Section 2 (16) of the Companies Act, 2013 defines the word ‘Charge’ as an interest or a lien created on a property or an asset of a company or any of its undertakings or both, as a security. A mortgage is also a type of Charge.
“CHARGE” as defined in Transfer of Property Act, 1882 According to Section 100 of the Transfer of Property Act, 1882, where an immovable property of one person is by act of parties or operation of law made security for the payment of money to another and the transaction does not amount to a mortgage, the latter person is said to have a charge on the property, and all the provisions which apply to a simple mortgage shall, so far as may be, apply to such charge.
The following are the essential features of the charge which are as under:
1. There should be two parties to the transaction, the creator of the charge and the charge holder.
2. The subject-matter of charge, which may be current or future assets and other properties of the borrower.
3. The intention of the borrower to offer one or more of its specific assets or properties as security for repayment of the borrowed money together with payment of interest at the agreed rate should be manifested by an agreement entered into by him in favour of the lender, written or otherwise. A charge may be fixed or floating depending upon its nature.
The word ‘MORTGAGE’ means a legal agreement by which a bank, building society, etc. lends money at an interest in exchange for taking a title of the debtor’s property, with the condition that the conveyance of the title becomes void upon the payment of the debt.
RELEVANT PROVISIONS UNDER THE COMPANIES ACT, 2013
|1.||77||Duty to register a Charge|
|2.||78||Application for registration of a Charge.|
|3.||79||Section apply in certain matters|
|4.||RULES||Companies (Registration of Charges) Rules, 2014|
|5.||100 of Transfer of Property Act, 1882||Definition of Charge|
DUTY TO REGISTER CHARGE
Primarily, under section 77 of the Companies Act, 2013 every company creating a charge shall register the particulars of charge signed Registration of Charges 3 by the company and its charge– holder together with the instruments creating. Important points in the Act relating to charge creation:
— Any charge created within or outside India-
— On property or assets or any of the company’s undertakings
— Whether tangible or otherwise, situated in or outside India shall be registered. Hence all types of charges are required under the Act to be registered whether created within or outside India.
Whose duty is it to get the Charge registered – The Company creating the Charge
1. Types of Charge – ALL types of Charge, whether within or outside India, may include a,
i) Property,Online GST Certification Course by TaxGuru & MSME- Click here to Join
iii) Any of its undertakings, whether tangible or otherwise.
2. Particulars of a Charge have to be signed by the company and the Charge-holder together with the instruments, if any.
PARTICULARS OF CHARGES
The following particulars in respect of each charge are required to be filed with the Registrar:
(a) date and description of instrument creating charge;
(b) total amount secured by the charge;
(c) date of the resolution authorising the creation of the charge; (in case of issue of secured debentures only);
(d) general description of the property charged;
(e) a copy of the deed/instrument containing the charge duly certified or if there is no such deed, any other document evidencing the creation of the charge to be enclosed;
(f) list of the terms and conditions of the loan; and (g) name and address of the charge holder.
3. FORMS TO BE FILED:
i) FORM NO. CHG-1 – Application for registration of creation, modification (other than those related to the debentures) including the particulars for modification of the Charge by an Asset Reconstruction Company in terms of Securitization and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (SARFAESI),
ii) FORM NO. CHG-9 – For debentures including rectification.
LIST OF ATTACHMENTS WITH FORM CHG
i) Instrument(s) of creation or modification of Charge is a mandatory attachment in all cases.
ii) Instrument(s) evidencing ……….which is already subject to charge ……………such acquisitions. This attachment is mandatory in case if there is any acquisition of property which is already subjected to the Charge.
iii) Particulars of all joint Charge holders – It is mandatory if number of Charge holder is more than one.
Time limit – within 30 days of creation of the Charge.
4. FEE STRUCTURE
In case of Indian company not having share capital – Rupees 200
In case of foreign company – Rupees 6,000
|In case of an Indian company having a share capital||Fee applicable|
|Less than 1,00,000||Rupees 200|
|1,00,000 to 4,99,999||Rupees 300|
|5,00,000 to 24,99,999||Rupees 400|
|25,00,000 to 99,99,999||Rupees 500|
|1,00,00,000 or more||Rupees 600|
|Period of delays||Fee applicable|
|Up to 30 days||2 times of normal fees|
|More than 30 days and up to 60 days||4 times of normal fees|
|More than 60 days and up to 90 days||6 times of normal fees|
|More than 90 days and up to 180 days||10 times of normal fees|
|More than 180 days||12 times of normal fees|
5. Additional time period/Condonation by Registrar– within a period of 300 days of such creation on a payment of an additional fee. The application for the delay shall be made in 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 Charge may be condoned by the central government, if there is a delay of more than 300 days(Section -87).
6. Charge Certificate – When a Charge is registered, the Registrar shall issue a certificate in Form No. CHG-2 and Form No. CHG-3(for the registration of modification of Charge) to the company and to the person, on whose favour the Charge is created.
Where a company fails to register the Charge within the period specified above, then 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 in Form Nos. CHG-1, CHG -9, as the case may be. The registrar may, on such application by the person on whose name the Charge is created, gives a notice to the company about such application. Then the company may itself register the Charge or show sufficient cause as in why such Charge should not be registered, i.e. comply or explain the basis. Upon failure on part of the company, the Registrar may allow the registration of such Charge within fourteen days after giving 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 fee paid by him to the Registrar for the purpose of registration of Charge.