Registration of Charges | Corporate & Other Laws for CA Intermediate PDF Download

 Page 1


                             
   
 
 
REGISTRATION OF CHARGES 
 
• DEFINITION OF CHARGE 
  A charge is a security, given for securing loans or debentures. The security may be 
provided either by way of mortgage, hypothecation or pledge.  
  Thus, charge is a general concept and it covers each and every mode of creating the 
security on the assets of a company, for the purpose of securing the repayment of any 
debt due by a company.  
 
KINDS OF CHARGE 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
• FILING OF PARTICULARS OF CREATION OF CHARGE [SECTION 77] 

 Section 77 of the Companies Act, 2013 provides that a Company shall file, the 
particulars of every charge created, with the ROC, within a period of 30 days 
from the date of creation of charge on its properties, within or outside India.  

 The particulars of charge shall be filed in Form No. CHG.1, together with the 
instrument, if any, creating, evidencing, etc. the charge. If the charge relates to 
debentures, the particulars of charge shall be filed in Form No. CHG.9.  

 The Registrar, after registering the charge, shall issue certificate of registration.  

 The ROC has power to grant extension of time for registration of charge, for 
a period not exceeding 300 days from the date of creation of charge, on the 
payment of prescribed additional fees.  

 The power to grant extension of time for registration of charges, beyond 
the period of 300 days, vests in the Central Government u/s 87.  

 It may be noted that a charge created orally would also require registration. The 
registration of a charge with the ROC itself would show that the charge is created 
even if no instrument is created. A Board resolution can also be taken to be the 
fact of creation of a charge.  

 This section shall not apply to such charges as may be prescribed in consultation 
with the Reserve Bank of India. 
Floating Charge 

 A floating charge is a charge on a class of 
assets present and future, which in the 
ordinary course of business is changing from 
time to time. 

 A floating charge is not attached to any definite 
property but covers property of a fluctuating 
type e.g. stock - in - trade, debtors, etc. and is 
thus necessarily equitable. 

 The company free to deal with the property as 
it sees fit until the holders of charge take steps 
to enforce their security. 
Fixed or Specific Charge 

 A charge is fixed or specific when it is 
made specifically to cover assets, which 
are ascertained and definite or are 
capable of being ascertained and 
defined, at the time of creating charge 
e.g., land, buildings, or heavy 
machinery.  

 A fixed charge is against security of 
certain specific property. 

 The company loses the right-to dispose 
off that property as unencumbered. 
Page 2


                             
   
 
 
REGISTRATION OF CHARGES 
 
• DEFINITION OF CHARGE 
  A charge is a security, given for securing loans or debentures. The security may be 
provided either by way of mortgage, hypothecation or pledge.  
  Thus, charge is a general concept and it covers each and every mode of creating the 
security on the assets of a company, for the purpose of securing the repayment of any 
debt due by a company.  
 
KINDS OF CHARGE 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
• FILING OF PARTICULARS OF CREATION OF CHARGE [SECTION 77] 

 Section 77 of the Companies Act, 2013 provides that a Company shall file, the 
particulars of every charge created, with the ROC, within a period of 30 days 
from the date of creation of charge on its properties, within or outside India.  

 The particulars of charge shall be filed in Form No. CHG.1, together with the 
instrument, if any, creating, evidencing, etc. the charge. If the charge relates to 
debentures, the particulars of charge shall be filed in Form No. CHG.9.  

 The Registrar, after registering the charge, shall issue certificate of registration.  

 The ROC has power to grant extension of time for registration of charge, for 
a period not exceeding 300 days from the date of creation of charge, on the 
payment of prescribed additional fees.  

 The power to grant extension of time for registration of charges, beyond 
the period of 300 days, vests in the Central Government u/s 87.  

 It may be noted that a charge created orally would also require registration. The 
registration of a charge with the ROC itself would show that the charge is created 
even if no instrument is created. A Board resolution can also be taken to be the 
fact of creation of a charge.  

