Creation/Modification of Change

The Companies Act, 2013 defines a Charge as an interest or lien created on the assets or property of a Company or any of its undertaking as security and includes a mortgage U/s 2(16). The financial institutions/banks do not lend their monies unless they are sure that their funds are safe and they would be repaid as per agreed repayment schedule along with payment of interest. In order to secure their loans they resort to creating right in the assets and properties of the borrowing companies, which is known as a charge on assets.

Registration of Charges

A company creating charge, shall, register the particulars of the said charge with the RoC within 30 days of its creation.

This charge could be Fixed or Floating:

• On its property or assets or
• Any of its undertakings
• Whether tangible or otherwise:-

> Situated in or outside India

> Signed by both the Company and the charge-holder

> Together with the instruments creating the charge

Charge may be registered by company or charge holder.

Time Limit for Registration of a Charge:

Time limit prescribed by both Act and Rules for registration is thirty days from creation/modification of a charge.

Condonation of delay by Registrar :

The Registrar may, on being satisfied that the company had sufficient cause for not filing the particulars and instrument of charge, ifany, within a period of thirty days of the date of creation of the charge,allow the registration of the same after thirty days but within a period of three hundred days of the date of such creation of charge or modification of charge on payment of additional fee.

Form to be filed for Registration of Creation or Modification of a Charge:

 1/5 For registration of charge the particulars of the charge together with a copy of the instrument, if any, creating or modifying the charge in FormNo.CHG-1 (for other than Debentures) or Form No.CHG-9 (for debentures including rectification), as the case may be.

A company shall within a period of thirty days from the date of the payment or satisfaction in full of any charge registered under Chapter VI, give intimation of the same to the Registrar in FormNo.CHG-4 along with the fee

The application for delay (not exceeding 300 days) shall be madein Form No.CHG-10 and supported by a declaration from the company signed by its secretary or director that such belated filing shall not adversely affect rights of any other intervening creditors of the company.

The application for condonation of delay by Central Government shall be filed with the Central Government in FormNo.CHG-8 along with the fee.

Register of charges to be maintained by Company:

(1) Every company shall keep at its registered office a register of charges in Form No. CHG.7 and enter therein particulars of all the charges registered with the Registrar on any of the property, assets or undertaking of the company and the particularsof any property acquired subject to a charge as well as particulars of any modification of a charge and satisfaction of charge.

(2) The entries in the register of charges maintained by the company shall be made forthwith after the creation, modification or satisfaction of charge, as the case may be.

(3) Entries in the register shall be authenticated by a director or the secretary of the company or anyother person authorised by the Board for the purpose.

(4) The register of charges shall be preserved permanently and the instrument creating a charge or modification thereon shall be preserved for a period of eight years from the date of satisfaction of charge by the company.

Register of Charge to be kept by Registrar

Section 81 requires that Registrar shall keep a register of charge in respect of each company. The particulars of charges maintained on the Ministry of Corporate Affairs portal shall be deemed to be the register of charges for the purposes of section 81 of the Act and any person can inspect it on payment of inspection fee.

Punishment for contravention:

As per section 86, If any company contravenes any provision of this Chapter, the company shall be punishable with fine which shall not be less than one lakh rupees but which may extend to ten lakh rupees and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to six months or with fine which shall not be less than twenty-five thousand rupees but which may extend to one lakh rupees, or with both.

Details required for filing the Form CHG 1

• Charge ID (Only in case of a modification of charge)
• Nature, description and brief particulars of the instruments creating or modifying the charge
• Details of whether the charge created in India or outside
• Type of charge
• Details of charge holders such as Category, Name, Address, Email ID and PAN
• Amount secured by the charge as per the instrument of charge
• Detailed particulars of the principal terms and conditions and extent and operation of the charge
• Rate of interest
• Repayment term in moths
• Terms of repayment
• Nature of facility
• Date of disbursement
• Margin
• Extent and operation of the charge
• Particulars of the property charged