ROC Charge Creations

Get Started – From Rs. 3,500/-

A charge is a right created by any person including a company referred to as “the borrower” on its assets and properties, present and future, in favour of a financial institution or a bank, referred to as “the lender”, which has agreed to extend financial assistance.

Section 2(16) of the Companies Act, 2014 defines charges so as to mean 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

The following are the essential features of the charge which are as under:

1. There should be two parties to the transaction, the creator of the charge and the charge holder.
2. The subject-matter of charge, which may be current or future assets and other properties of the borrower.
3. The intention of the borrower to offer one or more of its specific assets or properties as security for repayment of the borrowed money together with payment of interest at the agreed rate should be manifested by an agreement entered into by him in favour of the lender, written or otherwise.

Need for Creating a Charge on Company’s Assets:

Almost all the large and small companies depend upon share capital and borrowed capital for financing their projects. Borrowed capital may consist of funds raised by issuing debentures, which may be secured or unsecured, or by obtaining financial assistance from financial institution or banks.

The financial institutions/banks do not lend their monies unless they are sure that their funds are safe and they would be repaid as per agreed repayment schedule along with payment of interest. In order to secure their loans they resort to creating right in the assets and properties of the borrowing companies, which is known as a charge on assets. This is done by executing loan agreements, hypothecation agreements, mortgage deeds and other similar documents, which the borrowing company is required to execute in favour of the lending institutions/ banks etc

Types of Charges to be Registered:

Section 77 of the Companies Act, 2013, states that Companies are required to register ALL TYPES OF CHARGES, with ROC within 30 days of its creation. For Creation of Charge Form CHG-1 will be filed with fees prescribed under Act.

Penalty for not Filing Charges:

The company shall be punishable with fine which shall not be less than one lakh rupees but which may extend to ten lakh rupees and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to six months or with fine which shall not be less than twenty-five thousand rupees but which may extend to one lakh rupees, or with both.

Effect Of Non Registration of Charge:

As per Section 77(3), if charge is not registered with ROC, the charge shall not be taken into account by the liquidator or any other Creditor. Thus, mere filing of charge with Registrar would not be sufficient. It has to be actually registered by ROC and certificate of registration should be issued.

However, this is so only if company is under winding up. Otherwise, contract or obligation for repayment of the money secured by charge is there even if charge was not registered. 77(4)

Process Time:

AuditNeeds can complete the ROC Charge Creation in 4 to 7 working days, subject to Government processing time.