Revision sheet: Registration of Charges

📋 Course Outline

1. Meaning and Scope of Charge
2. Fixed and Floating Charges
3. Crystallization of Floating Charge
4. Duty and Basic Registration Procedure
5. Verification and Registration Deadlines
6. Registration Certificate and Exceptions
7. Deemed Notice of Registered Charge
8. Consequences of Non-Registration
9. Applications by Charge-Holder
10. Acquisition and Modification of Charges
11. Registers and Inspection Rights
12. Satisfaction, Receivers and Rectification
13. Penalties for Contravention

📖 1. Meaning and Scope of Charge

🔑 Key Concepts & Definitions

• Charge : An interest or lien created on the property or assets of a company, any of its undertakings, or both, as security, and it includes a mortgage.

★ Must-know

📌 A charge created by a company on property, assets, or undertakings as security for a loan is compulsorily registrable under Chapter VI of the Companies Act, 2013 and the applicable Rules.

Further detail

• Chapter VI of the Companies Act, 2013 covers sections 77 to 87 and the Companies (Registration of Charges) Rules, 2014.

📖 2. Fixed and Floating Charges

🔑 Key Concepts & Definitions

• Fixed Charge : A charge on specific, identified, generally permanent assets such as land, buildings, machinery, or office premises.
• Floating Charge : Created on fluctuating present and future assets or a class of assets, such as raw materials, stock-in-trade, and debtors, which the company may use in the ordinary course of business.

📝 Essential Points

📌 A company may use an asset under a fixed charge but may sell it only with the permission or consent of the charge-holder.

💡 Memory Hook

Fixed charge anchors identified assets; floating charge moves over changing assets.

📖 3. Crystallization of Floating Charge

📝 Essential Points

• A floating charge may crystallize when: the creditor enforces the security after breach, the company ceases business, the company enters liquidation, the terms and conditions of the charge are violated

📌 After crystallization, the assets covered by the floating charge become fixed and available for realization by the lender, and the company can no longer sell or use them in its business operations.

💡 Memory Hook

Default or liquidation → floating security becomes fixed.

📖 4. Duty and Basic Registration Procedure

★ Must-know

📌 The company creating a charge within or outside India on property, assets, or undertakings situated within or outside India must register the particulars of the charge.

• 🔄 Registration requires: the prescribed particulars of the charge, a duly signed copy of the charge instrument when applicable, filing with the Registrar, payment of the prescribed fee

Further detail

• The prescribed forms for registration are Form CHG-1 for charges other than debentures and Form CHG-9 for charges relating to debentures.

💡 Memory Hook

Create charge → file particulars and instrument → obtain registration.

📖 5. Verification and Registration Deadlines

★ Must-know

• A charge must initially be registered within 30 days of its creation.

📌 For a charge created on or after 2 November 2018, the Registrar may allow registration within 60 days of creation with additional fees and, thereafter, within a further 60 days on payment of prescribed ad valorem fees.

Further detail

📌 For a charge created before 2 November 2018, the Registrar may allow registration within 300 days of creation, and if it remains unregistered, registration may be completed within six months from 2 November 2018 with additional fees.

📌 An application for extension must be supported by a declaration signed by the company secretary or a director stating that belated filing will not adversely affect intervening creditors.

💡 Memory Hook

Indian property requires director, secretary, or charge-holder verification; solely foreign property permits an additional interested person.

📖 6. Registration Certificate and Exceptions

★ Must-know

📌 A certificate issued by the Registrar is conclusive evidence that the requirements for registration or modification under Chapter VI and the Rules have been complied with.

Further detail

• The Registrar issues Form CHG-2 for fresh registration of a charge and Form CHG-3 for registration of a modification of charge.

📖 7. Deemed Notice of Registered Charge

★ Must-know

📌 A person acquiring property, assets, undertakings, or an interest in them is deemed to have notice of a charge from the date on which the charge is registered.

Further detail

• Registered charges are public documents accessible through the Ministry of Corporate Affairs portal, and constructive notice prevents a later acquirer from claiming loss caused by failing to investigate the charge.

💡 Memory Hook

Registration as a public document → deemed notice to later acquirers.

