Summary: Under the Companies Act 2013, a “charge” refers to an interest or lien created on a company’s property or assets as security, including mortgages. Charges serve to secure loans or debentures by way of mortgages, hypothecation, or pledges, ensuring creditors can recover their debts through the sale of charged property if the borrower defaults. Companies must comply with stringent rules for charge registration, modification, and satisfaction. Form CHG-1 is used for registering charges within 30 days of creation, while delayed applications may be filed under Section 78. For debentures, Form CHG-9 is applicable. Certificates of registration and modification are issued via Forms CHG-2 and CHG-3, respectively, when terms of security or ownership change. Upon repayment or satisfaction of a charge, Form CHG-4 is used to notify the Registrar of Companies (ROC), with provisions allowing for delayed submissions within 300 days upon payment of additional fees. In cases of non-compliance, creditors can approach the National Company Law Tribunal (NCLT) for enforcement. Companies are also required to maintain a detailed register of charges in Form CHG-7 at their registered office for inspection. The ROC maintains a public register of charges, ensuring transparency. Special provisions, such as Form CHG-8, allow for rectification of omissions or misstatements. These measures emphasize the importance of registering all secured debts and security interests to safeguard creditor rights and ensure compliance across all types of companies, including private, public, and one-person companies.
Meaning
2(16) “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.
ICSI Company Law module “A charge is a security given for securing loans or debentures by way of a mortgage, hypothecation, pledge etc on the assets of the company.”
In conclusion Property on which charge is created shall be provided to creditors for recovery of their debt, in case borrower company fails to repay it, by sale of such property.
Provisions for charges under Companies Act 2013,
| Form no. | Provisions |
| CHG-1 | Application to ROC for Registration/modification of Charge created: (other than debentures)
77: Application to roc for registration of charge: u/s-77(1): every co. shall in 30 days of creation of charge, apply to roc in form chg-1 for reg. of charge created by it: – in/outside india, – on property/assets of its own or of its undertakings, – whether tangible/intangible situated in/outside India – signed by the company and the charge-holder. Point to remember: u/s-77(1)(proviso): “subsequent registration of a charge shall not prejudice any right acquired in respect of any property before the charge is actually registered. e.g. suppose company taken loan and executed mortgage in favor of lender, but company delay in registration of charge, however this not affect right of lender under mortgage 78: delayed application for registration of charge -if co. fails to register charge in 30Days, the proposed-charge-holder may apply to roc for its registration. – roc may register the charge within 14-days after giving notice to co. to show cause why charge should not be registered. (i.e. roc first verify charge with co. to avoid any false charge) – This registration does NOT relieve co. from offences under provisions of charges. 80. Third-parties/public acquiring the charged property/assets/undertaking or its part/interest/share shall be deemed to have notice of charge from date of its registration |
| CHG-9 | us-77(1): Application to ROC for Registration/modification of Charge created for debentures. Same provisions as above |
| CHG-2 | us-77(2):Certificate of registration of charge by ROC to company/charge holder |
| CHG-3 | Certificate of modification of charge by ROC to company/charge holder as per section 79.
79: Registration of charge on purchase of asset already subject to charge OR modification in existing charge when co. purchase a new asset that is already subject to charge, then company is required to apply for registration of such charge in its own name. OR When there is change in terms of security, T&C, extent or operation etc, of charge then co. is required to apply for modification of such charge. In both above cases: co. apply in chg-1 and get certificate in chg-3 |
| CHG-4 | Intimation of satisfaction of charge to ROC, i.e. when company repays the debt or security interest is enforced in case of default such shall be intimated to roc.
82. Intimation of satisfaction of charge to ROC – Co. Shall intimate payment or satisfaction in full of charge to roc in form chg-4 in 30 days. – Roc may accept such intimation after 30 days but not more than 300 days from payment of debt, on payment of additional fees to roc – roc may register the memorandum of satisfaction of charge in chg-5 within 14-days after giving notice to charge-holder to show cause why satisfaction of charge should not be registered. 83. Suo-moto registration of the memorandum of satisfaction of charge by ROC Roc may suo-moto register the memorandum of satisfaction of charge, on evidence given to him that: – debt has been paid in whole/part, – Company looses ownership over its charged property. ROC shall inform the affected parties within thirty days of making the entry in the register of charges |
| CHG-5 | us-83(1)(b): format of Memorandum of satisfaction of charge |
| CHG-6 | 84.Intimation of appointment of receiver or manager to roc
If any person obtains the court’s order for the appointment of/ or himself appoints as per power contained in any instrument, a receiver/ manager, to manage the charged-property, then he shall, within thirty days from the date of order or appointment, give notice to the co. + ROC and ROC shall register particulars of the receiver/ manager. |
| CHG-7 | 85. Company’s register of charges
– to be maintained by every company: – maintained in form chg-7 -kept at registered office ( copy of the instrument creating the charge shall also be kept at the registered office of the company along with the 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:
Inspection of register of charges Register of charges and instrument of charges shall be open for inspection during business hours— (a) by any member or creditor without any payment of fees; or (b) by any other person on payment of such fees as may be prescribed, subject to such reasonable restrictions as the company may, by its articles , impose. 81. Roc register of charges (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. |
| CHG-8 | Application to CG for extension of time for filing of particular of registration of satisfaction of charge or rectification of omission or mis-statement of any particular in respect of creation/modification/satisfaction of charge |
Basic points of charge to remember:
– charge may be created on present or future property.
– charged property remains in ownership and possession of company.
– in case of default, creditor may apply to NCLT for satisfaction of charge, i.e. enforcement of security for recovery of debt.
– under ca2013 it is compulsory for every type of company(opc/pvt/pub) to register charge for every secured debt taken by it and security interest created for it, either in or outside India.
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