Steps for Effectively Registering Charges to Protect Company Assets

Registering charges with the Registrar of Companies (ROC) is a vital compliance requirement under the Companies Act, 2013. This process ensures that all charges or securities created by a company are properly documented, maintaining transparency and accountability in financial transactions. It is particularly important in the context of creating or modifying charges over a company’s assets. The Companies (Registration of Charges) Rules, 2013, outline the specific forms to be used, deadlines for registration, and the consequences of failing to meet these requirements.

Procedure for Registration of Charges

1. Passing Special Resolutions

Before registering a charge in company law, a company must pass special resolutions under Section 180(3)(c) of the Companies Act, 2013, authorizing the Board of Directors to borrow funds and under Section 180(1)(a) authorizing the creation of a charge on the company’s assets and properties. These resolutions are crucial for securing borrowings from financial institutions, banks, or lenders.

2. Filing Form MGT-14

Once the special resolutions are passed, the company must file Form MGT-14 with the Registrar. This form is required under the Companies (Management and Administration) Rules, 2014.

3. Filing Particulars of Charge

Under Section 77 of the Companies Act, 2013, every company creating a charge on its property or assets must register the particulars of the charge with the concerned Registrar of Companies within thirty days of its creation. This is done using Form No. CHG-1 (for charges other than debentures) or Form No. CHG-9 (for debentures).

4. Attaching Required Documents

The following documents must be attached to the e-form:

A certified true copy of every instrument evidencing the creation or modification of charge.

In case of joint charge and consortium finance, particulars of other charge holders.

Instruments evidencing the creation or modification of charge in case of acquisition of property already subject to charge.

5. Payment of Fees

Fees for registration can be paid online through credit card or internet banking as per Annexure ‘B’ of Companies (Registration offices and fees) Rules, 2014.

6. Late Filing

If the particulars of charge in company law cannot be filed within thirty days due to unavoidable reasons, they can be filed within three hundred days of creation with an additional fee. The application for delay must be made in Form No. CHG-10, supported by a declaration from the company signed by its secretary or director.

7. Verification of Instruments

Instruments evidencing the creation or modification of charge must be verified. If the instrument relates solely to property situated outside India, it must be verified by a certificate issued under the seal of the company or by an authorized officer. For property situated in India, it must be verified by a director or company secretary.

8. Certificate of Registration

Once a charge is registered, the Registrar issues a certificate of registration in Form No. CHG-2. For modifications, a certificate of modification is issued in Form No. CHG-3.

9. Intimation of Satisfaction of Charge

A company must inform the Registrar within thirty days of the payment or satisfaction in full of any registered charge using Form No. CHG-4. The Registrar will then issue a certificate of registration of satisfaction of charge in Form No. CHG-5.

10. Register of Charges

The company must maintain a register of charges in Form No. CHG-7 at its registered office. This register should include particulars of all charges registered with the Registrar, and the entries must be authenticated by a director or the company secretary.

11. Preservation of Documents

The register of charges should be preserved permanently, and the instrument creating a charge should be preserved for eight years from the date of satisfaction of charge.

12. Condonation of Delay

If the satisfaction of charge in company law is not filed within thirty days, an application for condonation of delay must be made to the Central Government in Form No. CHG-8.

13. Filing Order of Central Government

The order passed by the Central Government must be filed with the Registrar in Form No. INC.28 along with the fee.

14. Other Applications

For matters other than condonation of delay, applications should be made to the Central Government in Form No. CHG-8.

Gist of E-Filing Under Charge Management

• CHG-1: Creating or modifying the charge (for other than Debentures)
• CHG-2: Certificate of registration
• CHG-3: Certificate of modification of charge
• CHG-4: Intimation of the satisfaction to the Registrar
• CHG-5: Memorandum of satisfaction of charge
• CHG-6: Notice of appointment or cessation of receiver or manager
• CHG-7: Register of charges
• CHG-8: Application for condonation of delay filed with the Central Government
• CHG-9: Creating or modifying the charge (for debentures)
• CHG-10: Application for delay to the registrar

Effects of Registration

Once a charge in company law is registered, it serves as a notice to the public that the charge holder has an interest in the charged property. This ensures that the property cannot be claimed without acknowledging the charge holder’s interest.

Consequences of Non-Registration

A charge that is not registered is void against the company’s liquidator and any creditor. However, this does not affect the company’s obligation to repay the secured money.

Frequently Asked Questions

What is a charge in company law?

A charge in company law refers to an interest or lien created on a company’s property or assets as security for a loan or obligation.

Why is it important to register a charge in company law?

Registering a charge ensures legal recognition and priority of the charge holder’s interest over the company’s assets. It also provides transparency and accountability in the company’s financial dealings.

What happens if a charge in company law is not registered within the prescribed time? If a charge is not registered within the prescribed time, it can be registered within three hundred days with an additional fee. If it is still not registered, it may become void against the liquidator and creditors.

How does the Registrar of Companies assist in the registration of charges?

The Registrar of Companies maintains a register of charges and issues certificates of registration or modification upon proper filing of the required forms and documents.

Conclusion

Registering charges is a crucial aspect of corporate governance, ensuring that all financial securities and encumbrances on a company’s assets are properly documented and accessible for scrutiny. Adherence to the specified forms, deadlines, and understanding the implications of non-compliance are vital for maintaining the legal standing of a company’s financial dealings. InstaFiling offers expert assistance in navigating the complexities of charge registration in company law. Our team ensures timely and accurate filing of all necessary forms and documents, helping your company maintain compliance with the Companies Act, 2013. With InstaFiling, you can be confident that your company’s assets are protected, and all legal requirements are met efficiently.