A Charge under the Companies Act, 2013 means an interest or lien created on the property and assets of the company or any of its undertakings or both as security and includes mortgage.
REGISTRATION OF CHARGES (SECTION 77):
Every company creating a charge shall register the particulars of charge signed by the company and its charge – holder together with the instruments creating such charge with the Registrar within thirty days of its creation.
- Any charge created
- within or outside India
- on property or assets
- of company or any of its undertaking
- Whether tangible or otherwise
- Situated in or outside India
- Shall be registered.
The Registrar may allow registration of charge within three hundred days of creation of charge on payment of additional fee.
If company fail to register the charge even within this period of three hundred days, it may seek extension of time in accordance with Section 87. We will discuss this section in our next post.
Any subsequent of charge shall not prejudice any right acquired in respect of any property before the charge is actually registered.
Certificate of Registration of Charge: Where a charge is registered with the Registrar, Registrar shall issue a certificate of registration of charge to the company and the person in whose favour the charge is created.
No charge created by the company shall be taken into account by the liquidator or any other creditor unless it is duly registered and a certificate of registration is given by the Registrar. However, this does not prejudice any contract or obligation for the repayment of the money secured by a charge.
APPLICATION FOR REGISTRATION OF CHARGE (SECTION 78):
Where a company fails to register the charge within the period specified, the person in whose favour the charge is created may apply to the Registrar for registration of the charge along with the instrument created for the charge. The registrar shall give notice to the company about such application. The company may either itself register the charge or shows sufficient cause why such charge should not be registered. On failure of the company, The Registrar on such application within fourteen days shall allow such registration. Before registration such permission, the Registrar shall give notice to the company.
Where registration is affected on application of the person in whose favour the charge is created, that person shall be entitled to recover from the company, the amount of any fee or additional fees paid by him to the Registrar for the purpose of registration of charge.
ACQUIRING PROPERTY UNDER CHARGE AND MODIFICATION OF CHARGE (SECTION 79):
The provision of Section 77 relating to registration of charge shall apply to –
(a) A company acquiring any property subject to a charge within the meaning of that section; or
(b) any modification in the terms or conditions or the extent or operation of any charge registered under that section.
DATE OF NOTICE OF CHARGE (SECTION 80):
Where any charge on any property or assets of a company or any of its undertakings is registered under section 77, any person acquiring such property, assets, undertakings or part thereof or any share or interest therein shall be deemed to have notice of the charge from the date of such registration.
REGISTER OF CHARGE (SECTION 81):
The Registrar of Companies shall keep a register containing particulars of the charges registered in respect of every company.
This charge register shall be open to inspection by any person on payment of fee for each inspection.
SATISFACTION OF CHARGE (SECTION 82):
The company shall give intimation to the Registrar of the payment or satisfaction in full of any charge within a period of thirty days from the date of such payment or satisfaction. The provisions of sub-section (1) of section 77 shall, as far as may be, apply to an intimation given under this section.
On receipt of such intimation, the Registrar shall cause a notice to be sent to the holder of the charge calling upon him to show cause within such time not exceeding fourteen days, as may be specified in such notice, as to why payment or satisfaction in full should not be recorded as intimated to the Registrar. If no cause is shown, by such holder of the charge, the Registrar shall order that a memorandum of satisfaction shall be entered in the register of charges kept by him under section 81 and shall inform the company that he has done so.
This notice shall not be required to be sent, in case intimation is signed by the holder of charge.
If any cause is shown by the charge – holder, the Registrar shall record a note to that effect in the register of charges and shall inform the company.
POWER TO MAKE ENTRIES OF SATISFACTION (SECTION 83):
Sometime, it may be possible that company fails to send intimation of satisfaction of charge to the Registrar but registrar receive evidence of satisfaction from any other person. This person may be charge – holder, Shareholder, purchaser or any one. These evidences may be that –
(a) The debt for which the charge was given has been paid or satisfied in whole or in part; or
(b) Part of the property or undertaking charged has been released from the charge;
(c) Part of the property or undertaking ceased to form part of he company’s property or undertaking.
After satisfying himself, the Registrar may enter in the register of charges a memorandum of satisfaction.
The Registrar shall inform affected parties within thirty days of making the entry in the registrar of charges.
INTIMATION OF APPOINTMENT OF RECEIVER OR MANAGER (SECTION 84):
If any person obtains an order for the appointment of a receiver of, or of a person to manage, the property, subject to a charge, of a company or if any person appoints such receiver or person under any power contained in any instrument, he shall, within a period of thirty days from the date of the passing of the order or of the making of the appointment, give notice of such appointment to the company and the Registrar along with a copy of the order or instrument and the Registrar shall, on payment of the prescribed fees, register particulars of the receiver, person or instrument in the register of charges.