 This section shall not apply to such charges as may be prescribed in consultation 
with the Reserve Bank of India. 
Floating Charge 

 A floating charge is a charge on a class of 
assets present and future, which in the 
ordinary course of business is changing from 
time to time. 

 A floating charge is not attached to any definite 
property but covers property of a fluctuating 
type e.g. stock - in - trade, debtors, etc. and is 
thus necessarily equitable. 

 The company free to deal with the property as 
it sees fit until the holders of charge take steps 
to enforce their security. 
Fixed or Specific Charge 

 A charge is fixed or specific when it is 
made specifically to cover assets, which 
are ascertained and definite or are 
capable of being ascertained and 
defined, at the time of creating charge 
e.g., land, buildings, or heavy 
machinery.  

 A fixed charge is against security of 
certain specific property. 

 The company loses the right-to dispose 
off that property as unencumbered. 
                             
 
 
 
• APPLICATION FOR REGISTRATION OF CHARGE [SECTION 78] 
Where a company fails to register the charge, the person in whose favour the 
charge is created may apply to the Registrar for registration and the Registrar 
may, on such application, within a period of 14 days after giving notice to the 
company, unless the company itself registers the charge or shows sufficient cause 
why such charge should not be registered, allow such registration.  
 

 Consequences of Non – Registration : 
If a charge, which requires registration under Section 77, is not registered, the 
consequences are as follows:-  
(a)  An unregistered charge is not void from its inception and would be enforceable 
against the company so long it is a going concern.  
(b)  During liquidation, a creditor with an unregistered charge assumes the status of 
an unsecured creditor.  
(c)  Although, the security becomes void by non - registration but it does not affect 
the contract or obligation of the company to repay the money thereby secured.  
(d)  The company shall be punishable with fine which shall not be less than one lakh 
rupees but which may extend to ten lakh rupees and every officer of the company 
who is in default shall be punishable with imprisonment for a term which may 
extend to six months or with fine which shall not be less than twenty-five 
thousand rupees but which may extend to one lakh rupees, or with both. 
[Section 86]  
 
• REGISTRAR'S REGISTER OF CHARGES [SECTION 81] 
Section 81 requires ROC to keep a register of charges in respect of each company 
and register therein the full particulars relating to charges created by the Company. 
This register is open to inspection to any person on payment of prescribed fess.  
It may be noted that the particulars of charges maintained on the Ministry of Corporate 
Affairs portal (www.mca.gov.in/MCA21) shall be deemed to be the register of charges 
for the purposes of section 81 of the Act. 
 
 
 
Page 3


                             
   
 
 
REGISTRATION OF CHARGES 
 
• DEFINITION OF CHARGE 
  A charge is a security, given for securing loans or debentures. The security may be 
provided either by way of mortgage, hypothecation or pledge.  
  Thus, charge is a general concept and it covers each and every mode of creating the 
security on the assets of a company, for the purpose of securing the repayment of any 
debt due by a company.  
 
KINDS OF CHARGE 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
• FILING OF PARTICULARS OF CREATION OF CHARGE [SECTION 77] 

 Section 77 of the Companies Act, 2013 provides that a Company shall file, the 
particulars of every charge created, with the ROC, within a period of 30 days 
from the date of creation of charge on its properties, within or outside India.  

 The particulars of charge shall be filed in Form No. CHG.1, together with the 
instrument, if any, creating, evidencing, etc. the charge. If the charge relates to 
debentures, the particulars of charge shall be filed in Form No. CHG.9.  

 The Registrar, after registering the charge, shall issue certificate of registration.  

 The ROC has power to grant extension of time for registration of charge, for 
a period not exceeding 300 days from the date of creation of charge, on the 
payment of prescribed additional fees.  

 The power to grant extension of time for registration of charges, beyond 
the period of 300 days, vests in the Central Government u/s 87.  

