The floating charge is sinking

All eyes have been on the new moratorium regime, and coronavirus has distracted us from the government’s proposals to reintroduce crown preference, but the Finance Bill 2020 has not gone away and as it stands when it comes in, Clause 98 it will have no grandfathering, and so will apply to any insolvencies beginning on or after 1 December (see Clause 98(7)), and so will relegate floating charges – no matter how many years ago they were created – behind various unpaid taxes. This will particularly impact ABL lenders, which often rely on floating charge security. And the new CIGA 2020 does its bit to prejudice floaters too, by ranking them behind moratorium and priority pre-moratorium debts where a company goes into administration or liquidation within 12 weeks of the end of a moratorium. Will all this lead to a re-examination by ABL lawyers of alternatives – block discounting, invoice factoring and other sorts of receivables purchase arrangements? If so, it may in turn may lead to further cases about the recharacterization of commercial arrangements (the last important case being probably the 1992 CA Exfinco decision (Welsh Development Agency v Export Finance Co Ltd).