The financial encyclopedia uses cookies to improve your user experience. Find out more here!



 

 


 

Charge
 

 

A term used in commerce in two major senses: first, as a synonym for price, where sale of goods or services is concerned (though usually one speaks of a charge for services and the price of goods); second, in the context of mortgages and the lending of money on security. The creditor is said to have a 'charge' on the property, real or personal, which is provided as security for the loan. The property need not change hands and it is more common for the relevant documents of title or a bill of sale to be given as security. In certain instances the creditor must register this charge. Many charges on the property of a company cannot be enforced until they have been registered at the Companies Registration Office and, in a liquidation, they will be honoured not in the order incurred but in the order registered. The company itself is equally bound to register such charges. Although it may not be necessary to have all charges on the assets of a company registered, it is safer for the creditor to do so lest there be any doubt.

Again, charges on land must be registered at the Land Registry if they are to be effective against a subsequent purchaser, though possession of the title deeds on a legal mortgage should make registration unnecessary for the protection of the lender. Charges secured on a bill of sale must also be registered under the Bills of Sale Act. Charges by way of securing a debt fall into two main groups: floating charges and fixed charges. Floating charges are generally associated with loans to businesses and especially to companies; the charge is not on a particular item of property but on the company's assets generally. It remains despite changes in the composition of those assets. A fixed charge, on the other hand, refers to a specified asset, e.g. a defined piece of land or a building, whether freehold or leasehold. The whole subject of charges and the registration thereof is a complicated one and the subject of much litigation. It is not possible to deal with it comprehensively here and any person confronted with a problem in this field is advised to take professional advice.

Reference: The Penguin Business Dictionary, 3rd edt.