Registration & Satisfaction of Charge under the Companies Act, 2013

Priyanka Bajpayee

02 Nov, 2019

As per the Companies Act, 2013^[1], A Charge is an interest or lien created on the assets or property of a Company or any of its undertaking as security and includes a mortgage U/s 2(16). A charge is defined under section 77 to 87 of the Companies Act 2013. In this article, we will discuss the registration & satisfaction of charge;

Key Points of the Charge          

• By providing security of its assets, the company may borrow money and may create a lien on the properties of the Company.
• For raising funds, the Company may also issue Debentures which may carry a right/ interest in the Assets/Properties of the company.
• A charge is a way of security to the creditor of his right on the properties of the company for the amounts due to him by the company.

What is the need of Charge Creation?         

For financing their projects, almost all the Companies i.e. big companies and small companies depend upon share capital and borrowed capital. Where the borrowed capital consists of funds raised by issuing –

1. Debentures (Secured or Unsecured) both, and
2. By obtaining financial assistance from financial institutions or banks.

To secure their loans, the financial institutions/banks do not lend their money unless they are sure that their funds are safe, and they would be repaid as per the agreed repayment schedule. The borrowing company is required to execute the agreements i.e. Loan & hypothecation deed, mortgage deeds, and another similar document, in favor of the lending institutions and banks.

The financial institution resort to creating the right in the assets and properties of the borrowing companies, which is known as a charge on assets.

How to register a charge? – Registration of Charge

For creating the charge, the company shall register the particulars of the charge with the ROC within 30 days of creating the charge. For registering the charge together with a copy of the instrument, if any, creating or modifying the charge in Form No.CHG-1 or Form No. CHG-9 as the case may be, duly signed by the Company and the charge holder and filed with the Registrar within a period of 30 days of the date of creation of such charge along with the respective fees.

• In case of delay in filing, the additional fees shall be levied, if the charge is not filed within the above-mentioned period i.e. 30 days but filed within a period of 300 days of the date of creation of such charge.
• For evidencing the creation and modification of charge, a copy of every instrument is to be filed with the registrar of the companies. Once a charge is registered with the Registrar, the Registrar shall issue a certificate of registration of such charge in Form No. CHG-2.

What is the Satisfaction of Charge?

The company shall from the date of payment in full or satisfaction of any charge registered is required to give the intimation of the same to the Registrar of the company within 30 days from date of such payment in Form CHG-4 i.e. Satisfaction of Charge along with the prescribed fees.

As the satisfaction of charge is the date of complete payment of debt towards which the charge is created on the assets of the company. The documents of satisfaction of charge must contain the amount secured and also the date of completion of payment.

The Registrar in pursuance of Section 82 or 83 of the Companies Act 2013, enters a memorandum of satisfaction of charge in full and issue a certificate of registration of satisfaction of charge in Form No. CHG-5.

Note – However, as per the provision of Section 82(1), the intimation can be filed beyond 30 days but within 300 days of the date of satisfaction with an additional fee.

Section 86 provides for penal provisions for default which may result in heavy fines or imprisonment.

In case of delay of more than 300 days in filing the satisfaction of charge, the respective company is left with the only option to move a compounding application before the Regional Director of the MCA or the person duly authorized by the MCA on their behalf (Ministry of Corporate Affairs).

What is the filing fee of the Satisfaction of Charge as per the Companies (Registration Offices and Fees) Rules 2014?

As per the Companies (Registration Offices and Fees) Rules 2014, the filing fees for the satisfaction of the charge are mentioned below. However, the filing fees depend upon the Nominal Share Capital of the Company –

Consequences in case of Non-Filing of Satisfaction of the Charge

In case of delay in non-filing of the satisfaction of the charge within a period of 30 days from the date of satisfaction of the charge, the additional fee is required to be paid if filed within a period of 300 days from the date of payment of satisfaction of the charge–

Maintenance of Register of Charge

Form CHG-7 (Register of Charge) to kept at the registered office of the Company i.e. the particulars of the charge i.e registration & satisfaction of charge shall be entered in the register of the charge and shall be authenticated by the Company Secretary of the Company or any other person duly authorized by the Board of directors of the company for this purpose. The register of Charge shall be open for inspection by any member or creditor of the company.