Companies Act 2014 section 597

Circumstances in which floating charge is invalid

Section 597 sets out the circumstances in which a floating charge created over a company's assets may be declared invalid when the company enters liquidation, primarily to prevent companies from securing old debts at the expense of other creditors.

• A floating charge created within 12 months before liquidation is presumed invalid unless the company can prove it was solvent immediately after the charge was created
• The charge remains valid to the extent it secures money actually advanced, the value of goods or services actually supplied, or interest at the appropriate rate on those amounts
• The value of goods or services is assessed at what could reasonably have been obtained for them in the ordinary course of business on the same terms
• Where the floating charge is created in favour of a connected person, the 12-month look-back period is extended to two years