📖 8. Consequences of Non-Registration

📝 Essential Points

📌 An unregistered charge is not taken into account by the liquidator or any other creditor and becomes void against them, reducing the charge-holder to the position of an unsecured creditor.

📌 Non-registration does not prejudice the contract or obligation to repay the secured money, but the security may be lost and the debt must be enforced against the company through the courts.

📌 A charge-holder loses priority against rights acquired before the charge was actually registered, even if the charge is later registered within an extended period.

💡 Memory Hook

Debt remains enforceable, whereas the security becomes void against the liquidator and other creditors.

📖 9. Applications by Charge-Holder

★ Must-know

• 🔄 The charge-holder’s registration route is: the company fails to register within 30 days, the charge-holder applies with the charge instrument, the Registrar gives notice to the company, the Registrar registers within 14 days if no objection is received

Further detail

📌 The Registrar must not allow registration by the charge-holder if the company registers the charge itself or shows sufficient cause why the charge should not be registered.

📌 A charge-holder who pays registration fees or additional fees may recover those amounts from the company.

💡 Memory Hook

Company defaults → charge-holder applies → Registrar notices company → registration follows if no objection.

📖 10. Acquisition and Modification of Charges

★ Must-know

📌 The registration provisions apply when a company acquires property already subject to a charge and when the terms, conditions, extent, or operation of a registered charge are modified.

Further detail

• Modification includes changing the interest rate other than the bank rate, repayment schedule, facility limits, pari passu arrangements, or releasing part of the charged property.

📖 11. Registers and Inspection Rights

★ Must-know

📌 The Registrar keeps a register of charges for every company, and the charge particulars maintained on the Ministry of Corporate Affairs portal are deemed to constitute that register.

📌 Every company must keep a Register of Charges in Form CHG-7 at its registered office, including charges, floating charges, acquired property subject to charge, modifications, and satisfactions.

📌 Members and creditors may inspect the company’s register and charge instruments during business hours without fees, while other persons may inspect them on payment of prescribed fees.

Further detail

• The Register of Charges must be preserved permanently, while the instrument creating or modifying a charge must be preserved for eight years from the date of satisfaction.

📖 12. Satisfaction, Receivers and Rectification

★ Must-know

📌 The company must inform the Registrar in Form CHG-4 of full payment or satisfaction of a registered charge within 30 days, with a possible extension to 300 days on payment of additional fees.

• 🔄 The Registrar records satisfaction by: receiving intimation, giving the charge-holder up to 14 days to show cause, recording satisfaction if no cause is shown, issuing Form CHG-5 for full satisfaction

📌 Under section 83, the Registrar may record satisfaction or release of a charge without company intimation when satisfactory evidence shows that the debt was paid or that charged property was released or ceased to belong to the company.

Further detail

📌 A person obtaining or appointing a receiver or manager over charged property must notify the company and Registrar with the order or instrument within 30 days, and must also notify them when the appointment ends.

📌 The Central Government may order rectification or extension of time under section 87 on Form CHG-8 when omission or misstatement was accidental, inadvertent, supported by sufficient cause, or did not prejudice creditors or shareholders.

💡 Memory Hook

Satisfy or release → notify or prove → record entry → issue certificate or rectify.

📖 13. Penalties for Contravention

📝 Essential Points

📌 For default in complying with Chapter VI, the company is liable to a penalty of five lakh rupees and every defaulting officer is liable to a penalty of fifty thousand rupees.

📌 A person who wilfully furnishes false or incorrect information or knowingly suppresses material information required under section 77 is liable for action under section 447 concerning fraud.

📊 Synthesis Tables

Fixed and Floating Charges

Dimension	Fixed charge	Floating charge
Assets	Specific, identified, generally permanent assets	Fluctuating present and future assets or a class of assets
Business dealings	Sale requires charge-holder consent	Ordinary-course use and sale are permitted
Status on enforcement	Remains fixed until repayment	Crystallizes into a fixed charge on triggering events

Charge Registration Deadlines

Charge date	First period	Further possibility
Before 2 November 2018	30 days, then up to 300 days	Six months from 2 November 2018 with additional fees
On or after 2 November 2018	30 days, then up to 60 days with additional fees	Further 60 days with ad valorem fees