Charge under Companies Act 2013
Meaning of Charge
A charge defined under Companies act 2013 which means an interest is created on any assets, property of the company which acts as a security. A charge includes mortgage, lien, hypothecation, etc. It means charge is a wider term and is used by the company to get funds. All companies get funds either by issuing shares i.e. raising capital or borrowing capital which may be secured or unsecured. Charges are created to secure borrowing by a company. A charge protects from the risk of non-payment of funds.
Requirement for Creating Charge
Practically all the large and small organizations rely on share capital and acquired capital may comprise of assets raised by giving debentures, which might be secured or unsecured, or by getting financial assistance from financial establishment or banks.
The financial institutions or banks don't loan their monies except if they are certain that their assets are protected and they would be reimbursed according to concurred reimbursement plan alongside installment of premium. So as to make sure about their advances they resort to creating right in the assets and properties of the borrowing companies, which is known as a Charge on assets. This is finished by executing credit understandings or loan agreements document which the borrowing organization is required to execute in favour of the lending banks or institution.
Different types of Charge
There are two types of charges,
Fixed charge is that charge which is created on property which is fixed or identifiable in nature such as plant and machinery, land, vehicle etc. In case borrower doesn’t pay back to the lender the money borrowed then lender can sell off the property to recover the money. However lender must take prior approval before selling of the assets.
Floating charge is that charge which is created on the assets whose value changes during a period such as trade debtors, stock, WIP etc. and company uses it in the ordinary course of business. The special feature of the floating charge is that the lender can sell off the asset without taking prior approval of the borrower.
It is the duty of the corporate including foreign company to register the charge whether charge is created in India or outside India. In case corporate fails to register the charge then in whose favour it is created shall proceed for registering the charge, however that person can recover the filing fees from the corporate after giving notice of 14 days. Charge form must be filed within a period of 30 days from the date of creation of charge with prescribed fees. The registrar after getting satisfied will issue certificate of registration of charge in form CHG-2. The technique for enlistment of a charge is the filing of particulars of charge along with the instrument with the Registrar of Companies.
Modification of Charge
The process and provisions of modification of charge is same as creation of charge. It’s just that the registrar after having certain modification in existing charge, will issue certificate of modification of charge in form CHG-3.
Satisfaction of Charge
When company repays the amount of loan to the bank or any other financial institution against any of its property then it means charge has been satisfied. A corporate must intimate to the ROC regarding satisfaction in form CHG-4 which must be filed within 30 days from the date of satisfaction of charge.
Where Form CHG-4 is not filled within 300 days i.e. (30 days Plus 270 days as extended on approval of ROC) from the date of satisfaction of charge then after the expiry of 300 days company must go for condonation to central government by filing form CHG-8.
Particulars of charge at the time of filing
The accompanying information is required to be filed with the Registrar:
- Name and address of the charge holder
- Description of the instrument creating charge
- Date of creating the charge
- Total amount secured by the charge
- Date of the resolution in which creation of charge authorised
- Description of the property under charged
- Charge deed or an instrument containing the charge duly certified
- Terms and conditions of the loan and,
- Details of modification/satisfaction as applicable.
Charge Form Filing
There are certain forms which are filed for different purpose in relation to charge. They are as follows:
- CHG-1- For Creation or Modification of charge
- CHG-2- For Certificate of registration of charge
- CHG-3- It is a Certificate of Modification of charge
- CHG-4- Intimation of satisfaction to the ROC
- CHG-5- It is a Memorandum of satisfaction of charge
- CHG-6- Filing for Notice of appointment or termination of receiver or manager
- CHG-7- Charge register
- CHG-8- It is an application filed to the Central Government for condonation of delay
- CHG-9- For creation or modification of charge for debenture
- CHG-10- Application for the delay to ROC
Every company must keep their documents regarding charge or register of charge at the registered office of company where all the information regarding charges is kept and entered. The organization must keep at its enrolled office, a copy of each instrument making any charge requiring the registration. During the business hours investigation by the bank or individual from the organization is permitted to be without charge of the register and documents. On behalf of company Neusource Startup Minds India Limited is here to file the forms related to charge. Here as team of professional assist you to make the financials secured by creating a charge or when fully repay, to satisfy the charge and liberated the company by filing particular form with applicable attachments.
For further queries please contact us on: Email Id Swati@neusourcestartup.com and Phone Number 9540026175.
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