On The System Of Floating Charges

Floating charge originates from Britain in the nineteenth century, and was established by Equity Court through legal practices to meet the new demand of financing capacity. With the development of economy in China, the demand of financing in our market is increasing rapidly. But many middle-sized or small companies'capacity of financing is limited in the traditional mortgage system. Floating charge, which was passed through "PRC Property Law", on March 6,2007, offered a new way to financing and could meet the demand of financing in the economic market very well. Although the establishment of floating charge is significant, there are still many problems such as the system of floating charge is too simple, and its lack of relative measures and so on.This article starts with studying the development of floating charge and its basic theory by using the methods of historical research, comparative research and value analysis research. Then introduce the characteristics of floating charge and analyzing the advantages and defects, and studying the system in other countries. Finally introduce the legislative process of floating charge in China and evaluating the system, and trying to give advices about how to perfect the-system.This article consists of four chapters. The first chapter introduces the development and the concept of floating charge, which was created to meet the demand of financing in the highly developed society. Compared with the descriptions of floating charge by the British judges, the author tries to define it as:the mortgagor takes the whole or part of his present and future property to guarantee the debt, during the charge term, he has the right to dispose the charged property, so the charged property can flow freely, once some events happen, the floating charge crystallizes to fixed charge.Then the author analyzed the basic theories of floating charge, including "the theory of permission" and "the theory of future-property", but neither of them can explain the system well. The author thought that the "the theory of entrust" which due the mortgagor's right to the commission from the creditor could make a better explanation.The second chapter introduces the characteristics of floating charge and analyzing the advantages and defects. First, floating charge secured with floating objects, and secured the freedom of people dispose of property, leading to specific issues fixed collateral, the special nature of registration, and other characteristics. Then the author analyzes the advantages of floating charge such as increasing the enterprises'capacity of financing, making a full use of property, being propitious for the enterprises'management, and the simple procedures. At the same time, floating charge has its defects such as increasing the risk of mortgagee and the weak effectiveness.Chapter three introduces floating charge in different countries such as England, Scotland, America and Japan. The author introduces the mortgagor, the range of the floating objects and the effectiveness of registration, in order to compare with the system of floating charge in China.Chapter four analyzes and evaluates floating charge in China. There are some defects such as:the range for the property is too narrow, the right and responsibility are not explicit, lack of trustees'system and the regulation of priority. Finally there are some suggestions to floating charge in our country, such as to expand the scope of collateral, to establish the social security system, to construct the system of trustees and the priority.