Reed Smith Client Alerts

The High Court’s ruling in Re Avanti Communications Limited (in administration)1 is the first major case examining the features of fixed and floating charges under English law – particularly in relation to the level of control required to take a fixed charge – since the 2005 House of Lords decision in Re Spectrum Plus.2 We examine the key takeaways of this case and the potential implications for parties involved in secured lending transactions.

Key takeaways

A total prohibition on the chargor dealing with the charged assets is not always necessary for the charge to take effect as a fixed charge. The High Court advocated a more nuanced approach to determining whether a charge is fixed or floating, depending on a combination of factors such as the nature of the chargor’s business and the charged assets, and the chargor’s ability to deal with the charged assets. There is therefore a “spectrum” of possibilities between total freedom to deal with the charged assets (plainly incompatible with a fixed charge) and a total prohibition on any kind of dealings in respect of those assets (typically a fixed charge).

This decision clarifies for creditors that taking fixed charge security with limited permissions for the chargor to deal with the charged assets may not necessarily be fatal to the characterisation of the charge.

Lenders will, however, need to exercise a degree of caution. For example, on trade finance transactions, the nature of a trading business and the assets subject to a charge (such as commodities or receivables) often fall on the wrong side of the “spectrum”, such that any significant freedom to deal with the assets without the lender’s consent will likely be inconsistent with the existence of a fixed charge.


Under English law, a key consideration between the characterisation of a floating charge and a fixed charge is the degree of control exercised over the charged asset by the relevant lender.

Demonstrating sufficient control is, therefore, a key concern for lenders in order to mitigate the risk that a charge expressed as a fixed charge is re-characterised by the court as a floating charge.