What allows a company to freely sell its assets before crystallization under a floating charge?

A company can sell its assets freely before crystallization under a floating charge because of the nature of how a floating charge operates. A floating charge is a type of security interest that allows a borrower (the company) to use its assets in the normal course of business without the lender's interference. Until crystallization occurs, the charge does not attach to specific assets, meaning the company retains the flexibility to sell, transfer, or alter its assets.

Crystallization of the floating charge typically happens upon certain events, such as default on the loan or the appointment of a receiver. Once crystallization occurs, the floating charge "fixes" to certain assets, at which point the company can no longer sell those assets without the lender’s consent. This pre-crystallization phase allows the company to manage its assets effectively while still having obligations to the lender, highlighting the importance of liquidity and operational flexibility for a business prior to any potential default or triggering event.