Key points

  • Floating charge is valid even where there are no unencumbered assets at the time it is taken

  • Crystallisation of prior ranking floating charge does not impact enforceability of second ranking floating charge

The facts

A company (C) granted fixed and floating security in favour of Nationwide (N) in breach of a negative pledge contained in a prior ranking debenture granted in favour of a different secured lender (P). The breach of the negative pledge resulted in the automatic crystallisation of the floating charge contained in P’s debenture.

N subsequently appointed administrators to C (with P’s consent). Shareholders and creditors of C challenged the appointment arguing that it was invalid because at the time that N’s security was taken, there were no assets which could be charged by way of floating charge and/or that such floating charge was not enforceable.


The Court of Appeal rejected the appeal. The Court found no basis in prior case law to support the submission that the validity of the floating charge was dependent on the existence of any uncharged assets owned by C. The only requirements were those set out in the Insolvency Act and the characteristics set out in case law.

In the leading judgment, Briggs LJ cited with approval Vinelott J’s analysis in an earlier case, referring to the fact that companies often grant floating charges to set up for business by borrowing working capital, before acquiring any assets. Secondly, in cases where a prior fixed charge has been granted, this still leaves a subsequent floating charge to attach to the charging company’s equity of redemption under the fixed charge.

In relation to enforceability, the Court confirmed that this was governed solely by the terms of the debenture.


The judgment will be well received by secured lenders as it reaffirms that the ability to take a valid floating charge and/or effect an out of court appointment of administrators is not hampered by the existence of a prior floating charge, or automatic crystallisation of a negative pledge.

SAW (SW) Limited v Wilson & Ors [2017] EWCA Civ 1001