Floating Charges in Comparative Perspective

Origins and Project Outline

Our project examining floating charges in comparative perspective can be viewed as a child of the Young Property Lawyers’ Forum. Upon attending YPLF events, we would frequently encounter other property law scholars who would talk about “floating charges” within their own systems. This raised a number of questions. What did others mean by a floating charge? How closely did the security rights in different systems approximate one another? What characteristics did they share? Which systems have or do not have a floating charge? And so on.

Following conversations with each other at YPLF 2018 in Maastricht, we decided to embark upon a comparative study of floating charges and their functional equivalents across a large number of jurisdictions. This will be the widest and most detailed comparative analysis of floating charges yet undertaken. Our intention is to produce a book that will act as a practical reference source for lawyers across the world but which will also provide high quality scholarly consideration of relevant issues, which can serve as a foundation for further academic work or a useful source for those seeking to reform the law in their jurisdictions.

We decided to formulate a questionnaire so that each of our contributors would be responding to the same questions, which would assist with our basic comparative analysis. After agreeing upon questions to be asked, we sought to identify suitable contributors. We have now received responses from a large number of our contributors and have carried out an initial review of these. The content of the questionnaire, the jurisdictions selected and our preliminary findings will be discussed in the remainder of this article.

The Questionnaire

In composing the questionnaire, we sought to pose questions on a wide range of issues relating to floating charges and functionally equivalent security rights. Amongst other things, we were hoping to find out how systems came to have a floating charge or functional equivalent, whether another system was explicitly or implicitly influential in this, the relationship between the security right and property law principles, and how the security is enforced. Here is the full questionnaire presented to our contributors:

  • Does (or did) your system have a floating charge or does (or did) it have a functional equivalent?
  • When, how and why was such a security introduced?
  • Was the law in any other legal systems especially influential when the security was introduced? If so, how did this influence manifest itself?
  • If your system formerly had a floating charge or functional equivalent, when, how and why was such a security abolished?  And what (if anything) was it replaced with?
  • What assets does the floating charge (or equivalent) extend to in your system? In what situations/by whom can it be created?
  • How is (or was) the security created over property in your system? (Particular reference is to be made to publicity/registration.) 
  • How does (or did) the security function in the broader legal system, including with respect to coherence with property law?
  • How do (or did) specific assets become encumbered by the security and how do (or did) specific assets become unencumbered?
  • How is (or was) the security enforced?
  • How is (or was) the security dealt with in competition with other rights, e.g. in a ranking context?


The next step was selecting jurisdictions. We have sought to cover all areas of the world (albeit that we do have more coverage of jurisdictions in some places, e.g. Europe, than in others). The jurisdictions chosen have been picked for varying reasons: some because we were aware that the system is an unusual one as far as security rights are concerned, some because of their interesting connections with another system, others due to their having been through a recent reform process, or because they are considered a “major” commercial jurisdiction. The project currently extends across more than 30 jurisdictions in the Americas, Africa, Europe, Asia and Australasia.

In terms of identifying contributors, the YPLF network has proved invaluable. It has provided us with experts in a number of systems as well as people from whom we could receive recommendations for other countries to cover. The chosen contributors range from PhD students, through senior legal practitioners to renowned university professors. So far, we have received 29 questionnaire responses.

As well as awaiting a few further responses to questionnaires, we are in the process of identifying a handful of further jurisdictions that we would wish to have contributions from, including the Republic of Ireland, Brazil, India and Japan.

Initial Findings

Upon receiving various questionnaire responses, one thing immediately struck us as remarkable. Contributors were stating that their system had a floating charge or functional equivalent but the security right in question was rather different to security rights in other systems where the relevant contributors had stated that they too were floating charges (or equivalents). This has caused us to re-examine a key question: what is a floating charge, or what makes a security right “floating”?

We are of the view that there is no undisputed single concept of a floating charge. Instead, there is a spectrum of what may be considered a floating charge, or perhaps more accurately a “floating security right” (as a “charge” is strictly speaking limited to English equity). We have therefore sought to define a floating security right in both a broad sense and a narrow sense.

For our working definition of a floating security right in the broad sense, the security has to comply with two core characteristics:

  1. It is a security right over multiple present and future assets, and
  2. The security grantor ordinarily has the power to dispose of property “covered” by the security right without the explicit consent of the security right holder.

Effectively, this broad definition comprises “revolving” security rights over a number of assets. Every jurisdiction we have so far received a questionnaire from has one or more security rights that conform to this broad definition – which leads us to believe that having such a type of security right is a core need of a modern economy.

We have also identified three common characteristics which are frequently encountered in addition to the core characteristics:

  1. That one and the same security right may be granted over different classes of assets (e.g. tangible movables, intangibles, immovable property) up to the totality of the assets of the grantor (“global security right”),
  2. That it is a security right available only to enterprises, and
  3. That a special comprehensive enforcement mechanism exists that replaces the grantor’s control of the enterprise.

Several of the jurisdictions considered have a “global” security right that fulfils the first characteristic, and some offer a special enterprise-only security right – and there are also instances where these two criteria are combined into a global-enterprise-only security right – these jurisdictions constitute the “middle” of the spectrum of floating security rights. Finally, in a number of jurisdictions, the third criterion of a special enforcement mechanism is also present – the fulfilment of all three common characteristics makes a security right “floating” in the narrow sense.

While it is too early to draw definitive conclusions from our findings, we have nevertheless noted some interesting aspects. Contrary to what one would assume, geographical distribution does not seem to be too strong a factor – rather, connections seem to stem from similar legal traditions, colonial influences, and direct or indirect legal transplants. The tracing of such influences is an avenue that we want to explore further in the course of the project. Similarly, we realised that not all jurisdictions that have a floating security right in the narrow sense base it on the English floating charge – instead, other models (e.g. a general hypothec) may lead to similar results. Comparing the different mechanisms that lead to functionally equivalent results will form another focus of the project.

Next Steps

We have decided to adopt a tri-partite structure for the book that will emerge from the project. The first part will be a “reference part” that will present the “raw data” regarding floating security rights in around 35-40 jurisdictions, mostly in the visual form of maps, tables and diagrams. In a second part, we will write a comprehensive comparative overview report drawing conclusions from this data. The third part will consist of essays which highlight particular issues (e.g. policy factors, property law principles) either from the point of view of a particular jurisdiction or comparatively examining a selection of jurisdictions.

Our next task will be the gathering of information for the reference part of our planned volume. In order to collect data that can easily be handled, compared and visualised, and also to keep the practical efforts for everybody involved to a bearable minimum, we are planning to do this by another round of questionnaires. Over the course of the summer, based on the results from answers provided so far, we will create a more detailed follow-up questionnaire. This will mostly consist of “closed” questions (i.e. yes/no, boxes to tick on a scale, etc.). Parallel to that, we will identify the selection of issues and jurisdictions for more in-depth exploration in essay form, and then approach the relevant contributors.

As well as the book, we would like to hold a conference or workshop to discuss the research emerging from the project. And our hope is that this project will only be the first in a longer series of research endeavours examining aspects of floating charges and other rights in security. As such, it may simply be one of many children and grandchildren of the YPLF to be born in the years to come…

Alisdair MacPherson         Caroline S. Rupp

University of Aberdeen      University of Würzburg

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