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What a debenture is
A debenture is a document that grants a lender a fixed and/or floating charge over the assets of a limited company. A fixed charge attaches to specific assets — typically land, buildings, or major equipment — and prevents the company from disposing of those assets without the lender's consent. A floating charge attaches to a class of assets that changes in the ordinary course of business, such as stock or trade debtors; it crystallises into a fixed charge upon default. The debenture is registered at Companies House within 21 days of creation; failure to register renders it void against a liquidator or other creditors.
What an insurance policy is
An insurance policy is a contract between your company and an insurer under which the insurer agrees to compensate you (or, in some structures, your lender) for specified losses in return for a premium. It does not give the insurer any legal interest in your company's assets. Instead, it transfers financial risk — if an insured event occurs, the insurer pays. If no insured event occurs, the premium is simply the cost of the protection during that period.
How lenders use both together
A commercial lender will typically take a debenture to secure its legal position over company assets, ensuring it can recover value if the company defaults. Separately, it will require the company to maintain insurance over those same assets — for example, buildings insurance on a property subject to a fixed charge. The lender may be noted on the insurance policy as a loss payee, meaning any claim proceeds are paid to the lender first. The debenture gives the lender control; the insurance gives the lender (and the company) financial protection against loss of the underlying asset.
Practical implications for directors
When you grant a debenture, you are giving the lender enforceable rights over your company's assets — this is a significant commitment. Before signing, ensure you understand which assets are caught by fixed charges and whether the floating charge covers all future assets. When you take out insurance as a loan condition, ensure the sums insured are adequate and that renewal dates do not slip. The two obligations are independent but both must be maintained throughout the loan term.
Frequently asked questions
Does a debenture affect my credit file or Companies House record?
It does not appear on personal credit files, but it is publicly visible on the Companies House register under your company number. Other creditors and potential lenders will see it when conducting due diligence, so the existence of a prior ranking charge can affect your ability to raise additional secured finance.
Can a lender enforce a debenture without notice?
In most standard debentures, the lender must serve a demand or notice before enforcing. The exact process depends on the debenture terms and the nature of the default. Take legal advice immediately if you receive enforcement correspondence.
Funding for UK limited companies
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