Can a director take security over company assets

Yes. A director who lends to their company can take a fixed or floating charge over its assets, usually through a debenture. The board must approve it with the director’s interest declared, members’ approval may be needed, and the charge must be registered at Companies House within 21 days. If the company later fails, a charge given to a director within two years can be cut back or set aside, especially if it secures money lent earlier.

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Is a director allowed to take security from their own company?

Nothing in the Companies Act 2006 stops a director lending on secured terms. The security is a transaction between the company and the director, so the normal rules for directors’ interests apply. Section 177 requires the director to declare the nature and extent of their interest to the other directors before the company enters into it. Section 175(3) takes transactions with the company outside the general conflicts duty, leaving section 177 and the articles to govern them.

The board must still decide that granting security promotes the success of the company under section 172. A common justification is that the director will only provide new money on a secured basis and the company needs it. Granting security for a loan that is already outstanding, with nothing new coming in, is much harder to justify and is exactly what insolvency law targets. If the company may be insolvent, section 172(3) brings creditors’ interests into play, and the Insolvency Service says directors of an insolvent company must treat all creditors the same.

Check existing lending first. If a bank already holds security, its terms may restrict the company from granting further charges. Section 859D requires the particulars delivered to Companies House to say whether a charge prohibits or restricts further security ranking equally with or ahead of it, so the public register is the first place to look.

Fixed charge or floating charge?

A fixed charge attaches to specific assets, such as a property or a piece of equipment, and the company cannot deal with them freely. A floating charge covers a changing pool of assets, such as stock and receivables, which the company can use in the ordinary course of business. Many director debentures contain both. The distinction affects ranking on insolvency and, for directors in particular, which challenges can be brought. The Insolvency Act 1986 defines a floating charge as one which, as created, was a floating charge, so the label used in the document is not the end of the analysis. Our page on fixed and floating charges explains the order of payment.

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Does the company need members’ approval?

Possibly. Section 190 says a company may not enter into an arrangement under which a director acquires a substantial non cash asset from the company unless the arrangement is approved by a members’ resolution or made conditional on approval. Section 1163(1) defines a non cash asset as any property or interest in property other than cash, and section 1163(2)(a) says acquiring a non cash asset includes the creation of an interest in, or a right over, any property. A charge in favour of a director is therefore capable of falling within section 190.

Under section 191 an asset is substantial if its value exceeds 10% of the company’s asset value and is more than £5,000, or exceeds £100,000. Asset value is net assets in the most recent statutory accounts, or called up share capital if no accounts have been prepared. No approval is needed from the members of a wholly owned subsidiary (section 190(4)(b)). Where the thresholds might be met, an ordinary resolution of the members approving the debenture removes the doubt. See substantial property transactions.

How is the charge registered?

Under section 859A the registrar must register a charge if the company or any person interested in the charge delivers a statement of particulars under section 859D, with a certified copy of any charge instrument, within the period allowed. That period is 21 days beginning with the day after the charge is created. The director, as chargeholder, is a person interested and can file it personally rather than relying on the company.

The consequence of missing the deadline is severe. Section 859H says an unregistered charge is void, so far as it gives security over the company’s property, against a liquidator, an administrator and any creditor. The debt itself survives, and section 859H(4) makes the money secured immediately payable, but the director becomes an unsecured creditor. The court can extend the period under section 859F, covered in registering a charge late. The filing process is in registering a charge at Companies House.

How can a liquidator or administrator challenge the charge?

There are three main routes, and directors are more exposed than outside lenders because they are connected with the company under section 249 of the Insolvency Act 1986.

Invalid floating charges, section 245. A floating charge created in favour of a connected person in the two years ending with the onset of insolvency is invalid except to the extent of money paid, goods or services supplied, or debt discharged at the same time as or after its creation, plus agreed interest on that amount. For outside lenders the shorter 12 month period only applies if the company was unable to pay its debts at the time or became so as a result (section 245(4)). For a director that condition does not apply. See invalid floating charges under section 245.
Preferences, section 239. Granting security for an existing debt puts the director in a better position in an insolvent liquidation. Section 240 sets a two year period for connected persons, provided the company was unable to pay its debts at the time or became so as a result. Section 239(6) presumes the company was influenced by a desire to prefer a connected person, so the director has to prove otherwise. This route can catch fixed charges as well as floating ones.
Transactions at an undervalue, section 238. Security given for no consideration, or for consideration significantly less than its value, can also be reversed. Section 240 sets a two year period for these, whoever the counterparty is.

What duties does the director carry while holding security?

The director remains a director. If the company becomes insolvent, enforcing security in a way that favours the director over other creditors can bring personal liability. Section 214 allows a court to order a director to contribute to the company’s assets where they knew or ought to have concluded that insolvent liquidation or administration could not reasonably be avoided and did not take every step to minimise creditors’ losses. Holding a valid charge does not protect a director from that claim, which is separate from the security itself. More detail is in directors as creditors of their insolvent company.

How might this play out?

Illustration only. Sam is a director of Harbour Ltd. In March 2025 he lent the company £60,000 unsecured. In January 2026 the company is struggling and Sam agrees to lend a further £30,000, but only if the company grants him a debenture with a floating charge securing everything it owes him. The charge is registered within 21 days. Harbour goes into liquidation in October 2026.

The charge was created within two years of the onset of insolvency in favour of a connected person, so section 245 applies.
It is valid only for the £30,000 of new money paid at or after its creation, plus interest agreed on that sum.
For the £60,000 lent earlier, Sam ranks as an unsecured creditor. The liquidator may also argue that securing the old debt was a preference.

Had Sam taken a charge in March 2025 for the original loan and registered it in time, the position would have been much stronger.

What mistakes do director lenders make?

Taking security for an old loan only when the company is already in difficulty.
Assuming the company will register the charge, then finding the 21 days have passed.
Voting on the debenture without declaring an interest or when the articles exclude the director from the quorum.
Ignoring section 190 where the charge is over valuable assets.
Overlooking restrictions in an existing bank charge.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 24 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.