Debenture

A debenture is a formal document through which a limited company grants a lender a fixed and/or floating charge over the company's assets. A fixed charge attaches to specific identifiable assets (such as land, buildings, or major equipment). A floating charge covers a category of assets that changes from time to time (such as stock, debtors, and cash), crystallising into a fixed charge upon default.

Debentures are registered at Companies House and are publicly visible on the company's filing record. Any business considering lending to a company can check Companies House to see whether existing debentures have priority over their own security. A debenture with a negative pledge clause prevents the company from granting other security without consent.

Debentures are commonly used by invoice finance providers (to secure the sales ledger), commercial mortgage lenders, and large unsecured business loan providers. For borrowers, a debenture means the lender has broad rights over company assets in the event of default - including the ability to appoint an administrator.

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