Penalty Charge Under Companies Act 2013: An Overview

Narendra Kumar

17 Mar, 2023

Penalty Charge

 Meaning of Charge as per companies Act 2013

As per section 2 (16) charge means

• An interest or lien
• Created on the assets or property of the company or
• Any of its undertakings or both as security and includes a mortgage

Registration of Charge

The company needs to borrow funds for the requirement of the Company Registration, for which the Board of Directors authorizes to create a charge on the assets of the company to provide security for repayment. Following is the procedure of Registration of Penalty for Charge by a company

• To conduct a Board Meeting for availing the facility of the creation of charge. A special resolution needs to be passed and authority to execute necessary documents has to be fixed at the same Board Meeting.
• Form MGT 14 has to be filed within 30 days with the Registrar.
• After the creation of Penalty for Charge, make necessary entries in Charge Register in Form CHG 7 and get it authenticated by Director or Secretary.
• Submit Form CHG 1 or CHG 9 with the Registrar within 30 days from its creation.
• Attach appropriate documents with Form CHG 1 or CHG 9
• After the due compliance, the Registrar will issue a certificate of creation of Penalty Charge in Form CHG 2.

 Coadunation of Delay for Registration of Charge

• Where the instrument creating a charge is not filed within 300 days from its creation, the registrar cannot register the Penalty  Charge unless it is condoned by the Central Government.
• For coadunation of delay, an application has to be filed in Form CHG 8 along with the requisite fees with Central Government.
• The order passed by CG needs to be filed with the registrar in Form INC 28.

Charge Register

• Every company shall maintain at their register office a Penalty Charge Register in Form CHG 7
• Copy of instrument creating charge should be kept at the registered office of the company.
• Every entry in the Charge register should be authenticated by the Director or secretary of the company.
• The Charge register should be maintained by the company all the time.
• The instrument creating charge or modification of charge should be maintained for a period of 8 years from the date of its satisfaction.

The Penalty for non-filing of Charge:

If any company fails to file a Form with the Registrar or contravene any provision of this Chapter, the company shall be punishable with a fine. The penalty charge non-filing shall not be less than 1 Lakhs rupees but it may extend to 10 Lakhs rupees. The officer in default for the company shall be punishable with imprisonment up to 6 months or with fine which shall not be less than 25 thousand rupees but which may extend to 1 lakh rupees or both.