What is a fixed charge?

Definition of fixed charge

A fixed charge is security taken by a creditor for a particular debt.

If your business borrows money from the bank, the bank may say it wants to take a fixed charge over a particular asset of your business, for example, your business's premises.

This means that if your business stops repaying the bank, it can seize your business's premises and sell them to recover the money it's owed.

Holders of fixed charges take precedence over most other creditors if a business is liquidated. For example, if your business is in liquidation, a bank holding a fixed charge over your business's property would be entitled to be repaid first from the sale of the property. Only money left over from that sale could go to the rest of the creditors.

If you have given a fixed charge on one of your business's assets, you can't usually sell that asset without permission from the creditor who holds the fixed charge.

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