A Charge Over Assets is a security interest where a company pledges its property or business assets as collateral for a loan, granting the lender legal rights to seize and sell those assets if the debt is not repaid according to the agreed terms.
A Charge Over Assets is a security interest created by a company in favour of a lender, giving that lender a legal claim over specific pieces of company property or the entire business as security for a loan. If the company fails to repay the debt, the charge gives the lender the right to seize and sell the assets to recover their money. This is the corporate equivalent of a home mortgage, where the house acts as collateral for the bank's loan.
When you create a Charge Over Assets, you are essentially "earmarking" business property to protect a creditor. This allows businesses to access larger amounts of capital or lower interest rates because the lender's risk is reduced by the underlying value of the assets. In Ireland, these charges must be formally registered with the Companies Registration Office to be legally valid against other creditors or liquidators.
For founders, understanding a Charge Over Assets is vital because it affects your ability to sell business equipment or property. It also impacts your company's credit profile. Once a charge is registered, it appears on your public company search results, letting future investors and lenders know that some or all of your assets are already pledged to someone else.
A "fixed charge" is attached to specific, identifiable assets that the company usually keeps for a long time, such as property, land, or heavy machinery. Under a fixed charge, you generally cannot sell or alter the asset without the lender's permission. This provides high security for the lender because the asset is "locked" in place.
A "floating charge" is more flexible, covering assets that change in value or quantity on a daily basis, such as stock, raw materials, or book debts. This allows the business to continue trading and selling its inventory without needing the lender's consent for every transaction. If the company defaults, the floating charge "crystallises," meaning it turns into a fixed charge over whatever assets the company holds at that moment.
In Ireland, a Charge Over Assets must be registered with the CRO within 21 days of its creation. This public registration is mandatory to inform other potential creditors that the assets are already burdened with debt. If a charge is not registered within this strict window, it becomes "void" against a liquidator. This means that if the company fails, the lender would lose their priority status and become an unsecured creditor, significantly reducing their chances of getting their money back.
Yes, a company can have multiple charges, but their "priority" depends on when they were registered. This is known as the "order of priority." Generally, the first charge registered has the first claim on the funds following an asset sale. This is why lenders conduct a thorough due diligence search of the public registry before issuing a loan, ensuring they aren't second or third in line behind other creditors.
While a Charge Over Assets primarily concerns company property, it can indirectly affect team members. If a significant portion of company assets is charged, it may limit the company's ability to fund a "buy-back" of shares from a bad leaver or even a "good leaver." Lenders often include covenants in the charge agreement that prevent the company from paying out large sums of cash to departing shareholders without prior approval.
Once the underlying loan is fully repaid, the charge should be "satisfied" on the public register. This involves filing a specific form (Form C6 or C7 in Ireland) with the CRO. Registering the satisfaction is just as important as registering the initial charge, as it "clears" the company's public record, making it easier to secure future equity financing or sell the business.
Yes, charges are frequently created over intangible assets like trademarks, patents, and copyrights. For tech companies, intellectual property is often the most valuable asset they own. Lenders can take a charge over these rights to ensure they have a claim on the company's core technology if the business defaults on its financial obligations.
