Fixed Charge: Asset Security in UK Business Lending

What distinguishes a fixed charge

A fixed charge attaches to a specific, identifiable asset at the moment the charge is created. Common examples include commercial property, manufacturing equipment, intellectual property rights, and — in some structures — book debts that are subject to a controlled collection account. The defining characteristic is that the company cannot deal with the charged asset (sell it, assign it, grant further security over it) without the lender's written consent.

Priority on enforcement

Fixed charge holders rank first in the insolvency waterfall. After costs of realising the asset, the proceeds go to the fixed charge holder before preferential creditors, floating charge holders, and unsecured creditors receive anything. This priority position makes a fixed charge the most valuable form of security a lender can hold.

Where a debenture grants both fixed and floating charges, any asset that truly qualifies as subject to a fixed charge (the lender controls the proceeds) attracts the higher priority treatment. Whether a charge over book debts is truly 'fixed' depends on whether the company is free to collect and use the proceeds — a point settled in Spectrum Plus [2005].

Practical implications for borrowers

Granting a fixed charge limits your operational flexibility. You cannot sell the charged asset without the lender's approval — relevant if you later need to refinance, upgrade equipment, or dispose of property. Review the release and substitution provisions in your facility agreement carefully before execution.

• Freehold and long-leasehold property is almost always subject to fixed charge in property-backed lending.
• Plant and equipment may be fixed-charged individually or by description.
• IP portfolios and brand assets are increasingly used as fixed-charge security.

Confirm the specific drafting and registration obligations with your solicitor before signing any security document.