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Mode of charge registration under companies act

Mode of charge registration under companies act


(This post elucidates entire process of creation of charge or modification of charge and satisfaction of charge and the requirement of information in the form of resolution passed in Board meeting)

At the outset, the borrowing company should conduct a Board meeting to discuss and decide about entire amount of credit facility sanctioned from a specific financial institution or the bank/s and terms and conditions of the sanction. The resolution passed in the Board meeting shall have the following information.

  • Date of the Board meeting,
  • Type of credit facilities and Name and address of the financier/s,
  • Total amount of finance, rate of interest, processing and other charges payable to the financier/s,
  • The details of security to be offered to the financier/s, as security.
  • Acceptance of terms and conditions of the sanction,
  • Acceptance of personal guarantee to be provided by any Directors of the company.
  • Naming and Authorizing the Directors to execute  the necessary loan documents on behalf of the company to avail the credit facility,
  • Nominating the director or Company Secretary or any other authorised person to file the application for registration of creation/modification of charge.

The extracts of the resolutions with resolution nos. with regard to having passed the positive decision on above points to be filed with the Registrar of Companies (ROC) in form MGT 14 within 30 days of its passing. [In case of secured debentures the date of resolution passed with regard to creation of charge against the property of the company as a security to the debenture holder to be entered in the register and informed to ROC in CHG-9 form for creation of charge.]

Execution of documents: The authorized persons of the company shall execute necessary loan documents like loan agreements, hypothecation deeds, mortgage deeds and other documents required, in order to create a charge on the assets of the company for availing credit facilities. The executed loan documents display the details of security including the mortgage of the property offered by the company with the company seal. The extract of the resolution passed in the Board meeting needs to be provided to the lending institution or the bank.

Entries in company’s register of charge:  Entries to be made in the register of charges maintained at the company in form CHG-7 format which shall be duly authenticated by Director or Secretary of the company or any other person authorized by the company. The entries in the register of charges shall contain following details;

  • Name and address of the charge holder bank/financial institution.
  • The terms and conditions of the sanction
  • The description of property charged
  • Date and description of the instrument creating the charge.
  • The total amount secured by the charge.

The above details are also to be furnished at ROC while filing each charge.

Filing of charge: The Company has to submit form CHG-1 (for other than debentures) or form CHG-9 (for debentures including rectifications) along with the copies of the instruments/deeds used for creation of  charge to the Registrar of Companies (ROC) within 30 days from the date of creation of charge/modification of charge. The copies of instruments/deeds submitted to ROC shall be duly certified by any director or Company Secretary or the Authorised Officer of the charge holder as an evidence of having verified the instruments/documents submitted to the ROC. The company shall make the prescribed payment of fees to ROC for the purpose of registration of the charge.

Certificate of registration of charge: The ROC would verify CHG-1 or CHG-9 as the case may be filed by the company under the sections 77(1) and 78 of companies’ act 2013 and sub-rule (1) of rule 6 of the Act. The ROC on the satisfaction of details furnished by the company would issue the certificate of registration in form CHG-2 containing particulars of charge together with copies of the instrument/s if any used for creating the charge.

Certificate of registration of modification of charge: The ROC would verify the form CHG-1 or CHG 9 as the case may be filed by the company under the sections 79(b) of companies’ act 2013 and sub-rule (2) of rule 6 of the companies. The ROC on the satisfaction of details furnished by the company would issue the certificate of registration in form CHG-3 containing particulars of modification of charge together with copies of the instrument/s if any used for modifying the charge.

Memorandum (Certificate) of Satisfaction of charge:

Click below to know how to apply for Memorandum/certificate of satisfaction of charges registered under companies act

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