Any person appointed under sub-section (1) shall, on ceasing to hold such appointment, give to the company and the Registrar a notice to that effect and the Registrar shall register such notice.
COMPANY’S REGISTER OF CHARGES (SECTION 85):
Every company shall keep at its registered office a register of charges which shall include therein all charges and floating charges affecting any property or assets of the company or any of its undertakings, indicating in each case such particulars as may be prescribed.
A copy of the instrument creating the charge shall also be kept at the registered office of the company along with the register of charges.
The register of charges and instrument of charges shall be kept open for inspection during business hours by members, creditors or any other person subject to reasonable restriction as the company by its article impose. No charge shall be paid by members or creditors for inspection of register of charges.
This Section effectively make Register of Charges as a mandatory register to be maintained by the company.
PUNISHMENT FOR CONTRAVENTION (SECTION 86):
If any company contravenes any provision of this Chapter i.e. provisions related to charge, 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.
RECTIFICATION BY CENTRAL GOVERNMENT IN REGISTER OF CHARGES (SECTION 87):
The Central Government on being satisfied that—
- the omission to file with the Registrar the particulars of any charge created by a company or any charge subject to which any property has been acquired by a company or any modification of such charge; or
- the omission to register any charge within the time required under this Chapter or the omission to give intimation to the Registrar of the payment or the satisfaction of a charge, within the time required under this Chapter; or
- the omission or mis-statement of any particular with respect to any such charge or modification or with respect to any memorandum of satisfaction or other entry made in pursuance of section 82 or section 83,
was accidental or due to inadvertence or some other sufficient cause or it is not of a nature to prejudice the position of creditors or shareholders of the company; or
(ii) on any other grounds, it is just and equitable to grant relief,
it may on the application of the company or any person interested and on such terms and conditions as it may seem to the Central Government just and expedient, direct that the time for the filing of the particulars or for the registration of the charge or for the giving of intimation of payment or satisfaction shall be extended or, as the case may require, that the omission or mis-statement shall be rectified.
This Section 87 has many implications in charge management. First, The Central Government has power to extend time period for registration of charge even beyond a period of three hundred days, within which, company may file intimation for registration of charge with additional payment. This section also empowers Central Government to extend time period for registration of modification of particulars of any charge. It is needless to say, Central Government may also extend time period for filing of intimation for satisfaction of charges. This is in addition of all other method to get register satisfaction of charge provided under this chapter. For this purpose, Application must be filed by the company or any other person interested. In application accidental lapse, inadvertence or any other sufficient cause should clearly be shown to the satisfaction of the Central Government.
Where the Central Government extends the time for the registration of a charge, the order shall not prejudice any rights acquired in respect of the property concerned before the charge is actually registered.
Please note: I welcome your comments and feedback. This blog post is not a professional advice. Readers may share this post on social media by using buttons given here.
In Mumbai, Navi Mumbai, Thane & Dombivli. at As a free lancer.
A. Mohan, I agree with your explanatory statement of CHARGE under Companies Act, 2013.
You have left your statement at half, as REGISTRATION.., which I would like to complete.
In order to have evidence of charges in the Court of Law, in case of defaulting in payment by the company, it is compulsory to register all the Deeds of the Charges with the Registrar of Assurances, after paying the applicable stamp duty.
Shirish S. Shanbhag, Mumbai-400089. Dated: 23rd Octiber, 2013.
Email ID: email@example.com
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Hello – Do we have to register a charge when we purchase a car for an employee under a hire purchase scheme?
Reason being, a car purchased on hire purchase is property of financier until last installment not of the company.
sir, can you tell me charge created through pledge of Share is registerable under new companies Act, 2013?
Does the Company have file Form CHG1 when it is being provided the facility of Foreign Letter of Credit from Bank?
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Need Suggestion :
I want to know is there any new format of Petition for seeking condonation of delay in filing the Form No.21 in compliance of ROC notice. if case of private company please send me on firstname.lastname@example.org
We have taken bank guarantee by giving 50% margin in form of FDR. Whether charge to be created on FDR and registeration of charge is required as per Companies Act 2013?
Dear Sir :
We are an Automobile Car dealership of a leading brand, For purchase of our Car stock we have got an INF (Inventory Funding facility) from a financier (say X) & cars brought from the manufacturer are through the financier. (thus all are stock in trade cars are hypothecated to The Financier,X). Now, we are using our Stock in trade cars for Demo purpose & thus getting another loan from a financier. Now, do we have to file a charge against the 2nd loan also (as for the 1st INF facility, Charge has been created on my whole stock value)
If it is same financier, same property stock in trade as security with some modification in terms and conditions and amount of loan; this should be modification of charge not 2nd charge.
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