Posted by:Esha Jain
Registration of a charge by a Private Limited company is no different than any public limited company.All companies need to register any charge or lien created on any asset or property or any of its undertaking, whether tangible or otherwise situated in or outside India with the Registrar of Companies (ROC). A charge on a company is a right created by the company acting as a “borrower” in favour of any Institution or bank acting as a “lender” to such a company.
Essentials of getting a charge created by a company, registered
- A company upon creating a charge must get it registered with the Registrar in the prescribed form within 30 days of its creation. Such period may extend upto 300 days by Registrar on an application made by the company;
- The Registrar upon registering a charge issues a Certificate of Registration of such charge to the person in whose favour the charge is created, in the form and manner as may be prescribed;
- Where a company fails to register the charge within the prescribed time, the person in whose favour such charge is created may apply for the registration of the charge with the Registrar. Registrar may on such application within 14 days after giving notice to the company get the charge registered with payment of certain fees, unless the company registers it or gives sufficient cause as to why the charge should not be registered.
Types of Charges
There are two types of charges created by a company by way of mortgage, namely, FIXED CHARGE and FLOATING CHARGE. The former attaches itself to the fixed assets of the company, e.g. machinery and the company may deal with the property subject to certain conditions, whereas, the latter attaches itself to the assets that are circulatory in nature, e.g. stock-in-trade and the company can use and deal with these assets until it is frozen and the due of the charge holder is due.
Particulars of a Charge
- Date and description of instrument creating charge;
- Total amount secured by the charge;
- General description of the property charged;
- List of the terms and conditions of the loan;
- Name and address of the charge holder
Charges that must be registered with the ROC
- Securing any issue of debentures or deposits;
- For any immovable or movable property;
- For any debt of the company;
- A floating charge;
- Calls made but not paid;
- Any intangible assets, including goodwill, patent, trademark or copyright
- A charge on ship.
How and where do they keep these records?
- The Registrar must maintain a register for companies, which contains particulars of the charges registered by each company, a copy of the same can be kept with the company;
- Such a register shall be open to inspection by any person on payment of such fees as may be prescribed.
What is to be done if the Charge is Satisfied?
The company shall give intimation to the Registrar of the payment or satisfaction in full of any charge within a period of 30 days from the date of such payment or satisfaction along with the fee. The Registrar shall inform affected parties within 30 days of making the entry in the register of charges and issue a Certificate of registration of satisfaction of charge.
Who manages or receives such property held in Security?
If any person by order is appointed or if any person appoints such a person under any power contained in any instrument shall, within a period of 30 days from the date of the passing of the order or the making of the appointment, give to the company and the Registrar a copy and the Registrar shall, on payment of the prescribed fees, register particulars of the receiver or instrument executed in the register of charges. Any person so appointed, ceases to hold such appointment, shall give to the company and the Registrar a notice of the same.
Role of Central Government in Register of Charges
- The Central Government on being satisfied that there is any omission to file registration:
- Of any particulars of any charge created by a company with the Registrar;
- Of any charge subject to which any property has been acquired by a company;
- Of any modification in respect of the charge;
- Of any modification regarding memorandum of satisfaction of the charge; or
2. If the registration or payment or the satisfaction of a charge is not within the time required;
3. Or any other grounds that is just and equitable.
The Central Government may on the application of the company or any person interested and on certain terms and conditions as it may deem just and fit, give direction to get the registration done. As for any modification of satisfaction the Registrar shall not register the same unless the delay is condoned by the Central Government.
What will be the consequences of Non-Registration of Charge?
All types of charges created by a company are to be registered by the ROC, if they are not filed with the ROC for registration, it shall be void as against the liquidator and any other creditor of the company. The concerned creditor is treated as unsecured and the property will be treated as free of charge i.e. the creditor cannot sell the property to recover its dues. The company cannot have a cause of action arising out of non-registration.
Thus, it is pragmatic to get the charges registered to only secure the creditors but also to satisfy the charges in a systematic manner.
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