Registration of Charge Service Description

Introduction to Registration of Charge

The registration of charge is a critical compliance requirement for companies under the Companies Act, 2013. This process involves registering any charge created by a company on its assets or property with the Registrar of Companies (RoC). At ComplyQuick, we offer specialized services to assist companies in the meticulous and timely registration of charges. This detailed service description outlines the steps, requirements, and compliance measures associated with the registration of charges as specified under the Ministry of Corporate Affairs (MCA) guidelines.

Importance of Charge Registration

The registration of charge is essential for maintaining transparency and protecting the interests of creditors and other stakeholders. A charge is a form of security interest granted over the company’s assets, and its registration provides public notice of the existence of this security. This process ensures that the company’s assets are not used to secure multiple loans without the knowledge of creditors, thus preventing fraudulent activities and potential legal disputes. Timely registration of charges is also crucial for the enforceability of the security in case of default.

Legal Framework and Compliance of Registration of Charge

The registration of charges is governed by the Companies Act, 2013, and the Companies (Registration of Charges) Rules, 2014. Key sections of the Act relevant to the registration of charges include:

• Section 77: Requires companies to register charges created within or outside India on its properties or assets.
• Section 78: Allows creditors or charge holders to register the charge if the company fails to do so.
• Section 79: Specifies the provisions for the registration of charges in different circumstances.
• Section 82: Companies must file satisfaction of charges with the RoC once the charge is paid off.

Types of Charges to be Registered

Charges that need to be registered include, but are not limited to:

• Fixed Charges: These are charges created on specific identifiable assets of the company.
• Floating Charges: These are charges on a class of assets, both present and future, that remain fluctuating until crystallization.
• Mortgage: A type of fixed charge created on immovable property.
• Hypothecation: A charge on movable assets like inventory, receivables, or other goods.
• Pledge: A security interest in movable property handed over to the lender.

Process of Registration of Charge

The registration of a charge involves several steps, from the creation of the charge to the submission of the necessary forms with the RoC. Below is a detailed overview of each step involved in this process:

1. Creation of Charge

The process begins with the creation of a charge through an agreement between the company and the lender (charge holder). This agreement specifies the terms and conditions of the charge, including the amount secured, the assets charged, and the rights of the lender. The agreement must be executed in writing and duly signed by authorized representatives of both parties.

2. Board Resolution

Once the charge is created, the company’s board of directors must pass a resolution authorizing the creation of the charge and its registration with the RoC. The board resolution should clearly state the details of the charge, including the amount, the assets charged, and the terms of the charge. The resolution must be recorded in the minutes of the board meeting.

3. Filing of Form CHG-1/CHG-9

To register the charge with the RoC, the company must file Form CHG-1 (for other than debentures) or Form CHG-9 (for debentures) within 30 days of the creation of the charge. These forms include details such as:

• The type and particulars of the charge.
• The name and address of the charge holder.
• The amount secured by the charge.
• A description of the assets or property charged.
• A copy of the charge instrument (agreement).

The form must be digitally signed by the director, manager, or secretary of the company, and certified by a practicing professional (CA, CS, or CWA).

4. Payment of Fees

The applicable registration fees must be paid along with the submission of Form CHG-1/CHG-9. The fees vary depending on the nominal share capital of the company and the amount secured by the charge. Payment of fees is crucial for the successful submission and processing of the registration form.

5. Verification and Registration by RoC

Upon submission, the RoC verifies the details provided in the form and the attached documents. If the RoC is satisfied with the accuracy and completeness of the information, the charge is registered, and a Certificate of Registration of Charge (Form CHG-2) is issued. This certificate serves as conclusive evidence of the registration of the charge.

Responsibilities of the Company

The company has several responsibilities to ensure compliance with the statutory requirements for the registration of charges. These include:

• Timely Filing

The company must ensure timely filing of Form CHG-1/CHG-9 for the creation or modification of charges and Form CHG-4 for the satisfaction of charges. Delays in filing can attract penalties and result in the charge becoming unenforceable.

• Accurate Documentation

Accurate documentation is essential for the successful registration of charges. The company must ensure that all details provided in the forms and attached documents are correct and complete.

• Maintaining Records

The company must maintain a register of charges at its registered office, recording all details of the charges created, modified, or satisfied. This register should be open for inspection by members, creditors, and other stakeholders.

Consequences of Non-Compliance

Non-compliance with the requirements for the registration of charges can have severe consequences, including:

• Penalties

  1. Fee for filing e-forms or documents in case of company have share capital

  Nominal Share Capital	Fee Applicable Rs.
  <1 lakh	200
  1 lakh – 5 lakh	300
  5 lakh – 25 lakh	400
  25 lakh – 100 lakh	500
  >100 lakh	600

  2. fee for filing e-forms or documents in case of company not have share capital – Rs 200 In case of foreign company – Rs 6,000
  3. Additional Fees

  • Charges created or modified before 02.11.2018 and allowed to be filed within a period of 300 days of such creation or six months from 02.11.2018 (i.e. 1st May 2019), whichever is later
  • Charges created or modified on or after 02.11.2018

  Period of delay	Fee Applicable Rs.
  Up to 30 days	2 times of normal fees
  More than 30 days and up to 60 days	4 times of normal fees
  More than 60 days and up to 90 days	6 times of normal fees
  More than 90 days and up to 180 days	10 times of normal fees
  More than 180 days	12 times of normal fees

• Enforceability Issues

An unregistered charge is not enforceable against the liquidator or any other creditor of the company. This means that in the event of the company’s liquidation, the unregistered charge holder may not be able to recover their dues from the company’s assets.

• Legal Complications

Non-compliance can lead to legal complications, including disputes with creditors and regulatory scrutiny. This can damage the company’s reputation and affect its relationships with lenders and other stakeholders.

Benefits of Professional Assistance

ComplyQuick services for the registration of charges offers several benefits, including:

• Expertise and Knowledge

ComplyQuick has in-depth knowledge of MCA regulations and filing procedures. Our expertise ensures that all statutory requirements are met accurately and efficiently.

• Time and Resource Efficiency

ComplyQuick allows companies to focus on their core business activities while professionals handle the compliance tasks. This saves time and resources and ensures timely and accurate filings.

• Risk Mitigation

ComplyQuick helps mitigate the risk of errors and non-compliance. Their thorough understanding of the regulatory landscape and meticulous approach to data verification and form preparation minimize the risk of penalties and legal complications.

Our expertise in navigating the complexities of the Companies Act, 2013, coupled with our commitment to accuracy and transparency, ensures that your company remains compliant and maintains high standards of corporate governance. Contact us today to learn more about our charge registration services and how we can support your business in achieving compliance and fostering stakeholder trust.