The piece of paperwork that lets a lender claim your business assets if you default. Every founder needs to understand this before signing a bank loan.
Who should read this: UK founders considering a bank loan, asset finance, or invoice discounting; founders preparing for a fundraise where the data room will show existing charges; and any founder running a Ltd company who wants to know what the "charges register" entry actually means.
A debenture, in UK company finance, is a written agreement between a lender and your company that gives the lender security over your assets if you default on the debt. It's the standard way UK lenders protect themselves when extending credit to a limited company, and the standard way founders accidentally limit their own flexibility for years afterwards.
Most founders first encounter a debenture when their bank says "we'll need to register a charge over the company" as part of a loan offer. That phrase is doing a lot of work, and saying yes without understanding the implications is one of the more common founder mistakes.
This guide covers what a debenture actually is in the UK corporate sense, the difference between fixed and floating charges, when lenders typically require one, the mechanics of registering at Companies House, and how an existing debenture can complicate your next fundraise.
When this matters for you. If you're taking any kind of bank debt, asset finance, invoice finance, or venture debt, assume a debenture is involved unless explicitly told otherwise. If you're raising equity within the next 18 to 24 months, an existing debenture will come up in due diligence and add cost, time, or both. If neither applies right now, this is the article to bookmark for when one does.
Quick disambiguation. If you're searching for "debenture" because of Wimbledon tickets or because you saw "Law Debenture" in a press release, those are different things. Wimbledon Debentures are a specific premium-ticket product sold by the All England Lawn Tennis Club. Law Debenture Corporation is a long-established UK trustee services company. Neither is what this guide is about. This guide is about the corporate finance instrument: the security agreement that lenders take over a company's assets.
A debenture usually contains both a fixed charge (over specific, identifiable assets) and a floating charge (over changing assets like stock, debtors, and cash). The two work very differently.
| Fixed charge | Floating charge | |
|---|---|---|
| What it covers | Specific, identifiable assets: property, machinery, vehicles, intellectual property | Changing pool of assets: stock, raw materials, work in progress, debtors, cash at bank |
| What you can do with the asset | Cannot sell or dispose of without lender consent | Free to use, sell, replace in the normal course of business |
| When it activates | Active immediately on creation | Floats above the asset pool until "crystallisation" |
| Crystallisation trigger | n/a (always fixed) | Default on the loan, insolvency, winding up, or contractual triggers in the debenture itself |
| Insolvency priority | Highest secured ranking | Below fixed charges and most preferential creditors (employee wages, unpaid pension contributions, certain HMRC debts) |
| Effect on your business | Significant: every disposal of a charged asset needs lender approval | Light-touch while solvent, but everything stops the moment it crystallises |
The combination matters. A debenture with both fixed and floating charges effectively gives the lender security over almost everything your company owns or might come to own. Lenders prefer this. Founders should understand it before signing.
From a lender's perspective, the floating charge is what really matters. Fixed charges cover specific assets, but the floating charge captures the day-to-day commercial value of the business: cash, stock, receivables, work in progress. That's why lenders push hard for "all assets" security and why narrowing the floating charge during negotiation is harder than narrowing the fixed one.
A debenture is the document that lets a lender take your company's assets if you don't repay them. The debenture itself is the legal agreement; once filed at Companies House it shows up on the public charges register as a "charge". You'll see lenders, lawyers, and Companies House switch between the two terms, but they're describing the same arrangement: the document is the debenture, the registry entry is the charge. Other lenders, investors, and acquirers can all see that claim exists. Think of it as a mortgage over your whole business rather than just a building.
The legal framework sits in the Companies Act 2006 (sections 859A to 859M) which governs how charges are created, registered, and what happens if you don't register them properly.
Three things to keep straight in your head:
The most common scenarios for UK founders:
What lenders almost never require a debenture for: friends and family loans, founder loans (where you lend money to your own company), and some specialist non-bank lending.
A debenture is standard practice, not a red flag by itself. The issue is not having one. The issue is signing one without understanding how broad it is and how it affects what you can do next. Cautious founders sometimes overcorrect and refuse any debt at all because of debenture concerns. That's usually overcorrection. The right move is to read the document, negotiate where you can, and know what you're committing to.
Mechanically straightforward. Three steps:
What happens if you miss the 21-day window:
In practice, the lender's solicitor handles MR01 filing as part of the loan completion. Founders rarely file it themselves. But knowing the deadline matters because the lender may push registration costs back to you in the loan documentation.
This is where most founders get caught out.
