What does 'in the ordinary course of business' mean in connection with floating charge asset disposals?

The ability of a chargor to dispose of or otherwise deal with assets in the ordinary course of business is the hallmark of a floating charge. Chargors are therefore permitted to dispose of and deal with floating charge assets in the ordinary course of business prior to crystallization even if this is not specifically stated in the debenture or other finance document.

The debenture may include a provision permitting the chargor to deal with their floating charge assets 'in the ordinary course of business' (effectively restating the law). Alternatively, the lender may want to impose additional controls on how the chargor deals with floating charge assets, eg by a negative pledge or a prohibition on disposals of floating charge assets except in the ordinary course of trading (see: Practical application).

Understanding the meaning of 'ordinary course of business' in this context can be helpful:

1. •

   in the context of a new transaction, when deciding whether to impose additional contractual controls on the chargor's ability to