Creation of Charges

Starts from Rs. 3,000/-

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 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.

Overview

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 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

With in 30 days -Application should be made within 30 days of creation of charge in form CHG-1 with none late fees.
➼  After expiry of 30 days but not beyond 300 days – Application should be made before 300 days of creation of charge in CHG-10 attached in CHG-1.
After Expiry of 300 days -Application for Condonation of Delay to Regional Director in form CHG-8.

Process of Charge Creation/Modification:

Organize a committee meeting , concluding during a decision, to avail the loan and securitize the fees or assets. During the meeting, the authority to execute necessary documents must even be given.
➼  File Form MGT-14, amid the said resolution with the ROC, within 30 days of its passing.
Execution of the required documents for availing the funds on loan and therefore the security being provided.
Once the charge has been created or any modification has been completed. File Form CHG-7, to form entries within the register of Charges maintained. It must be authenticated by the Director or Secretary of the corporate or an individual as authorized by the board.
Either Form CHG-1 (for aside from debentures) or Form CHG-9 (for debentures including rectification) is to be submitted. Pay the fee, as applicable. This step must be completed within 30 days from the date of charge creation/modification.
Attach the subsequent documents:
If a Joint Charge or Consortium Finance has been undertaken, then the particulars of other charge holders or lenders.

The Instrument that evidences creation or modification of charge, just in case of acquiring property which is already a topic to another charge. and therefore the Instrument evidencing such acquisitions.

After a correct examination has been conducted, the ROC shall issue a Certificate of Registration. Form CHG-2, if the charge has been registered under section 77(1) or 78. Form CHG-3, if the charge is registered under section 79.

In case of a modification of charge, Form CHG-3 is to be obtained from the ROC.

When the shape CHG-1 or Form CHG-9 has not been submitted within the amount of 30 days. they will be submitted within the amount of 300 days, with an Application for Condonation in Form CHG-8 or Form CHG-10, respectively. they’re to be submitted with the Regional Director having territorial jurisdiction over the registered office of the corporate under the businesses Act, 2013.

Form CHG-8 or Form CHG-10 are to be enclosed with a Declaration by the Secretary or Director of the corporate that delays shall not affect the rights of the creditors.

Pay the penalty as imposed by the Regional Director. Generally, a period of 15 days time is given to pay this penalty.

After the payment of the imposed penalty, submit the Challan with the Regional Director’s office. It must be enclosed with a letter requesting issue an Order allowing Condonation of delay.

Submit the Order of Condonation with the ROC within the stipulated time given within the order itself with Form INC-28.

Once the ROC has approved the shape INC-28, get approval for the shape CHG-1 or CHG-9, whichever is applicable.

Once due compliance has been met with, the ROC shall issue Certificate of Registration in Form CHG-2, if the charge has been registered under section 77(1) or 78. Or Form CHG-3, if the charge has been registered under section 79.

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.

Process

Get the process done in 5 Easy Steps

1. Get in touch with our expert for free consultation.

2. Fill the Details sheet form. (Download details sheet form).

3. Provide the necessary Documents.

4. Application form with concern Department.

5. Document verification.

5. Now your work is completed. (Congratulations your work is completed now.)

FAQ's

1. Whether there's got to create charge on the personnel guarantee of the Promoters?
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.
2. Whether charge will create on Pledge?

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 predecessorThis question I even have discussed in details in my separate article.

3. Whether Guarantee given by Company to other Company amount to creation of Charge?

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.

4. There are two Companies ABC Pvt Ltd and PQR Pvt Ltd. ABC Pvt Ltd taking loan from the Bank and PQR giving guarantee on its property?

Answer: Whether Charge are going to be created in ABC Pvt Ltd?
Whether charge 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 loan to ABC, therefore assets of the PQR is involved charge are going to be create within the PQR Pvt Ltd.
  • Here assets of the ABC aren’t involved within the security, therefore no got to create charge in ABC Pvt Ltd.
5. Whether charge are often create on future assets of the Company?

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 .

8: what's the period of time to file CHG-1 with ROC just in case of creation of security out of India?

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.

 

7. Whether enhancement of a loan amounts to modification?

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.

 

6. Whether charge are going to be create on FDR of the Company?

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.

 

9. Whether Charge are going to be create on hire purchase agreement?

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}.

11. Who can inspect the register of Charge of the Company?

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

10. Who can authenticate the entry within the Register of Charge?

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 .

12. From which date charge consider as register?

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.

13. Whether provision of charge are going to be applicable on One Person Company?

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

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