11 - The Empirical Importance of the Floating Charge in Scotland

Summary

A. INTRODUCTION

B. THE MACRO PICTURE

(1) Methodology

(2) Results

(3) Implications

C. THE MICRO PICTURE: RECENTLY LIQUIDATED COMPANIES

(1) Methodology

(2) Results

(3) Implications

D. THE MICRO PICTURE IN CONTEXT: TERMS OF FLOATING CHARGES

E. CONCLUSION APPENDIX

A. INTRODUCTION

The rest of this book outlines the historical, theoretical and practical elements of the floating charge in Scotland. In this chapter, we explore empirically how important the floating charge is for Scottish companies. Empirical research provides an original method of reviewing the world as we find it. Companies are usually brought into existence by registration at Companies House. Fixed securities and floating charges created by a company must be registered against that company at Companies House within twenty-one days of their creation to be valid. The records of Companies House are freely available and ripe for empirical study. This chapter examines Companies House data and uses three different empirical techniques to review the floating charge in practice.

First, Companies House is subject to freedom of information requirements and therefore we submitted freedom of information requests to ascertain the macro picture regarding the creation of floating charges. Secondly, we utilised data obtained on Scottish companies who filed certain insolvency (liquidation) forms between 1 October 2019 and 30 September 2020 to review this set of companies and identify their use of floating charges. Thirdly, we reviewed a sample of the floating charges granted by such companies to identify and examine certain key terms included in these instruments.

Legal empirical research has been compared to attempts to verify a pre-existing hunch and, as such, legal empirical research does not need to be held up to the same level of statistical scrutiny that other social sciences require. Our first method of analysis overcomes any risk, as it presents a holistic overview of the floating charges granted by Scottish companies. Our second and third methods rely on a smaller sample, and therefore there may be limits as to their extrapolability. Nonetheless, our results are stark – the floating charge is an integral part of Scottish corporate finance. In addition, our examination of the terms of a sample of floating charges shows some commonplace terms and variations thereof and highlights the potential for future research.