 It may be noted that a charge created orally would also require registration. The 
registration of a charge with the ROC itself would show that the charge is created 
even if no instrument is created. A Board resolution can also be taken to be the 
fact of creation of a charge.  

 This section shall not apply to such charges as may be prescribed in consultation 
with the Reserve Bank of India. 
Floating Charge 

 A floating charge is a charge on a class of 
assets present and future, which in the 
ordinary course of business is changing from 
time to time. 

 A floating charge is not attached to any definite 
property but covers property of a fluctuating 
type e.g. stock - in - trade, debtors, etc. and is 
thus necessarily equitable. 

 The company free to deal with the property as 
it sees fit until the holders of charge take steps 
to enforce their security. 
Fixed or Specific Charge 

 A charge is fixed or specific when it is 
made specifically to cover assets, which 
are ascertained and definite or are 
capable of being ascertained and 
defined, at the time of creating charge 
e.g., land, buildings, or heavy 
machinery.  

 A fixed charge is against security of 
certain specific property. 

 The company loses the right-to dispose 
off that property as unencumbered. 
                             
 
 
 
• APPLICATION FOR REGISTRATION OF CHARGE [SECTION 78] 
Where a company fails to register the charge, the person in whose favour the 
charge is created may apply to the Registrar for registration and the Registrar 
may, on such application, within a period of 14 days after giving notice to the 
company, unless the company itself registers the charge or shows sufficient cause 
why such charge should not be registered, allow such registration.  
 

 Consequences of Non – Registration : 
If a charge, which requires registration under Section 77, is not registered, the 
consequences are as follows:-  
(a)  An unregistered charge is not void from its inception and would be enforceable 
against the company so long it is a going concern.  
(b)  During liquidation, a creditor with an unregistered charge assumes the status of 
an unsecured creditor.  
(c)  Although, the security becomes void by non - registration but it does not affect 
the contract or obligation of the company to repay the money thereby secured.  
(d)  The company shall be punishable with fine which shall not be less than one lakh 
rupees but which may extend to ten lakh rupees and every officer of the company 
who is in default shall be punishable with imprisonment for a term which may 
extend to six months or with fine which shall not be less than twenty-five 
thousand rupees but which may extend to one lakh rupees, or with both. 
[Section 86]  
 
• REGISTRAR'S REGISTER OF CHARGES [SECTION 81] 
Section 81 requires ROC to keep a register of charges in respect of each company 
and register therein the full particulars relating to charges created by the Company. 
This register is open to inspection to any person on payment of prescribed fess.  
It may be noted that the particulars of charges maintained on the Ministry of Corporate 
Affairs portal (www.mca.gov.in/MCA21) shall be deemed to be the register of charges 
for the purposes of section 81 of the Act. 
 
 
 
                             
• SATISFACTION OF CHARGES [SECTION 82]  

 Section 82 requires that on payment or satisfaction of charge, in full, relating to a 
Company, the Company shall give intimation to ROC, within a period of 30 
days from the date of such payment or satisfaction. The 'particulars of 
satisfaction of charge shall be filed in Form No. CHG.4, together with 'no dues 
letter' issued by the creditor.  

 Provided that the Registrar may, on an application by the company or the charge 
holder, allow such intimation of payment or satisfaction to be made within a 
period of 300 days of such payment or satisfaction on payment of such additional 
fees as may be prescribed. (Amended as per notification dated 3
rd
 Jan, 2018). 
 
 
• COMPANY'S REGISTER OF CHARGES [SECTION 85] 

 Every company is required to keep at its registered office, a register in Form No. 
CHG.7 containing the particulars of all charge created, modified and satisfied. 
Further, every company must keep at its registered office a copy of every 
instrument creating/modifying/satisfying any charge.  

 Inspection of the Register of charges and of the instruments 
creating/modifying/satisfying charges can be allowed only during the business 
hours to any member or creditor of the Company without any fees and to any 
other person on payment of prescribed fees.  

