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Difference in Fixed and Floating Charges

(1) Assets – Fixed charge can be generated only on certain specific assets which can be permanently identified and determined. Movable charge can be generated on all assets or any part or class of assets which are subject to change or change from time to time.

(2) Transaction or transfer of property – The company cannot buy, sell or transfer the property charged under fixed charge, whereas the property charged under movable charge can be transacted or transferred under normal business. .

(3) Existing or future assets – Movable charge can be generated on both types of assets, whereas fixed charge can be generated on existing assets only.

(4) Conversion – A mobile charge is converted into a fixed charge, but a fixed charge cannot become a mobile charge.

(5) The effective floating charge shall remain in force until such time as the institution continues or this right is not exercised by the lender in case of default in payment of the loan by the institution. The effect of fixed charge is clear from the very beginning as to which properties will be affected in case of error.

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