Security & Charges Over IP: Companies House s.859A
Taking security over IP charges only protects a lender if the structure is sound and the charge is registered at Companies House within 21 days — miss that window and it is void against a liquidator.
Why security over IP has to be taken deliberately
When a lender advances against intangibles, the loan is only as strong as the security that sits behind it. Cash flow is the primary repayment source; the charge over the IP is the fallback that a lender relies on when things go wrong. Security over IP charges must therefore be structured to survive an insolvency, and perfected on the public record so that a liquidator or administrator cannot set them aside.
This page explains the three security structures used over IP, how each is perfected at Companies House and the UK IPO, where a charge ranks in an insolvency waterfall, and what a borrower actually gives up and keeps. It sits within our lending standards hub and complements the lender's guide and borrower's guide.
Key takeaway: A charge over IP that is not registered at Companies House within 21 days of creation is void against a liquidator or administrator under s.859A of the Companies Act 2006. The debt survives; the security does not.
The three security structures over IP
Security over IP ranges from an outright transfer of title down to a floating claim over a shifting pool of assets. The stronger the structure, the more control the lender has on enforcement — and the more the borrower concedes up front.
Security structures ranked strongest to weakest
| Structure | What it does | Borrower position |
|---|---|---|
| Legal mortgage / assignment by way of security | Legal title in the IP passes to the lender, with a licence-back so the borrower keeps operating and re-acquires title on repayment | Strongest for the lender; borrower gives up bare legal title but retains use via the licence |
| Fixed charge (by patent number) | A charge fixed to specifically identified rights — e.g. named patents by number — that the borrower cannot deal with freely without consent | Borrower keeps title but loses the freedom to sell, licence or abandon the charged rights |
| Floating charge | A charge that hovers over a class of assets (including after-acquired IP) and crystallises on default | Borrower deals with the assets in the ordinary course until crystallisation; weakest priority |
In practice a lender often combines these: a fixed charge or assignment over the core registered rights that carry the collateral value, plus a floating charge (within a wider debenture) to sweep up everything else. HSBC Innovation Banking, for example, typically takes a first-ranking debenture that includes IP.
Perfection: registration within 21 days
Creating a charge is not enough. To be effective against third parties and an insolvency office-holder, the charge must be perfected. For a company borrower that means two steps, and the first is time-critical.
- Companies House (s.859A). The charge must be registered within 21 days beginning with the day after it is created. Miss the deadline and the charge is void against a liquidator, administrator and any creditor — leaving the lender unsecured. Late registration generally requires a court order. See our glossary entry on Section 859A.
- UK IPO. For registered rights, the security interest should also be recorded against the patent, trade mark or design at the UK Intellectual Property Office. This puts prospective buyers and other financiers on notice and protects priority against a later assignee.
Key takeaway: Registration is a diligence checkpoint in both directions. A lender searches Companies House and the UK IPO for existing encumbrances before advancing, and registers its own charge promptly after. Both searches feature in any Lending Readiness Report.
Priority in insolvency
When a borrower fails, the order in which claims are paid decides whether a lender recovers anything. Where a charge sits in that waterfall is a direct function of the structure chosen above.
The insolvency priority waterfall
| Rank | Claim |
|---|---|
| 1 | Fixed charge holders (over the charged asset) |
| 2 | Insolvency expenses and the office-holder's costs |
| 3 | Preferential creditors (certain employee claims, some HMRC debts) |
| 4 | Floating charge holders (after the prescribed part is set aside) |
| 5 | Unsecured creditors |
The lesson is stark: a fixed charge or legal mortgage over a named patent sits ahead of preferential creditors, while a floating charge ranks behind them. This is why lenders push for fixed security over the specific registered rights that carry the appraised value, and treat the floating charge as a supplement rather than the main event.
What the borrower gives up — and keeps
Good security is not the same as a punitive one. A well-drafted assignment by way of security transfers title but licences the IP straight back, so the business runs unchanged day to day.
- Gives up: the freedom to sell, sub-licence, assign or abandon the charged rights without the lender's consent; bare legal title (under a mortgage or assignment); and the ability to grant a competing prior-ranking charge.
- Keeps: operational use of the IP under the licence-back; the commercial upside the IP generates; and full title again once the facility is repaid and the charge released.
Clean, unencumbered title is a precondition to all of this. A lender will require a documented chain of title — contractor and employee IP properly assigned in — before it will take security at all. Where that chain is broken, the collateral is weakened regardless of how the charge is drafted. Our guidance on IP loan eligibility and how to apply for an IP-backed loan covers the evidence a borrower should assemble first, and the Intangible Asset Valuator establishes the appraised value that anchors the loan-to-value.
For the underlying legislation and the broader UK lending context, see the IP-Backed Loans UK pillar and the collateral suitability glossary entry, which explains how separability, saleability and legal strength combine to set what a lender will lend against.
Frequently asked questions
What happens if a charge over IP is not registered within 21 days?
Under s.859A of the Companies Act 2006 the charge becomes void against a liquidator, administrator and any creditor of the company. The underlying debt still exists, but the lender loses its security and is treated as an unsecured creditor. Late registration normally requires a court order and cannot prejudice rights acquired in the interim.
Do I register an IP charge at Companies House or the UK IPO?
Both. Registration at Companies House within 21 days perfects the charge against the company and its insolvency office-holder. Recording the security interest at the UK Intellectual Property Office against the specific patent, trade mark or design protects priority against a later buyer or financier of that registered right. Skipping either step leaves a gap.
What is the difference between a fixed charge and a floating charge over IP?
A fixed charge attaches to specifically identified rights — for example named patents by number — which the borrower cannot deal with freely. A floating charge hovers over a class of assets, including after-acquired IP, and crystallises on default. A fixed charge ranks ahead of preferential creditors in insolvency; a floating charge ranks behind them, so lenders prefer fixed security over the core registered rights.
Does taking security mean the borrower loses use of its IP?
No. The standard structure is an assignment by way of security with a licence-back: legal title passes to the lender, but the borrower is immediately licensed to keep using the IP in the ordinary course of business, and re-acquires full title once the loan is repaid and the charge released. The borrower loses the freedom to sell or re-encumber the charged rights, not the ability to trade.
Where does a secured IP lender rank if the borrower becomes insolvent?
The priority order is fixed charge holders first, then insolvency expenses, then preferential creditors, then floating charge holders (after the prescribed part), then unsecured creditors. A legal mortgage or fixed charge over a named IP asset therefore recovers ahead of most other claims, which is why fixed security over specific registered rights is the lender's goal.
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