What is a charge in company law?
An interest or lien on company property or assets as security, including a mortgage.
What must be done with a charge created by a company as security for a loan?
It must be compulsorily registered under Chapter VI of the Companies Act, 2013.
Which sections and rules does Chapter VI of the Companies Act, 2013 cover?
Sections 77 to 87 and the Companies (Registration of Charges) Rules, 2014.
What is a fixed charge?
A charge on specific, identified, generally permanent assets.
What assets does a fixed charge typically cover?
Land, buildings, machinery, or office premises.
When can a company sell an asset under a fixed charge?
Only with the permission or consent of the charge-holder.
Can a company use an asset under a fixed charge?
Yes, it may use the asset under a fixed charge.
What is a floating charge?
A charge on fluctuating present and future assets or a class of assets.
What types of assets are subject to a floating charge?
Raw materials, stock-in-trade, and debtors.
Can a company use assets under a floating charge in business?
Yes, it may use them in the ordinary course of business.
When does a floating charge crystallize?
When the creditor enforces security after breach, company ceases business, enters liquidation, or charge terms are violated.
What happens to assets after a floating charge crystallizes?
They become fixed and available for lender realization.
Can the company sell or use assets after floating charge crystallization?
No, the company can no longer sell or use them in business.
What must a company do when creating a charge on property inside or outside India?
Register the particulars of the charge.
What must a company file with the Registrar when creating a charge?
Prescribed particulars of the charge and a signed copy of the instrument creating the charge.
Which forms are prescribed for registering charges related to debentures?
Form CHG-9.
Which form is used for registering charges other than debentures?
Form CHG-1.
Within how many days must a charge be initially registered?
Within 30 days of its creation.
What is the Registrar's allowance for charges created before 2 November 2018?
Registration may be allowed within 300 days of creation.
What happens if a charge before 2 November 2018 remains unregistered after 300 days?
Registration may be completed within six months from 2 November 2018 with additional fees.
What is the Registrar's allowance for charges created on or after 2 November 2018?
Registration may be allowed within 60 days of creation with additional fees.
What is the further registration period after the initial 60 days for charges after 2 November 2018?
Registration may be allowed within a further 60 days on payment of prescribed ad valorem fees.
What must support an application for extension of registration?
A declaration signed by the company secretary or a director.
What must the declaration for extension state regarding belated filing?
That belated filing will not adversely affect intervening creditors.
Which form does the Registrar issue for fresh registration of a charge?
Form CHG-2
Which form does the Registrar issue for modification of a charge?
Form CHG-3
What does a certificate issued by the Registrar conclusively prove?
Compliance with registration or modification requirements under Chapter VI and the Rules
When is a person deemed to have notice of a charge on acquired property?
From the date the charge is registered.
Where can registered charges be accessed publicly?
Through the Ministry of Corporate Affairs portal.
What does constructive notice prevent a later acquirer from claiming?
Loss caused by failing to investigate the charge.
What happens to an unregistered charge against the liquidator?
It is not taken into account and becomes void against the liquidator.
How is an unregistered charge treated by other creditors?
It becomes void against them, reducing the charge-holder to unsecured creditor status.
Does non-registration affect the contract to repay secured money?
No, the contract or obligation to repay remains unaffected.
What risk does a charge-holder face if the charge is not registered?
The security may be lost and the debt must be enforced through the courts.
What priority does a charge-holder lose if the charge is registered late?
Priority against rights acquired before actual registration is lost.
What can a charge-holder do if the company fails to register a charge within 30 days?
Apply to the Registrar with the charge instrument.
What does the Registrar do after a charge-holder applies with the charge instrument?
Gives notice to the company and may register the charge within 14 days if no objection is received.
When must the Registrar refuse registration by the charge-holder?
If the company registers the charge itself or shows sufficient cause against registration.
Who can a charge-holder recover registration fees from if they pay them?
From the company.
When do registration provisions apply regarding company property charges?
When a company acquires property already subject to a charge or modifies a registered charge's terms.
What changes count as modifications to a registered charge?
Changes to interest rate (other than bank rate), repayment schedule, facility limits, pari passu arrangements, or releasing part of charged property.
Who keeps the register of charges for every company?
The Registrar.
What is deemed to constitute the register of charges?
Charge particulars on the Ministry of Corporate Affairs portal.
Where must every company keep its Register of Charges?
At its registered office.
What form is used for the Register of Charges?
Form CHG-7.
Who may inspect the company’s register and charge instruments without fees?
Members and creditors during business hours.
Who must pay prescribed fees to inspect the company’s register and charge instruments?
Other persons who are not members or creditors.
How long must the Register of Charges be preserved?
Permanently.
For how many years must the instrument creating or modifying a charge be preserved?
Eight years from the date of satisfaction.
What must a company do within 30 days after full payment of a registered charge?
Inform the Registrar in Form CHG-4 of full payment or satisfaction.
How long can the company extend the notification period for satisfaction of a charge?
Up to 300 days on payment of additional fees.
What does the Registrar do after receiving intimation of satisfaction of a charge?
Gives the charge-holder up to 14 days to show cause.
What form does the Registrar issue when satisfaction in full is entered?
Form CHG-5.
Under section 83, when may the Registrar record satisfaction without company intimation?
When satisfactory evidence shows debt was paid or charged property was released or ceased to belong to the company.
Who must notify the company and Registrar when appointing a receiver over charged property?
The person obtaining or appointing the receiver or manager.
Within what time must the receiver appointment be notified to the company and Registrar?
Within 30 days of the order or instrument.
When may the Central Government order rectification or extension of time under section 87?
When omission or misstatement was accidental, inadvertent, supported by sufficient cause, or did not prejudice creditors or shareholders.
Test your knowledge with 30 questions on Registration of Charges.
1. What is a charge created by a company on its property or assets?
2. A company grants security over its machinery to support a loan. What legal requirement applies to this charge?
Review the complete course in the revision sheet for Registration of Charges.
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