Charges Under Companies Act 2013 Complete Guide

Definition & Meaning Of Charges

Types Of Charges

• It covers assets which are ascertained or are capable of being ascertained and defined.
• Generally created on fixed assets.
• Cannot deal in that property which has been charged.

• It covers those assets which are not capable of being ascertained and defined.
• Generally it is created on current assets.
• It is created on such a class of assets which changes from time to time in the ordinary course of business.

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Difference Between Fixed Or Specific Charge And Floating Charges

Below we've mentioned the difference between fixed charge and floating charges:

Crystallization Of Floating Charges

Effect Of Crystallization Of A Floating Charges

• Priority over any subsequent equitable charge and other and unsecured creditors
• However, preferential creditors like government employee dues get priority over the floating charge .

Postponement Of Floating Charges

1. Landlord who restrain from rent
2. Creditor who obtain a garnishee order
3. Judgment creditor who attach and sold the property
4. Employee or other preferential creditors
5. Suppliers under the hire purchase agreement under goods remain the property of the seller.
6. Persons who take out a mortgage without notice of floating charge have priority over floating charge.
7. Floating charge created within 12 months immediately preceding the winding up shall be invalid unless it is proved that the company was solvent after the creation of charge.

Also Read: Security Analysis, Guide for Company Secretary Students

Difference Between Mortgage And Charges

Below we've mentioned difference between mortgage and charges:

Difference Between Charges And Pledge

Below we've mentioned difference between charges and pledge:

Registrable Charges

1. i) a charge created for the purpose of securing any issue of debentures or deposits;
2. ii) a charge on uncalled share capital of the company;

1. iv) a charge on any book debt of the company. Assignment of book-debts as security is covered.
2. v) a lien on sub freight is a charge on book-debt of the company.
3. vi) a charge, on any movable property of the company;

1. ix) a charge on a ship or any share in a ship;
2. x) a charge on intangible assets, including goodwill, patent, a license under a patent, trade mark, copyright or a license under a copyright;
3. xi) a charge or assignment on insurance policies obtained by the company;

Registration Of Charges (Section 77)

1. Can be register within 300 days from creation of charge
2. Companies shall register within 6 months from commencement of amendment (2019) act by paying additional fees.

1. Register within 30 days from creation if not
2. Can be register within 60 days from creation by paying additional fees
3. Further extension of 60 days after payment of ad valorem duty

Consequences Of Non-registration

1. A) Liquidator can ignore the charge and treat them as an unsecured creditors
2. B) If subsequent charge is cr eated and registered on the same property than later charge would get priority

Application For Registration By Charges Holder

• Company failed to register within 30 days from creation
• Charge holder may apply to ROC for registration
• ROC issued 14 days’ notice to the company for registration of charge.
• If a company failed to register the charge even after notice given by ROC then ROC shall register the charge.
• Fees paid by the charge holder can be recovered from the company.

Satisfaction Of Charges

1. A) Company intimate to ROC within 30 days from satisfaction (CHG-4).
2. B) Extension can be granted by ROC for a period of 300 days after payment of additional fees.
3. C) ROC shall give 14 days’ notice to the charge holder.
4. D) If no objection is received within 14 days then ROC shall register the satisfaction of charge and issue certificate of registration for satisfaction in form CHG -5.

Register of Charges Maintained in ROC’s Office (Section 81)

• The particulars of charges maintained on the Ministry of Corporate Affairs portal (www.mca.gov.in/ MCA21) shall be deemed to be the register of charges for the purposes of section 81 of the Act.
• This charge register shall be open to inspection by any person on payment of fee .

Register Of Charges (Section 85)

• Keep register of charge in form CHG -7 containing particulars of charge.
• Register of charge shall be kept at the register office of the company and preserved permanently .
• Instrument creating charge shall preserve for 8 years from satisfaction.
• Register of charge can be inspected by members, creditors (free of cost) and other persons (fees) during business hours.

Application To Central Government Condonation Of Delay [Section-87]

1. A) Non-registration was accidental
2. B) Inadvertence or some other sufficient reason
3. C) Not of a nature to prejudice the position of creditors
4. D) Just and equitable grounds. Order of CG shall be filed with ROC in form no. INC-28 along with the fees.