A floating charge granted during the relevant time is exempt from being automatically void if it provides a benefit to the company, known as “new value”. This could be money paid, or goods or services supplied, the discharge or reduction of any debt of the company or any interest payable in relation to one of the above.
The creditor is thus only able to rely on their charge, and benefit from a higher priority in the liquidation, if it relates to new value. Any other sums owing under the charge are treated as unsecured debt.
Moreover, this new value must come either simultaneously with the charge or following its granting (see paragraph 31.4B.52).
For money to qualify under the “new value” exception, the creditor must make a money payment, which could be a cheque or a direct bank transfer as well as cash. It must, however, be a genuine transfer; money paid and immediately returned will not count, nor will the waiving of a debt. The company must receive new money it can keep and use.
While the terms “goods” and “services” are not defined in the Act, in the absence of case law on the matter, they are given a wide interpretation.
Debt discharged or reduced does not have to be owed to the person receiving the new value, as it could be a debt they owe a third party.