As a result, in the absence of insolvency proceedings, the English floating charge functions in essentially the same manner as the American floating lien. Both allow the debtor to sell inventory free of the security interest in the ordinary course of business without the secured creditor's consent.
Professor Armour has argued that the English Carve-out has not made floating lien collateral available to unsecured creditors, but merely caused debtors to avoid the Calve-out by selling their accounts receivable rather than by borrowing against them.
This leaves reclamation creditors in the lurch with the impossible choice of deciding whether to seek emergency injunctive relief at the beginning of the case, a battle they will likely lose at great expense, or forfeit the ability to assert their reclamation rights at a later date (perhaps when secured creditors with
floating liens on the reclamation creditors' goods have been paid in full)
Some courts have denied the reclamation of goods where the debtor was in bankruptcy and the debtor's lender had a
floating lien on all of the debtor's inventory.
However, in practice, because issues of quality and quantity are not addressed, the LGTOC does not create a commercially viable
floating lien mechanism.
"England is sort of strange because they have charges and they have
floating liens, and charges are on equipment, they're on real property, while
floating liens are on inventory, general intangibles and receivables," Peterson added.