floating security

floating security
A form of security by equitable charge wherein the property standing as security is left with the debtor to be handled and even sold in the due course of a business, with provisions for replenishing the security whenever it becomes depleted. Pennsylvania Co., etc. v United Railways, etc. (DC Me) 26 F Supp 379. It is what might be called an equitable lien, a continuing charge on the assets of the company creating it, but permitting the company to deal freely with the property in the usual course of business until the security holder shall intervene to enforce his claim, whereupon the lien or charge becomes fixed or crystallized and the company which gave it has no further authority to deal with the property. Nor can the general creditors take the property charged with the lien after the secured creditor has intervened to enforce the lien. Pennsylvania Co., etc. v United Railways, etc. (DC Me) 26 F Supp 379.

Ballentine's law dictionary. . 1998.

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