Corporate Law
Registration of Charge by the Charge Holder under Section 78
When a company borrows against its assets, the charge must be registered with the Registrar of Companies. The duty to register is the company’s. But where the company fails to do so in time, Section 78 of the Companies Act, 2013 allows the charge holder, usually the lending bank or financial institution, to apply for registration itself.
This article explains when a charge holder can file, the procedure, and why registration matters to the lender.
Why registration matters to the lender
Under Section 77(3), a charge that is not registered is not taken into account by the liquidator or any creditor in a winding up or insolvency. In other words, the lender loses its priority as a secured creditor against other creditors. Registration also places the charge on public record, so that anyone dealing with the company can see the asset is encumbered.
Time allowed to the company
| Period from creation of charge | Filing |
|---|---|
| Within 30 days | Normal fee |
| Within a further 30 days | With additional fee, on application to the Registrar |
| Within a further 60 days | With ad valorem fee, on application to the Registrar |
The time limits and fees are as provided in Section 77 and the Companies (Registration of Charges) Rules, 2014.
Registration by the charge holder under Section 78
- The charge holder files Form CHG-1 (or CHG-9 for debentures) with the instrument creating the charge.
- The Registrar gives notice to the company, which may either register the charge itself or show cause why it should not be registered, within fourteen days.
- If the company does neither, the Registrar may allow the registration on the charge holder’s application.
- The Registrar issues the certificate of registration in Form CHG-2.
- The charge holder may recover the fees paid from the company.
Modification and satisfaction
Any modification of the terms of a registered charge, for example an enhancement of the limit or a change in the assets covered, is registered in the same way, and a certificate is issued in Form CHG-3. When the loan is repaid, the company must report satisfaction in Form CHG-4 within thirty days under Section 82. Lenders should ensure that a satisfaction is not filed without their confirmation, since a satisfied charge is removed from the register.
Practical points for lenders and borrowers
- The charge documents should be complete and stamped as required, since they are attached to the form
- The property description in the form must match the documents exactly
- Borrowers should register charges promptly, because late filing costs more and the lender may withhold disbursement
- Charges created before the 2019 changes, and old charges never satisfied on record, should be reviewed during due diligence or before closing a company
Related: rectifying mistakes in ROC filings and closing a company, where open charges on record often cause delay.
Frequently asked questions
Who signs the form when the charge holder files?
The authorised officer of the charge holder signs, and the form is certified by a practising professional as required.
Is a charge on a vehicle loan also registrable?
Yes, where the borrower is a company, a hypothecation of a vehicle is a charge that should be registered with the Registrar, in addition to the endorsement with the motor vehicles department.
What if the time limits have passed?
Once the extended time has passed, registration is no longer possible as a matter of course. The charge holder’s options should be examined with the facts of the case.
ചുരുക്കം (Summary in Malayalam)
കമ്പനി ആസ്തി ഈടായി നൽകി വായ്പ എടുക്കുമ്പോൾ ആ ചാർജ് ROC-യിൽ രജിസ്റ്റർ ചെയ്യണം. ഇത് കമ്പനിയുടെ ചുമതലയാണ്. 30 ദിവസത്തിനകം ചെയ്യണം; അധിക ഫീസോടെ നീട്ടാം. കമ്പനി ചെയ്തില്ലെങ്കിൽ സെക്ഷൻ 78 പ്രകാരം വായ്പ നൽകിയ ബാങ്കിന് CHG-1 ഫയൽ ചെയ്ത് രജിസ്റ്റർ ചെയ്യാം; ചെലവായ ഫീസ് കമ്പനിയിൽ നിന്ന് ഈടാക്കാം. രജിസ്റ്റർ ചെയ്യാത്ത ചാർജിന് ലിക്വിഡേഷനിൽ മുൻഗണന ലഭിക്കില്ല. വായ്പ തീർന്നാൽ 30 ദിവസത്തിനകം CHG-4 ഫയൽ ചെയ്യണം.
This article gives a general overview of registration of charges under the Companies Act, 2013. Time limits, fees and forms are revised from time to time; for accurate and current requirements, refer to the Act, the Companies (Registration of Charges) Rules, 2014 as amended and the MCA portal. The article is not advice on any particular case.
Please note. This article is provided for general information and is not professional advice or a solicitation of work. The law is stated as understood on the date shown above and may have changed since.