_The Floating Debenture._--The form of debenture chiefly in use at the present day is that secured by a floating charge. By it the company covenants to pay to the holder thereof the sum secured by the debenture on a specified day (usually ten or fifteen years after the date of issue), or at such earlier date as the principal moneys become due under the provisions of the security, and in the meantime the company covenants to pay interest on the principal moneys until payment, or until the security becomes enforceable under the conditions; and the company further charges its undertaking and all its property, including its uncalled capital, with the payment of the amount secured by the debentures. Uncalled capital if included must be expressly mentioned, because the word "property" by itself will not cover uncalled capital which is only property potentially, i.e. when called up. This is the body of the instrument; on its back is endorsed a series of conditions, constituting the terms on which the debenture is issued. Thus the debenture-holders are to rank _pari passu_ with one another against the security; the debenture is to be transferable free from equities between the company and the original holder; the charge is to be a floating charge, and the debenture-holders' moneys are to become immediately repayable and the charges enforceable in certain events: for instance, if the interest is in arrear for (say) two or three months, or if a winding-up order is made against the company, or a resolution for winding-up is passed. Other events indicative of insolvency are sometimes added in which payment is to be accelerated. The conditions also provide for the mode and form of transfer of the debentures, the death or bankruptcy of the holder, the place of payment, &c. The most characteristic feature of the security--the floating charge--grew naturally out of a charge on a company's undertaking as a going concern. Such a charge could only be made practicable by leaving the company free to deal with and dispose of its property in the ordinary course of its business--to sell, mortgage, lease, and exchange it as if no charge existed: and this is how the security works. The debenture-holders give the directors an implied licence to deal with and dispose of the property comprised in the security until the happening of any of the events upon which the debenture-holders' money becomes under the debenture conditions immediately repayable. Pending this the charge is dormant. The licence extends, however, only to dealings in _the ordinary course of business_. Payment by a company of its just debts is always in the ordinary course of business, but satisfaction by execution levied _in invitum_ is not. This floating form of security is found very convenient both to the borrowing company and to the lender. The company is not embarrassed by the charge, while the lender has a security covering the whole assets for the time being, and can intervene at any moment by obtaining a receiver if his security is imperilled, even though none of the events in which the principal moneys are made payable have happened. If any of them has happened, for instance default in payment of interest, or a resolution by the company to wind up, the payment of the principal moneys is accelerated, and a debenture-holder can at once commence an action to obtain payment and to realize his security. At times a proviso is inserted in the conditions endorsed on the debenture, that the company is not to create any mortgage or charge ranking in priority to or _pari passu_ with that contained in the debentures. Very nice questions of priority have arisen under such a clause. A floating charge created by a company within three months of its being wound up will now be invalid under § 12 of the Companies Act 1908 unless the company is shown to have been solvent at the time, but there is a saving clause for cash paid under the security and interest at 5%.