Provision of Charge as per Companies Act, 2013

DEFINITION:

According to section 2 (16) of Companies Act, 2013 – Charge means :

-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

TYPES OF CHARGE:

CRYSTALLIZATION OF FLOATING CHARGE:

• Crystallization of floating charge means that the floating charge becomes fixed and now the company cannot use the charged property without the permission of the charge holder.

1. When the company goes into liquidation;

2. When the company ceases to carry on its business;

3. When the creditors or the debenture holders take steps to enforce their security e.g. by appointing receiver to take possession of the property charged.

4. On the happening of the event specified in the deed.

REGISTRATION OF CHARGE: (SECTION – 77):

• Every company needs to register all types of charge with the Registrar within 30 days of creation of charge.
• Charge created on any property or asset (on tangible or any other) of Company within or outside India.
• Form to be Filed: (Duly signed by charge holder & company)

Additional time for Registration of Charge:

For further 30 days = 3 times the fees and 0.0025% of the amount of charge created.

Verification of Instrument evidence of charge:

Certificate of Registration:

• Registered charge gets priority over prior unregistered charge.
• Charge will not be taken into account by liquidator or any creditor unless duly registered.
• Certificate of registration of charge issued by ROC shall be conclusive evidence that all provisions of this chapter are duly complied with.

REGISTRATION OF CHARGE BY CHARGE HOLDER: (SECTION – 78):

APPLICABILITY OF SECTION 77 (SECTION – 79):

• A company acquiring any property subject to charge or
• Any modification in terms of any charge registered

 DATE OF NOTICE OF CHARGE (SECTION – 80):

• Any person acquiring such property which is subject to any charge shall be deemed to have notice of charge from the date of registration.

REGISTER OF CHARGE TO BE KEPT BY REGISTRAR (SECTION – 81):

• ROC shall keep a Register containing particulars of charge. (Particulars of charge maintained on MCA portal)
• Register shall be open to inspection by any person on payment of fees.

COMPANY TO REPORT SATISFACTION OF CHARGE (SECTION – 82):

Form/Certificate:

• Registrar on receipt of notice issue same to the Charge-Holder to show cause within 14 days why the satisfaction or partial payment should not be recorded (if the form CHG 4 is already signed by Charge Holder than no such show cause notice is required to be send)
• Within 14 days:

• Provided that if Charge holder has signed the required form than such show cause notice is not required.

POWER OF REGISTRAR TO MAKE ENTRIES OF SATISFACTION(SECTION – 83):

Registrar on evidence of:

• Debt being paid
• Part of property or undertaking released from charge
• Property ceased to become a part of company
• Will register in the memorandum of satisfaction.
• If the company has not intimated the same than the Registrar have the power to register the same.
• Registrar may intimate the effected parties within 30 days of making the entry in the registrar

INTIMATION OF APPOINTMENT OF RECEIVER (SECTION – 84):

• Person on obtaining any order or through power contained in the instrument appoint receiver or manager to the property
• The same needs to be intimated to Registrar within 30 days of his appointment (cessation, if any) in Form CHG-6.
• Registrar on receiving the notice register the same.

COMPANY’S REGISTER OF CHARGES (SECTION – 85):

• Company to keep Register of Charge in Form CHG-7
• Entries made in the register to be authenticated by CS, Director or any other authorised person by board
• Register to be maintained permanently and instrument relating to such charge to be preserved for 8 years from satisfaction of charge.

RECTIFICATION BY CENTRAL GOVERNMENT IN REGISTER OF CHARGE (SECTION – 87):

• CG on being satisfied that :
• Omission to give intimation of payment or satisfaction
• Omission of any particulars register by ROC previously made
• Was accidental or inadvertent & not prejudice to interest of creditor
• CG by order instructs to extend the time for satisfaction and make correction into Register.

FORM: