charge is an equitable charge which does not fasten on any specific property but covers the whole of the company’s property whether it is or is not subject to fixed charge.

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