fixed charge

A fixed charge is a form of security over specific and identifiable property. A holder of a fixed charge may force the sale of the property in order to secure payment of a debt in the event that the debt is not paid, and takes priority over other creditors in respect to payment of debts, by having recourse to the security. Fixed charges are acquired as means for creditors to have recourse to assets in default of repayment of a loan or other advance in the event of insolvency.  Fixed charges take priority over floating charges.

Such charges must adequately specify the property over which the security interest is intended to apply. Fixed charges may be taken over real property, intellectual property (registered and unregistered) and other assets of a business. 

Whether or not a charge is fixed or floating will depend upon whether the person taking the security interest retains control over the assets in a practical sense. When the charge is granted, the lender should ensure that it is granted, inter alia, the right to sell the property, the right to the proceeds of the property in priority to other creditors of the borrower, and to restrict dealings with the property.

A holder of a fixed charge takes priority over a holder of a floating charge in insolvency. Fixed charges should include an irrevocable power of attorney and right to sell the assets which are subject to the charge in the event of a default.

Usage: The company granted a fixed charge over its intellectual property.

Related Words: floating charge; charge; equitable charge; equitable interest; legal mortgage; equitable mortgage; company; lien; security interest; mortgage; charging order; pledge; lien.