Charges: Registration, Satisfaction & Modification

A CHARGE is stated in Section 2(16) of the Companies Act, 2013 which expresses that a charge could be

• an interest or lien;
• created on the property or assets of a corporation; and
• any of its undertakings or both as security

and includes a mortgage

In other words, a charge, in the context of the Companies Act, refers to a legal claim or interest created by a company over its assets or properties to secure a debt or an obligation. It serves as a safeguard for lenders and investors who provide financing to the company.

Charges can be classified into two broad categories:-

1. Fixed Charges:- A fixed charge is a charge created on specific identifiable assets of the company, such as land, buildings, or machinery. The charge creates a proprietary interest for the lender, and the company cannot dispose of or deal with the charged assets without the lender’s consent.
2. Floating Charges:- A floating charge is a charge that covers a class of assets, which are subject to change or fluctuation during the normal course of business. These assets may include stock-in-trade, raw materials, or work in progress. Unlike a fixed charge, a floating charge does not attach to specific assets immediately, but it crystallizes into a fixed charge upon the occurrence of certain events mentioned in the Companies Act.

Who shall register for Charges (Section 77)

It shall be the duty of every company to create 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-

• within 30 days of its creation
• together with the instruments
• signed by the company and the charge-holder
• in e-Form CHG-1 (for other than Debentures) or e-Form CHG-9 (for debentures including rectification)

Registration of charge by charge holder (Section 78)

Failure of a company to file for registration of Charge within 30 days as referred to in section 77, the person in whose favor the charge is created (‘charge holder) may apply to the Registrar for registration of the charge along with the instrument created for the charge, within such time and in such form and manner as may be prescribed, the Registrar may, on such application, within a period of 14 days after giving notice to the company allow such registration on payment of such fees, as may be prescribed 

In such a case, the Charge-holder has the right of recovering, from the company, the amount of any fees or additional fees paid by him to the Registrar for the purpose of registration of such charge.

Effect of Registration

The Registrar shall register the charge and issue a certificate of registration in FORM CHG-2; or modification of charge in FORM CHG-3, to the person in whose favor the charge is created

Register of Charges

• The company needs to maintain necessary entries in the Register of Charges in Form CHG-7 at its registered office, which shall be authenticated by a director or secretary or any other authorized person and the said register shall be open for inspection during business hours by any members or creditors.

• The Registrar maintains the particulars of charges on the MCA (Ministry of Corporate Affairs) portal, which is deemed as the Register of Charges. It shall be open to inspection by any person on payment of a fee.

Satisfaction of Charges

• A company shall, within a period of 30 days from the date of such payment or satisfaction, give intimation to the Registrar in e-Form CHG-4, of the payment or satisfaction in full of any charge already registered.

• The registrar may on receipt of the application by the company allow such satisfaction to be made within a period of 300 days of such payment or satisfaction on payment of such additional fees as may be prescribed.

Punishment for Contravention 

• The company shall be liable to a penalty of five lakh rupees and every officer of the company who is in default shall be liable to a penalty of fifty thousand rupees.
•  If any person wilfully furnishes any false or incorrect information or knowingly suppresses any material information, required to be registered in accordance with the provisions of section 77, he shall be liable for action under section 447.

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