ROC Charge Creation

ROC Charge Creation refers to the process of registering or creating a charge with the Registrar of Companies (ROC). A charge refers to a security interest or claims that a company grants over its assets to secure a debt or obligation.

When a company takes a loan or borrows money, it may need to provide security for the loan. This security can take the form of a charge over the company’s assets, such as property, land, machinery, or other valuable assets. Creating a charge is a way for the lender to have a legal claim over those assets in case the company defaults on the loan.

Discover the power of ROC charge creation and achieve financial independence. Learn about different factors, time limits, and fees regarding it in this blog.

ROC Charges a Creation Fee

The fees for ROC charge creation depends on the share capital of the company ranging between 200-600.

A charge is a legal claim made by anyone, including a business known as “the borrower,” in favour of a financial institution or bank known as “the lender,” which has promised to provide financial support on all of the borrower’s assets and properties, both current and future.

Charges are defined as an interest or lien placed on the assets or property of a company, any of its undertakings, or both as security in Section 2(16) of the Companies Act, 2014, which includes a mortgage.

The following charge’s key characteristics are as follows:

1. The charge originator and the charge holder should be the only two persons involved in the transaction.
2. The charge’s subject matter could represent the borrower’s current or future assets and other properties.
3. An agreement made by the borrower in favor of the lender, whether written or verbal, should make clear that it intends to pledge one or more of its specific assets or properties as security for the repayment of the borrowed funds along with payment of interest at the agreed-upon rate.
4. The requirement to establish a Charge against the Company’s Assets
5. Nearly all small and large businesses rely on borrowed money and share capital to finance their projects. Borrowing capital can be obtained from financial institutions or banks or raised by issuing debentures that might be secured or unsecured.

Banks and other financial institutions will only lend money if they are confident that it will be returned with interest and that the funds are secure. They establish a charge on the borrowing corporations’ assets—also known as an asset charge—to secure their loans. 

This is accomplished by the borrowing corporation signing loan agreements, hypothecation agreements, mortgage deeds, and other similar instruments that favour lending institutions, banks, and rest.

The Companies Act of 2013’s Section 77 mandates that companies register All Charges with the ROC within 30 days of their inception. Form CHG-1 for Charge Creation will be submitted along with the required fees under the Act.

Penalty for failing to file charges: The company may be fined not less than one lakh rupees. However, up to ten lakh rupees and each company officer in default may be sentenced to up to six months in jail or a fine not less than twenty-five thousand rupees but up to one lakh rupees, or both, depending on the severity of the offence.

Impact of Charge Non-Registration: According to Section 77(3), if a charge is not registered with the ROC, neither the liquidator nor any other Creditor may consider it. As a result, more than simply filing a charge with the Registrar is required. The ROC must register it, and a registration certificate must be given.

This is only true, though, if the corporation is being wound up. Even though the charge was not registered, there is still a contract or duty to repay the funds secured by the charge. 77(4)

Process Time: Depending on how quickly the government processes requests and keeping in mind the audit needs and other requirements, you can finish the ROC Charge Creation process in 4 to 7 business days.

ROC Charge Creation Time Limit

Section 125 of the Companies Act of 1956 stipulates nine categories of charges that must be registered.

Corporations are obliged by Section 77 of the Companies Act 2013 to file ALL 

CHARGES with the ROC within 30 days of their formation.

• within or without India, 
• on its property or assets or any of its undertakings,
• tangible or intangible, and 
• located within or outside India.

To Generation of Charge Form CHG-1, fees prescribed by law must be submitted. It must be signed by both the Company and the Chargee and filled alongside the instrument creating the charge.

Extended period to register the Charge: Section 77- ROC may, at the company’s request, provide the registration of a charge within 300 days (30 days plus an additional 270 days). If a form is filed beyond 30 days, it will incur additional expenses.

The application must be accompanied by a Form CHG-10 certification from the CS or Director stating that the late submission would not negatively affect the interests of the company’s creditors.

What Is the Period to File CHG1 With ROC in Case of the Creation of a Charge Against the Assets of a Company?

Creation of Charge and Completion of Form CHG-1 Sections 77 and 87 of the 2013 Companies Act address charges. All businesses must file a CHG 1 to establish a charge with the ROC by the due date. 

There are two sorts of loans for Charge Creation: 

Secured Loans and Unsecured Loans. 

Banks and financial institutions provide Secured Loans against the company’s assets.

Unsecured loans obtained from the company’s directors.

Hence, when a company obtains a secured loan from a financial institution such as a bank instead of a mortgage of Assets of the Company such as pledging shares or any company property, whether movable or immovable, the Registrar of Companies must be informed (ROC). The Business must notify the ROC within 30 days of the formation of the charge.

Deadline date for Filing CHG-1

Form CHG-1 must be filed within 30 days of the day the charge was created.

FAQs: ROC Charge Creation

What Is the Time Limit for the Creation of a Charge With ROC?

In India, the time limit for creating a charge with ROC is 30 days from the creation of the charge.

What Is the Creation of a Charge In MCA?

Creating a charge in MCA refers to registering security interests, such as mortgages or pledges, over a company’s assets with the Ministry of Corporate Affairs (MCA).

Can a Charge Be Filed With ROC After 120 Days?

Yes, it is possible to file a charge with ROC after 120 days, but additional fees are required, and permission from the Registrar of Companies is needed.

Which ROC Form Is for the Creation of a Charge?

The form required to create a charge with ROC is Form CHG-1.

What if the Charge Is Not Registered With ROC?

Suppose a charge is not registered with ROC. In that case, it becomes void against certain parties, including liquidators and creditors, and it will not be considered when distributing assets in the event of insolvency.

Conclusion

In conclusion, creating a charge with ROC is essential for Indian enterprises. It entails filing security interests over a company’s assets with the Ministry of Corporate Affairs (MCA) within thirty days of the charge’s formation. 

Failing to record a charge can have serious repercussions, as it becomes null and void against specific parties and is disregarded during the allocation of assets during insolvency proceedings. 

For the registration of charges, it is vital to use the correct form, Form CHG-1, and to file on time to prevent additional fees and the necessity for permission from the Registrar of Companies. As with many legal procedures, seeking professional guidance can assist firms in navigating the process and ensuring regulatory compliance. 

 Hope the article answers you about roc charge creation. Feel free to contact our experts at Instafiling for further assistance.

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