Almost all the large and small companies depend upon share capital and borrowed capital for
financing their projects. Borrowed capital may consist of funds raised by issuing debentures,
which may be secured or unsecured, or by obtaining financial assistance from Financial
institution or banks.
The financial institutions/banks do not lend their money 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. This is done by executing
loan agreements, hypothecation agreements, mortgage deeds and other similar documents,
which the borrowing company is required to execute in favour of the lending institutions/
banks etc.
Companies Act, 1956: Section 125 specifies only 9 types of charges to be registered.
Companies Act, 2013: Section 77 states that Companies are required to register ALL TYPES
OF CHARGES, with ROC within 30 days of its creation.
Within or outside India,
on its property or assets or any of its undertakings,
whether tangible or otherwise, and
situated in or outside India.
For Creation of Charge Form CHG-1 will be filed with fees prescribed under Act. Form
should be signed by the Company and the Charge-holder and should be filed together with
instrument creating charge.
Modification of Charge-
Any change in terms of terms & conditions, extend, operation of the charge created on the
company is termed as modification of charge. The company is required to give its intimation
to ROC as well.
Satisfaction of Charge
If the conditions of registration of charge are fulfilled or the subject matter is not in existence
i.e. the debentures are redeemed (fully paid) or the loan is settled. Then the company needs to
intimate the registrar of companies by filing form within 30 days of the same.
If the company fails inform the satisfaction of charge within prescribed time limit, then the
company will have to go for condensation of delay for satisfaction of charge.
Effect Of Non Registration of Charge:
As per Section 77(3), if charge is not registered with ROC, the charge shall not be taken into
account by the liquidator or any other Creditor. Thus, mere filing of charge with Registrar
would not be sufficient. It has to be actually registered by ROC and certificate of registration
should be issued.
However, this is so only if company is under winding up. Otherwise, contract or obligation
for repayment of the money secured by charge is there even if charge was not registered