 According to the rules related to the Company's register of charges- 
(1)   every company shall keep at its registered office a register of charges and 
enter therein particulars of all the charges registered with the Registrar on 
any of the property, assets or undertaking of the company and the 
particulars of any property acquired subject to a charge as well as 
particulars of any modification of a charge and satisfaction of charge. 
(2)   The entries in the register of charges maintained by the company shall be 
made forthwith after the creation, modification or satisfaction of charge, as 
the case may be. 
(3)   Entries in the register shall be authenticated by a director or the secretary of 
the company or any other person authorised by the Board for the purpose. 
(4)   The register of charges shall be preserved permanently and the instrument 
creating a charge or modification thereon shall be preserved for a period of 
eight years from the date of satisfaction of charge by the company. 
Page 4


                             
   
 
 
REGISTRATION OF CHARGES 
 
• DEFINITION OF CHARGE 
  A charge is a security, given for securing loans or debentures. The security may be 
provided either by way of mortgage, hypothecation or pledge.  
  Thus, charge is a general concept and it covers each and every mode of creating the 
security on the assets of a company, for the purpose of securing the repayment of any 
debt due by a company.  
 
KINDS OF CHARGE 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
• FILING OF PARTICULARS OF CREATION OF CHARGE [SECTION 77] 

 Section 77 of the Companies Act, 2013 provides that a Company shall file, the 
particulars of every charge created, with the ROC, within a period of 30 days 
from the date of creation of charge on its properties, within or outside India.  

 The particulars of charge shall be filed in Form No. CHG.1, together with the 
instrument, if any, creating, evidencing, etc. the charge. If the charge relates to 
debentures, the particulars of charge shall be filed in Form No. CHG.9.  

 The Registrar, after registering the charge, shall issue certificate of registration.  

 The ROC has power to grant extension of time for registration of charge, for 
a period not exceeding 300 days from the date of creation of charge, on the 
payment of prescribed additional fees.  

 The power to grant extension of time for registration of charges, beyond 
the period of 300 days, vests in the Central Government u/s 87.  

 It may be noted that a charge created orally would also require registration. The 
registration of a charge with the ROC itself would show that the charge is created 
even if no instrument is created. A Board resolution can also be taken to be the 
fact of creation of a charge.  

 This section shall not apply to such charges as may be prescribed in consultation 
with the Reserve Bank of India. 
Floating Charge 

 A floating charge is a charge on a class of 
assets present and future, which in the 
ordinary course of business is changing from 
time to time. 

 A floating charge is not attached to any definite 
property but covers property of a fluctuating 
type e.g. stock - in - trade, debtors, etc. and is 
thus necessarily equitable. 

 The company free to deal with the property as 
it sees fit until the holders of charge take steps 
to enforce their security. 
Fixed or Specific Charge 

 A charge is fixed or specific when it is 
made specifically to cover assets, which 
are ascertained and definite or are 
capable of being ascertained and 
defined, at the time of creating charge 
e.g., land, buildings, or heavy 
machinery.  

 A fixed charge is against security of 
certain specific property. 

 The company loses the right-to dispose 
off that property as unencumbered. 
                             
 
 
 
• APPLICATION FOR REGISTRATION OF CHARGE [SECTION 78] 
Where a company fails to register the charge, the person in whose favour the 
charge is created may apply to the Registrar for registration and the Registrar 
may, on such application, within a period of 14 days after giving notice to the 
company, unless the company itself registers the charge or shows sufficient cause 
why such charge should not be registered, allow such registration.  
 

