Creation/Modification of Charge

CHAPTER VI

REGISTRATION OF CHARGE

(Section 77-87)

WHAT IS CHARGE

Definition

As per Sec 2(16) of Companies Act 2013 Charge,” means an interest or lien created on the property or assets of the company or any of its undertakings or both as security and including mortgage.

Interpretation

• Charge is an interest or lien,
• It is created on the Property or Assets of a company or any of its undertakings or both,
• It is created as a security for repayment of a loan,
• Charge includes mortgage.
   

Whenever a company borrows money by way of loans whether term loan or working capital loans from financial institutions or bank or any other person by offering the company’s property or assets as security, a charge is created on such property or assets of the company in favour of the person who lends money to the company.

DUTY TO REGISTER OF CHARGE
Section 77 (1) of Companies Act 2013

It shall be the primary duty of the company creating a charge on its property or assets or any of its undertakings, whether tangible or otherwise and situated in or outside India to register the particulars of the charge with the Registrar along with the Instrument evidencing the creation or modification of charge, as the case may be, withing the prescribed period of 30 days from the date of creation of charge.

If the company creating the charge fails to register the charge within the prescribed period of 30 days, the person in whose favour the charge is created can get the charge registered, along with the instruments and such evidencing the creation or modification of charge and such charge holder shall be entitled to recover from the company the amount of any fees or additional fees by him.

However, Charge holder can also create charge within 30 days of its creation after informing the borrower company on behalf of the company.

REGISTRATION OF CHARGE TO ACT AS A CONSTRUCTIVE NOTICE

When a charge is registered with the Registrar of Companies, it is considered a public notice. This means that anyone who wants to buy a company’s assets or lend money to the company against the security of such property or assets can check the official website of the Ministry of Corporate Affairs (MCA) to see if there are any charges on the property or assets.

If such person does not refer to the public documents, he would still be considered or deemed to have seen it.
 

Thats why ROC Search Report is required while sanctioning the loan and reviewing the loan every year for Private Limited/Public Limited Company and LLP.

APPLICABLE ROC FEES FOR REGISTRATION/MODIFICATION OF CHARGE

Normal Fees: (Within 30 days of creation/modification of charge)

Fees for Company having Share Capital.

Additional Fees and Advalorem Fees

Definition of small company

The Act defines a small company as a company that is not a public company and has:

• A paid-up share capital equal to or below Rs.4 crore or such a higher amount specified not exceeding more than Rs.10 crores.
• A turnover equal to or below Rs.40 crore or such a higher amount specified not exceeding more than Rs.100 crore.

However, the concept of small companies does not apply to the following companies:

• A holding or a subsidiary company.
• A company registered under section 8 of Companies Act.
• A body corporate or company governed by any special act.