Procedure for Registration or Creation or Modification of Charges

Aakanksha Singhal

Aakanksha Singhal

Published on: Dec 13, 2020

Khushboo Sharma

Updated on: Sep 30, 2023

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Introduction

“Charge” means an interest or lien created on the property or assets of a company or any of its undertakings or both as security and includes a mortgage. [Section 2(16)]

Applicable Provisions:

1. Section 2, 77 & 80 of Companies Act, 2013
2. Rule 4 of the Companies (Registration of Charges) Rules, 2014

Mandatory Requirements

1. It shall be the duty of every Company creating a charge within or outside India, 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 signed by the Company and the charge-holder together with the instruments, if any, creating such charge in such form, on payment of such fees with the Registrar within thirty days of its creation. [Section 77(1)]
2. Where any charge on any property or assets of a company or any of its undertakings is registered, any person acquiring such property, assets, undertakings or part thereof or any share or interest therein shall be deemed to have notice of the charge from the date of such registration. [Section 80]

Following Procedure is to be followed

• Registration of Charge within 120 Days
  1. File Particulars of the Charge with ROC
     • “Company shall file the particulars of the Charge with ROC within 30 days of execution of the instrument creating or modifying charge in Form CHG-1 (for other than Debentures) or Form CHG-9 (For Debentures including rectification), duly signed by the Company and the charge holder along with the copy of the instrument creating and modifying charge and attach the following documents with Form CHG-1”
       • A Certified copy of the instrument or deed by which the charge is created or evidenced.
       • Instrument evidencing creation of charge in case of acquisition of property which is already subject to charge together with the instrument evidencing such acquisitions.
       • In case of Joint charge, particulars of all joint charge holders
       • In case of filing of form beyond 30 days of creation of charge, declaration from the company signed by its secretary or director that such belated filing shall not adversely affect rights of any other intervening creditors of the company.
       • Detailed application (if form is filed after the expiry of 60 days)
       • Any other document, as applicable
       Form CHG-9
       • Certified true copy of resolution authorizing the issue of the debenture series is a mandatory in case of creation of charge
       • Instrument containing details of the charge created or modified is mandatory in all cases.
       • Order of the Central Government is mandatory in case eForm is being filed for rectification of charges.
       • In case of filing of form beyond 30 days of creation of charge, declaration from the company signed by its secretary or director that such belated filing shall not adversely affect rights of any other intervening creditors of the company.
       • Detailed application (if form is filed after the expiry of 60 days)
       • Any other document, as applicable
     • These forms can be filed after the expiry of 30 days but within additional period of 30 days on payment of additional fees.
     • Where the instrument for creating or modification of charge is not filed within a period of 60 days from the date of its creation or modification, Company shall make an application for extension of time-limit for filing the relevant forms and ROC may allow such registration to be made within a period of further 60 days after payment of advalorem fees.
  2. Certificate of Registration of Charge
     ROC will register the charge and issue Certificate of Registration of Charge in Form CHG-2 or modification of charge in Form CHG-3.
  3. Entries in Register of Charges
     Company shall make necessary entries in the Register of Charges in Form CHG-7 maintained by the Company. Director or CS or any other person authorized by the Board shall authenticate these entries.
• Registration of Charge Beyond 120 Days
  1. Convene a Meeting of Board of Directors [As per section 173 & SS-1]
     • Issue Notice of Board Meeting to all the Directors of Company at their addresses registered with the Company, at least 7 days before the date of Board Meeting. A shorter notice can be issued in case of urgent business.
     • Attach Agenda, Notes to Agenda and Draft Resolution with the Notice.
     • Hold a meeting of Board of Directors of the Company and pass the necessary Board Resolution
       • to authorize the Director or Company Secretary or CFO to file the application for condonation of delay of creation or modification of charge with Central Government.
       • to authorize any practicing professional or officer of the company for appearing before the Ministry of Corporate Affairs and execute an authorization in favour of such representative.
     • Prepare and Circulate Draft Minutes within 15 days from the conclusion of the Board Meeting, by Hand/Speed Post/Registered Post/Courier/E-mail to all the Directors for their comments. [Refer the Procedure for Preparation and Signing of Minutes of Board Meeting]
  2. File Application for Condonation of Delay
     Company shall file an application for condonation of delay to Central Government in Form CG-1 along with fees and following documents
     • Certified true copy of Board Resolution for authorizing the filing of the application and appointing the authorized representative
     • Detailed application for the Condonation of delay
     • Latest audited Balance sheet with profit and loss account
     • MOA and AOA of the Company
     • Any other document, as applicable
     Central Government will scrutinize the application and issue the final order for either approving or rejecting the application.
  3. File Order of Central Government with ROC
     Company shall file the copy of final order passed by the Central Government with ROC in Form INC-28 along with requisite documents and fees as per the directions issued by the Central Government.
  4. File Particulars of the Charge with ROC
     Company shall file the particulars of the Charge with ROC after getting approval on the application for condonation of delay, in Form CHG-1 (for other than Debentures) or Form CHG-9 (For Debentures including rectification), duly signed by the Company and the charge holder along with the copy of the instrument creating and modifying charge and attach the following documents with Form CHG-1
     • A Certified copy of the instrument or deed by which the charge is created or evidenced.
     • Instrument evidencing creation of charge in case of acquisition of property which is already subject to charge together with the instrument evidencing such acquisitions.
     • In case of Joint charge, particulars of all joint charge holders
     • Any other document, as applicable
     Form CHG-9
     • Certified true copy of resolution authorizing the issue of the debenture series is a mandatory in case of creation of charge
     • Instrument containing details of the charge created or modified is mandatory in all cases.
     • Any other document, as applicable
  5. Certificate of Registration of Charge
     ROC will register the charge and issue Certificate of Registration of Charge in Form CHG-2 or modification of charge in Form CHG-3.
  6. Entries in Register of Charges
     Company shall make necessary entries in the Register of Charges in Form CHG-7 maintained by the Company. Director or CS or any other person authorized by the Board shall authenticate these entries.
• Registration of Charge Created before the commencement of the Companies (Amendment) Ordinance, 2019
  1. Company shall make an application to the Registrar to allow such registration to be made within a period of three hundred days of such creation.
  2. If the registration is not made within the period specified, the registration of the charge shall be made within six months from the date of commencement of the Companies (Amendment) Ordinance, 2019, on payment of additional fees and different fees may be prescribed for different classes of companies.