 Consequences of Non – Registration : 
If a charge, which requires registration under Section 77, is not registered, the 
consequences are as follows:-  
(a)  An unregistered charge is not void from its inception and would be enforceable 
against the company so long it is a going concern.  
(b)  During liquidation, a creditor with an unregistered charge assumes the status of 
an unsecured creditor.  
(c)  Although, the security becomes void by non - registration but it does not affect 
the contract or obligation of the company to repay the money thereby secured.  
(d)  The company shall be punishable with fine which shall not be less than one lakh 
rupees but which may extend to ten lakh rupees and every officer of the company 
who is in default shall be punishable with imprisonment for a term which may 
extend to six months or with fine which shall not be less than twenty-five 
thousand rupees but which may extend to one lakh rupees, or with both. 
[Section 86]  
 
• REGISTRAR'S REGISTER OF CHARGES [SECTION 81] 
Section 81 requires ROC to keep a register of charges in respect of each company 
and register therein the full particulars relating to charges created by the Company. 
This register is open to inspection to any person on payment of prescribed fess.  
It may be noted that the particulars of charges maintained on the Ministry of Corporate 
Affairs portal (www.mca.gov.in/MCA21) shall be deemed to be the register of charges 
for the purposes of section 81 of the Act. 
 
 
 
                             
• SATISFACTION OF CHARGES [SECTION 82]  

 Section 82 requires that on payment or satisfaction of charge, in full, relating to a 
Company, the Company shall give intimation to ROC, within a period of 30 
days from the date of such payment or satisfaction. The 'particulars of 
satisfaction of charge shall be filed in Form No. CHG.4, together with 'no dues 
letter' issued by the creditor.  

 Provided that the Registrar may, on an application by the company or the charge 
holder, allow such intimation of payment or satisfaction to be made within a 
period of 300 days of such payment or satisfaction on payment of such additional 
fees as may be prescribed. (Amended as per notification dated 3
rd
 Jan, 2018). 
 
 
• COMPANY'S REGISTER OF CHARGES [SECTION 85] 

 Every company is required to keep at its registered office, a register in Form No. 
CHG.7 containing the particulars of all charge created, modified and satisfied. 
Further, every company must keep at its registered office a copy of every 
instrument creating/modifying/satisfying any charge.  

 Inspection of the Register of charges and of the instruments 
creating/modifying/satisfying charges can be allowed only during the business 
hours to any member or creditor of the Company without any fees and to any 
other person on payment of prescribed fees.  

 According to the rules related to the Company's register of charges- 
(1)   every company shall keep at its registered office a register of charges and 
enter therein particulars of all the charges registered with the Registrar on 
any of the property, assets or undertaking of the company and the 
particulars of any property acquired subject to a charge as well as 
particulars of any modification of a charge and satisfaction of charge. 
(2)   The entries in the register of charges maintained by the company shall be 
made forthwith after the creation, modification or satisfaction of charge, as 
the case may be. 
(3)   Entries in the register shall be authenticated by a director or the secretary of 
the company or any other person authorised by the Board for the purpose. 
(4)   The register of charges shall be preserved permanently and the instrument 
creating a charge or modification thereon shall be preserved for a period of 
eight years from the date of satisfaction of charge by the company. 
                             
• RECTIFICATION OF THE REGISTER OF CHARGES MAINTAINED BY 
THE ROC [SECTION 87]  

 Under Section 87 of the Companies Act, 2013, the Central Government 
(Power delegated to RD) has powers to grant extension of time for filing 
particulars of any charge; or any modification thereof; or for giving of any 
intimation about the payment or satisfaction of charge, if the Central 
Government is satisfied: - 
(a)  That the omission to do so within the prescribed time: -  
(i)  is accidental; or 
(ii)  is due to inadvertence; or  
(iii)  is not of a nature, as to prejudice the position of creditors I 
shareholders, 
(b)    That it is just and equitable to grant relief on other grounds.  
 

 For this purpose, an application shall be made to the Central Government 
in Form No. CHG.8, along with the following documents : -  
1.  Copy of the agreement creating I modifying the charge/ no dues letter, as 
the case may be.  
2.  Copy of the resolutions passed for borrowing the funds by the company and 
creation of security thereof.  
3.  Affidavit verifying the petition. 
4. Memorandum of appearance with copy of Board resolution, authorizing any 
one of the Directors or Company Secretary of the Company, to appear 
before the Central Government (RD), as the case may be.