CHARGE Under Companies Act,2013 and Companies (Registration of Charges) Rules, 2014.

CONCEPT OF CHARGE:

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).

Need:  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.

Section 77: 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.

Compliance Legal Rule Compliancy Conformity Concept

After Companies (Amendment) Ordinance, 2018:-

CHARGE CREATED/MODIFIED BEFORE ORDINANCE

  • If Charge is CREATED BEFORE DATE OF ORDINANCE i.e. 02.11.2018 in such case filling shall be according to new provisions or old provisions?

Explanation:

As per Act before ordinance or after ordinance both states that company shall file form for registration of charge within 30 days of creation in E Form CHG-1. Or CHG-9 for debenture.

In case company fails to file the same within 30 days of Registration and date of creation of charge is before 02.11.2018 in that case:

Provided that the Registrar may, on an application by the company, allow such registration to be made within a period of three hundred days of such creation on payment of such additional fees as may be prescribed.

Provided further that if the registration is not made within the period specified i.e. 300 (30+270) days from such creation then the registration of the charge shall be made within six months from the date of commencement of the Companies (Amendment) Ordinance, 2018 on payment of such additional fees as may be prescribed and different fees may be prescribed for different classes of companies

Stage Particulars Time Period Days Fees
 

1

Registration of Charge with
ROC
Within 30 days of creation 0+30 = 30 Days Normal Fees
 

2

If fails to file within 30 days Within a period of 300 days of such
creation
30+270= 300 Days Normal Fees
+ Additional
Fees

Note:within 300 days or 6 months from creation, whichever is earlier from ordinance date i.e 2  Nov, 2018.

> If Charge is created after date of Ordinance i.e. 02.11.2018 in such case what shall be time period for filing of form for registration of charge with ROC.

If charge is created after 02.11.2018 in such case following shall be period for filing of charge form with ROC.

Stage Particulars Time Period Days Fees
1 Registration of Charge with
ROC
Within 30 days of creation 0+30 = 30 Days Normal Fees
2 If fails to file within 30 days Within a period of 60 days of such
creation
30+30 = 60 Days Normal Fees
+ Additional
Fees
3 If fails to file within 60 days Registrar may, on an application made by the Company, allow such registration to be made within a further period of 60 days 30 +30 + 60 = 120 Days Normal Fees
+ Additional
Fees +
ADVALOREM
FEES*
After Ordinance i.e. 02.11.2018 Clause Relating To Condonation Of Delay In Creation/ Modification Of Charge Has Been Removed From Section 87.

*ADVALORAM FEES: – 0.05 % of total value of charge to be register.

Section: 78  Charge Holder may register Charge:

Company fails to register a charge in 30 days  → Charge Holder may make application

To ROC in CHG-1/CHG-9

↓ Within 14 Days

On Satisfactory reply Roc allows registration → Roc issue Notice (SCN) to company

Provided that where registration is effected 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 fees or additional fees paid by him to the Registrar for the purpose of registration of charge.

Section: 79

Section 77 to Apply in Certain Matters.

The provisions of section 77 relating to registration of charges shall, so far as may be, 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.

Section: 80

Date of Notice of Charge

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.

Section: 81

Register of Charges to be kept by Registrar

(1) The Registrar shall, in respect of every company, keep a register containing particulars of the charges registered under this Chapter in such form and in such manner as may be prescribed.

(2) A register kept in pursuance of this section shall be open to inspection by any person on payment of such fees as may be prescribed  for each inspection.

Section: 82

If charge is satisfied even before or after 02.11.2018 in such case following shall be period for filing of e-form CHG-4 for satisfaction of charge with ROC.

Table Stating facts in relation to satisfaction of charge;

STAGE PARTICULARS TIME PERIOD DAYS FEES
 

1

Satisfaction of Charge with
ROC
Within 30 days of Satisfaction in E Form CHG-4 0+30 = 30 Days Normal Fees
 

2

If fails to file within 30 days Within a period of 300 days of such Satisfaction 30+270 = 300 Days Normal Fees + Additional Fees
 

3

If fails to file within 300
days
Filing of form with RD for satisfaction of Charge in E Form CHG-8 30+270+∞∞= ∞∞ Normal Fees +Additional Fees +
CONDONATION
FEES
Provisions For Condonation Of Delay In Satisfaction Of Charge Is Still There In Act Even After Ordinance.

Section: 83

On being satisfied ROC shall enter Memorandum of satisfaction in Register of Charge.

Section: 84

If a person appoint or obtains an order for the appointment of a Receiver to manage property then notice of the same is to be given to company as well ROC.

Section: 85

Every company shall keep at its registered office a register of charges in E Form CHG-7 and open for inspection in business hours for any members and creditors without payment or by any other person on payment of such fees as may be prescribed,

Section: 86

Punishment for Contravention.

(1) 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.

 (2) If any person wilfully furnishes any false or incorrect information or knowingly suppresses any material information, required to be registered in accordance with the provisions of section 77, he shall be liable for action under section 447.

Section: 87

Rectification by Central Government in Register of Charges

The Central Government (R.D.) on being satisfied that —

(a) The omission to give intimation to the Registrar of the payment or satisfaction (NOT CREATION) of a charge, within the time required under this Chapter; or

(b) the omission or misstatement of any particulars, in any filing previously made to the Registrar with respect to any such charge or modification thereof 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, it may, on the application of the company or any person interested and on such terms and conditions as it deems just and expedient, direct that the time for the giving of intimation of payment or satisfaction shall be extended or, as the case may require, that the omission or misstatement shall be rectified.

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8 Comments

  1. KK Jayasree says:

    Is there any limitation period for making APPLICATION TO CENTRAL government for reinstating the charge which was satisfied inadvertently.

    1. CS deepak kumar sharma says:

      if charge is not registered within 120 days then company can go for condonation as per section 460 (b).

      Condonation of Delay in Certain Cases.(Section 460) clearly says :

      Notified Date of Section: 12/09/2013

      460. Notwithstanding anything contained in this Act,—
      (a) where any application required to be made to the Central Government under any provision of this Act in respect of any matter is not made within the time specified therein, that Government may, for reasons to be recorded in writing, condone the delay; and
      (b) where any document required to be filed with the Registrar under any provision of this Act is not filed within the time specified therein, the Central Government may, for reasons to be recorded in writing, condone the delay.

  2. Pardha Saradhi V Andukuri says:

    Dear Tax Guru

    Are there any provisions in the companies amendment act to reinstate a charge that got satisfied due to error.?

    1. CS deepak kumar sharma says:

      First of all there is no possibility to satisfy a charge due to error because of:
      – NOC letter of bank
      – DSC of both bank and charge holder
      Apart from that there is no provision in companies amendment act to reinstate a charge that got satisfied due to error.. Charge holder have to create fresh charge again.

    2. CS Deepak kumar sharma says:

      Please amend previous reply
      As per section 87 (b) the omission or misstatement of any particulars,in any filing previously made to the Registrar with respect to any such charge or modification thereof or with respect to any memorandum of satisfaction or other entry made in pursuance of section 82 or section 83,

      So it clearly says that in case memorandum of satisfaction rectification is allowed by filling chg-8

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