Section 859A (Companies Act 2006)
Definition
Section 859A of the Companies Act 2006 is the provision that requires most charges created by a company to be registered at Companies House within 21 days of creation, failing which the security is void against a liquidator, an administrator and any creditor of the company. In IP-backed lending, section 859a charge registration is a hard deadline that no lender can afford to miss: a legal mortgage, fixed charge or floating charge over intellectual property that is not registered in time still binds the borrower but collapses on insolvency, precisely when the lender most needs it. The consequence is severe, because the debt it secures becomes immediately payable and the lender is relegated to the position of an unsecured creditor, ranking behind fixed and preferential claims in the insolvency waterfall. Registration also puts the wider market on notice of the charge, which is why encumbrance searches at Companies House are a routine part of due diligence. For IP specifically, the charge should additionally be recorded at the UK Intellectual Property Office so that the security is noted against the registered rights themselves. This matters to both sides: a lender taking security over a UK SME's patents under a facility such as NatWest's High Growth IP Loan will register the charge within the 21-day window as a matter of course, and a borrower's advisers should confirm registration has been completed to avoid any later dispute about validity. The 21-day period runs from the date the charge is created, not the date funds are drawn, so diarising it from execution is essential. It is the UK analogue of perfecting a security interest, comparable in function to filing a UCC-1 in the United States, and getting it right is fundamental to the enforceability of any charge over intellectual property.
Complementary Terms
Concepts that frequently appear alongside Section 859A (Companies Act 2006) in practice.
The legal process by which a creditor's security interest in collateral becomes enforceable against third parties, typically through registration (UCC filing, PPSA registration, or Companies House filing), possession of the collateral, or control over financial assets. Perfection establishes the creditor's priority ranking relative to other secured parties.
A security interest granted by a borrower over its intellectual property assets — including patents, trademarks, copyrights, and trade secrets — as collateral for a loan or other financial obligation. IP charges must typically be registered at both the relevant IP registry (such as the UK Intellectual Property Office or USPTO) and the general security interests registry (Companies House, UCC, or PPSA).
A security interest over a specific, identified asset that prevents the borrower from dealing with or disposing of the charged asset without the lender's consent. Fixed charges attach to assets such as land, buildings, specific plant and equipment, or identified intellectual property rights.
A form of security interest, primarily used in UK and Commonwealth jurisdictions, that attaches to a class of present and future assets of a company (such as stock, receivables, or general business assets) without preventing the company from dealing with those assets in the ordinary course of business. A floating charge 'crystallises' into a fixed charge upon the occurrence of a specified event such as default, appointment of a receiver, or commencement of winding up.
Security priority ranking is the order in which competing creditors are paid from a charged asset when a borrower defaults or becomes insolvent. In IP-backed lending it determines how much a lender can realistically recover from intangible collateral, and so it directly shapes the loan-to-value the lender is prepared to offer.
A legal mortgage over intellectual property is the strongest form of security a lender can take over an intangible asset, in which legal title to the IP is transferred to the lender as collateral, subject to the borrower's right to have it returned once the loan is repaid. In practice a legal mortgage ip security is created by an assignment by way of security, almost always paired with a licence-back so the borrower can continue to exploit the very patents, trade marks or registered designs it has charged.
An encumbrance over intellectual property is any existing charge, security interest, licence or other third-party claim that burdens an IP asset and limits the owner's freedom to deal with it. Running an encumbrance intellectual property search is a standard part of a lender's due diligence, because a prior charge held by another creditor would rank ahead of the new lender and could leave it with little or no recovery on default.
Related FAQ
What is the NatWest High Growth IP Loan?
The NatWest High Growth IP Loan lends £250k to £10m against intellectual property at up to around 50% of independently appraised value, revalued annually. It was the first such facility from a UK high-street bank.
Read full answer →How do I register a charge over IP at Companies House?
File form MR01 with a certified copy of the charge instrument at Companies House within 21 days of creation, or the charge is void against a liquidator or administrator. Also record it at the UK IPO.
Read full answer →What is Section 859A and why does it matter for IP loans?
Section 859A of the Companies Act 2006 requires most company charges to be registered at Companies House within 21 days. Miss the deadline and the security is void against a liquidator or administrator.
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