When you raise equity from VCs or sophisticated angels, due diligence will look at your charges register at Companies House. An existing debenture doesn't necessarily kill the deal, but it does three things:
If you're planning to raise equity within 12 to 18 months of taking on debt, ask the lender upfront how the debenture would interact with a future round and whether they have flexibility on partial release. Many do; many don't. Asking before you sign is better than finding out after.
A profitable UK Ltd company two years into trading wants a £100,000 working capital loan from its high-street bank. The bank approves on the following terms:
The founder signs and the bank's solicitors file MR01 within 21 days.
Eighteen months later, the founder wants to raise a £500,000 seed equity round to scale the team. A VC's lawyer reviews the charges register and sees:
The conversation that follows:
The VC asks the founder to either repay and release the debenture (using £75,000 of the new round) or negotiate a partial release with the bank so the new investors can take some security of their own. The bank agrees to release the floating charge but keeps the fixed charge over the equipment and trade marks. The intercreditor agreement takes three weeks of legal back-and-forth and adds £4,000 to the legal bill.
£75,000 of the new round used to reduce or release rather than to scale. £4,000 legal fees on the intercreditor. Three weeks of round delay. Founder time: significant. A debenture is rarely a deal-killer, but it's almost never free of friction at the next round.
Stylised illustration. Real outcomes depend on specific lender, specific investor, the state of the loan at the time of the new round, and how aggressive the original debenture's terms were.
Always work with a corporate solicitor when negotiating a debenture if you anticipate raising equity within two years.
Signing without reading the negative pledge clause. Most debentures include a clause preventing you from creating any further charges without the existing lender's consent. The lender's logic is straightforward: "I was here first, I don't want anyone else jumping the queue if things go wrong." That's standard protection, not a personal slight. But in practice it can block you from taking on additional working capital facilities, invoice finance, asset finance, or venture debt later without going back to the original lender to ask permission. That permission isn't always granted, and even when it is, the renegotiation can land mid-fundraise at the worst possible moment. Always read this clause before signing.
Letting the fixed charge sweep up your IP without thought. For tech-heavy startups, this is one of the most dangerous parts of a debenture. If a lender has a fixed charge over your code, patents, or registered trade marks, you technically need their consent to license, sell, or sometimes even materially modify that IP. That can quietly limit commercial deals you didn't realise you were giving up. Negotiating to carve IP out of the fixed charge, or limit it to specific registered IP rather than "all intellectual property", is often achievable if you ask. It's almost never offered.
Not asking for a partial release option upfront. A debenture that only covers specific assets (the equipment, the IP) is much easier to live with than one with floating charges over everything. Sometimes a lender will accept the narrower version if you ask. They almost never offer it.
Forgetting the debenture exists. Founders who paid off the underlying loan years ago sometimes don't realise the registered charge is still showing at Companies House. Investors will assume it's still active if it's sitting there on the public register. File a release notice (form MR04) the moment the loan is repaid. The lender's solicitor often won't volunteer to do this unless you ask.
Personal guarantees layered on top. A personal guarantee is separate from the debenture. The guarantee is a personal claim against the founder (limited to whatever amount you signed for), the debenture is a corporate claim against the company. Founders sometimes conflate the two and end up with unexpected personal exposure. Lenders may also ask the director to subordinate any director's loan account they're owed (where you've lent money to your own company) to the bank's debenture. Worth flagging because most founders don't realise their DLA balance can be quietly demoted.
Missing the 21-day window. Almost always handled by the lender's solicitor, but if you're using a smaller lender or doing this yourself, the consequences of a missed deadline are real.
Treating "fixed and floating charge debenture" and "all-monies debenture" as the same. They're not. An all-monies debenture secures any debt the company owes the lender, including future debts. Read the small print before signing.
The one-line mental model. If you take secured debt, you are giving the lender first call on your company's assets if things go wrong. The debenture is the document that makes that claim real and visible to everyone else, including future investors and acquirers.
From an investor's perspective, a debenture means someone else gets paid first if things go wrong. That single fact is what drives the friction in due diligence, the partial-release negotiations, and the intercreditor agreements you'll see in the worked example above.
A founder who reads the debenture before signing, understands what's a fixed charge and what's a floating charge, asks for partial release flexibility upfront, knows how the negative pledge clause will affect future rounds, files form MR04 the moment the loan is repaid, and has the corporate solicitor's number on speed dial whenever a lender or investor mentions "charges".
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This is general information, not financial, tax, or legal advice. Debenture terms vary widely and the consequences of signing one bind your company for the life of the underlying loan and beyond. Always work with a UK-qualified corporate solicitor before signing any debenture or security agreement, particularly if you anticipate raising equity within two years.