Qualifying floating charge holder rights
A well-drafted bank debenture is one of the most powerful positions in UK insolvency. It lets the lender appoint an administrator same-day, block a directors' choice of IP, and steer the process from the outset. Here's what a QFCH can and cannot do.
Paragraph 14 — file the Notice of Appointment at court, no notice period, no hearing.
5-day NoI window under para 26 — consent, do nothing, or override with your own IP.
Also entitled to apply under para 12 for a court order in contested cases.
Definition — the three-part test
Under Sch B1 para 14(2), a floating charge qualifies only if the instrument (a) says so, or (b) purports to empower the holder to appoint an administrator, or (c) purports to empower the appointment of an administrative receiver. In practice, modern bank debentures include all three.
Para 14(3) adds the coverage test: the charge, together with any other floating charges held by the same person, must cover "the whole or substantially the whole of the company's property". Case law (Re Croftbell [1990] BCC 781) suggests coverage of the great majority of assets by value is enough.
Interaction with the directors' route
The directors must give notice of intended appointment to every QFCH under para 26(1). The QFCH then has 5 business days to respond. Three options: (i) consent — appointment can go ahead immediately; (ii) silence — directors can proceed once the 5 days expire; (iii) counter-appoint — QFCH files its own Notice of Appointment under para 14, which prevails.
This is the practical mechanism by which lenders control the choice of insolvency practitioner. In borrower-friendly cases, banks routinely consent to the directors' choice. In enforcement scenarios, they appoint their own.
See Out-of-court appointment for the mechanics.
Frequently asked questions
What is a QFCH?
A holder of a 'qualifying floating charge' as defined in Sch B1 para 14(2)–(3): a charge that (a) states it is a qualifying floating charge, (b) purports to give a power to appoint an administrator or an administrative receiver, and (c) covers the whole or substantially the whole of the company's property. Most modern bank debentures qualify.
Can any floating charge holder appoint?
No — only a QFCH. A floating charge over a specific asset (e.g. only over stock) is not sufficient. The 'whole or substantially the whole' test looks at the property covered against the company's total assets at the date of appointment.
What are the QFCH's core rights?
Three main powers: (1) appoint an administrator directly out of court under para 14; (2) require notice of any directors' or company appointment, and either consent or appoint their own IP; (3) apply to court for an administration order under para 12.
Can a QFCH still appoint an administrative receiver?
Only if the charge was granted before 15 September 2003 or the appointment falls within one of the s.72A–72GA IA 1986 exceptions (capital-markets, project finance, PPP, utilities, urban regeneration, financial-market and social-landlord). For everyone else, administration replaces administrative receivership.
What is the 5-business-day rule?
Under para 26(1), directors' or company appointments must give 5 business days' notice to every prior QFCH by way of the Notice of Intention. This is the QFCH's opportunity to (a) consent, (b) do nothing, or (c) appoint their own choice of administrator.
Can the QFCH veto the directors' choice of IP?
Effectively yes. If the QFCH prefers a different administrator, they can appoint their own under para 14 during the 5-business-day notice period, which pre-empts the directors' choice. The QFCH's appointment takes priority.
What if multiple QFCHs disagree?
Priority follows the order of creation of the charges. The prior-ranking QFCH's appointment takes priority under para 15. If two QFCHs both file notices, the court decides who prevails, weighing priority and the interests of creditors as a whole.
Does a QFCH pay for the administration?
The administration is funded from company assets. However, the QFCH is usually the largest secured creditor and effectively bears the economic cost through reduced recoveries. Fees are subject to creditor and (if applicable) committee approval under SIP 9.
What happens if the security is defective?
If the charge is not properly registered under s.859A CA 2006 within 21 days of creation, it is void against the administrator. A QFCH with a void charge has no appointment right. Diligent registration is critical — see also our page on <a href='/administration/secured-vs-unsecured-creditors'>secured creditors</a>.
Where is the QFCH framework set out?
Sch B1 paras 14–15 (appointment), para 22–26 (interaction with directors' appointments), para 12 (court applications). The definition is in para 14(2)–(3). Enforcement is subject to any moratorium under CIGA 2020 Part A1.