A Critical Analysis of the Nature and Effectiveness of a Floating Charge as a Security in Nigerian Law

Abstract

The purpose of this research is to examine the character and efficacy of a floating charge as a security in Nigerian law. It argues that the disadvantages of a floating charge are so much making it a vulnerable security. The charge holder runs the risk of the company dissipating the assets attached to the charge which arguably is the most serious risk the charge holder faces. Furthermore, a floating charge usually will be deferred to any subsequent fixed legal charge created by the company over its assets. Similarly, if the company’s debts are under a floating charge, a floating charge holder’s asset will be made subject to or put under a lien or any set off created by the company with respect to the charged assets before crystallization. It uses the blackletter approach, relying particularly on the relevant provisions of the Nigerian Companies and Allied Matters Act and cases.