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Creation of Charges

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Creation of Charges

A charge is essentially a right which is made by an individual or company (borrower) on its assets and properties, whether present or future, in favor of a bank or financial organization (lender) which lends financial assistance. where an immovable property of 1 person is by an act of parties or operation of law made security for the payment of cash to a different and therefore the transaction doesn’t amount to a mortgage, the latter person is claimed to possess a charge on the property, and every one the provisions which apply to an easy mortgage shall, thus far as could also be , apply to such charge.

There are two sorts of charge:

Fixed Charge: fixed cost is defined as a lien or mortgage created over specific and identifiable fixed assets. The charge covers all those assets that aren’t sold by the corporate normally. it’s created to secure the repayment of the debt.

Floating Charge: The lien or mortgage which isn’t particular to any asset of the corporate is understood as a Floating Charge. The charge is dynamic in nature during which the number and value of asset changes periodically.

Modification of Charge:

Provisions for Modification of charge are precisely the same because the provisions for Creation of Charge. Once the shape for Modification of Charge has been filed, the ROC will issue a certificate for Modification of Charge in Form CHG-3. Any change within the terms, conditions, the extent or operation of any charge pre-registered under also requires registration.

Satisfaction of Charge:

A Charge is made as a security for loan or debentures or as a security for a few other purpose. When the quantity has been fully paid and other purposes are fulfilled, there remains no necessity of the charge. this is often termed as Satisfaction of Charge.

Time Limit for filling for Creation of Charge

Process of Charge Creation/Modification:

Effect of Non-Registration of Charge:

As per Section 77(3), when the charge has not been created or registered with the ROC. Such charge shall not be taken under consideration by the liquidator or the other Creditor. which mere filing of the charge with the ROC isn’t sufficient. due process of law has got to be maintained and it’s to be registered by the ROC and a Certificate of Registration must be received by office.

Procedure for appointment of director

Frequently Asked Questions

Answer: As per principle rule, Personnel guarantee of the Promoters aren’t assets of the corporate. Therefore, there’s no got to create charge on the personnel guarantee of the promoters.

Answer: Earlier there was list of transaction on which charge was required to make . With the enactment of the businesses Act, 2013, tire list of charges requiring registration done away with. Thus, within the absence of a selected list of charges to be registered, and therefore the wide definition of the word “charge”, ‘pledges’ and ‘liens’ were also required to be registered.

The companies creating pledge over shares are compulsorily required to register the charge, which wasn’t the case with its predecessor This question I even have discussed in details in my separate article.

Answer: Sometimes companies give counter-guarantee to banks for the guarantee given by the banks to the govt or other authorities. Such a guarantee doesn’t create any encumbrance on the company’s properties. So, it needn’t be registered- S.T. Patil V. Registrar of Companies 10 CC.

Answer: Whether Charge is going to be created in ABC Pvt Ltd?

 Whether charges are going to be created in PQR Pvt Ltd?

  • As per principle rule, within the above situation, PQR is giving its assets as security to bank for a loan to ABC, therefore assets of the PQR is involved charge is going to be created within the PQR Pvt Ltd.
  • Here assets of the ABC aren’t involved within the security, therefore no got to create a charge in ABC Pvt Ltd.

Answer: As per principle rule, Future assets aren’t a part of the assets side of the record of the corporate . Company can’t create security on an equivalent . Therefore, no need of creation of charge on the longer term assets of the corporate .

Answer: Deposit of a hard and fast deposit receipt with the Bank by way of security for a loan amount to pledge of movable property. there’s required to make charge on pledge under Companies Act, 2013. Conclusion, So it got to be registered.

Under CA-1956 there wasn’t required to make charge on pledge at that point during a case of Sree Meenakshi Mills Ltd. V ROC (1966) decisions was there’s no got to register charge on fixed deposit.

Answer: Provision: As per section 79 Company required to file form for modification of charge for 4 (four) purposes. Any modification within the terms or conditions or the extent or operation of any charge registered thereunder section.

Example: within the case of companies it’s a traditional practice that they obtain capital facilities from banks. There capital facilities are usually secured by a charge on the present assets of the corporate . Whenever the capital facilities are increased a corporation is required to offer additional security which suggests the prevailing charge has got to be enhanced to hide the improved limits, by filing CHG-1 with ROC.

Answer: within the case of a charge created out of India, and comprising solely property situate outside India, thirty days after the date on which the instrument creating or evidencing the charge or a replica thereof could, in due course of post and if despatched with due diligenee, are received in India, shall be substituted for 4hirty days after the date of the creation of the charge, at the time within which the particulars and instrument or copy are to be filed with the Registrar.

Answer: A hire purchase contract place the financier within the position of a secured creditor. So a hire purchase contract must be registered as a charge- Official Liquidator, Manasuba & Co. (P.) Ltd. V. Commissioner of Police {1968}.

Answer: Entries within the register shall be authenticated by a director or the secretary of the corporate or the other person authorized by the Board for the aim.

Answer: Any member or creditor of the corporate without fees; Any other person on payment of fee.

Answer: it had been held within the case of SBI v. Haryana Rubber Industries (P.) Ltd. [1986] 60 Comp Cas 472 (Punj. & Har.) that the charge stands registered from the date of filing of particulars albeit the ROC delays making entries in his books.

Moreover, it had been held within the case of Official Liquidator v. Union Bank of India that non-compliance doesn’t mean that the transaction is void or debt isn’t recoverable. Only consequence is that security becomes void as against liquidator and creditors

Answer: The provisions of this chapter shall apply mutatis mutandis to at least one Person Company.