Satisfaction of Charge

Demystifying Satisfaction of Charge

In the realm of the Companies Act, 2013, charges play a significant role. But what exactly is a “charge”? According to the Act, a charge is defined as an “interest or lien created on the property or assets of a company or any of its undertakings or both as security and includes a mortgage.” These charges are typically created on various assets of the company, as defined in Schedule III of the Companies Act, 2013.

Two Shades of Loans

Charges come into play when a company secures a loan. There are essentially two types of loans: secured loans granted by banks and financial institutions against the security of company assets and unsecured loans taken from directors or related parties of the company.

When a company borrows a secured loan from a financial institution, such as a bank, in exchange for collateralizing company assets like pledging shares or any company property, whether movable or immovable, it is crucial to notify the Registrar of Companies (ROC). This notification to the ROC must occur within 30 days from the date of charge creation.

The Act of Satisfaction

The flip side of this process is when a company repays a secured loan. This occurrence is referred to as the “Satisfaction of Charge.” Just as it is mandatory to report any borrowed loans to the ROC using Form CHG-1, it is equally vital to report the satisfaction of such charge using Form CHG-4 when the loan is repaid.

Meeting the Deadline

Filing Form CHG-4 should take place within 30 days from the date of satisfying the charge. This aligns with the requirements laid out in Sec 82(1) of the Companies Act, 2013, and Rule 8(1) of the Companies (Registration of Charges) Rules, 2014. The due date for submitting Form CHG-4 is indeed 30 days.

Understanding the intricacies of charge creation and satisfaction is essential for companies to maintain compliance and avoid penalties. By following these procedures diligently, companies can ensure smooth ROC compliance.