While case law has established that the main characteristic of a floating charge is the unfettered freedom of the chargor to deal with the charged assets in the “ordinary course of business”, there is conflicting authority on the legal meaning of the phrase. Lawyers drafting security documents containing a floating charge should find helpful the court’s conclusions in Ashborder BV & Ors v Green Gas Power Ltd & Ors [2004] when examining the meaning of ‘ordinary course of business’ in this context.
The judgment should also provide assistance to chargors in determining whether a contemplated transaction involving assets that are subject to a floating charge would be in breach of the terms of the security. However, it is worth noting that since the court did not formulate a particular legal ‘test’ on the meaning of ‘ordinary course of business’, it remains to be seen whether an unintended consequence of the court’s conclusions in Ashborder will actually be to encourage litigation over such transactions.
