creation of change

Digital Signature Certificate

Starting at Rs. 1999(All-Inclusive Price)

Creation Of Charge

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. A charge may be fixed or floating depending upon its nature. A charge created by a company is required to be registered with the Registrar within thirty days of its creation in such form and on payment of such fees as may be prescribed.

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.

As a matter of convenience and practice, as and when more funds are required by companies, they approach the same institutions/banks or certain new institutions/ banks and offer same assets as security for fresh loans. However, when the same assets are charged for second and subsequent times, a very important question arises as to priority in respect of the charges in favour of different institutions. This situation is managed by securing consent of the earlier lending institutions to the creation of second and subsequent charges on the same assets. With their consents, the charges of all the lending institutions ranks pari passu, i.e. on the same footing.

DUTY TO REGISTER CHARGE

Primarily, under section 77 of the Companies Act, 2013 every company creating a charge shall register the particulars of charge signed by the company and its charge – holder together with the instruments creating. Important points in the Act relating to charge creation:

Any charge created within or outside India on property or assets or any of the company’s undertakings Whether tangible or otherwise, situated in or outside India shall be registered.

Hence all types of charges are required under the Act to be registered whether created within or outside India.
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Process for Creation of Charge

Choose Your Plan

You can choose any of our packages based on your requirements.

Documentation

My Efilings Business Consultant will verify all the documents regarding Registration of Charge and prepare the forms for filing with the MCA.

Bank Signature

My Efilings Business Consultant will share duly filled Charge Registration form with you and your Banker for Banker's Digital Signature.

Filing

On receiving the Charge Registration form duly signed by your Banker, we will file the form with the MCA and pay the filing fees.

Documents required for Creation of Charge

Choose Your Plan

Basic

4999 All-Inclusive Price
  • Registration, Modification or Satisfaction of Charge within 30 days of event
  • Govt. Fees as actual

Standard

12999 All-Inclusive Price
  • Registration Modification or Satisfaction of Charge within after 30 days of event but before 180 days.
  • Govt. Fees and other expenses as actual

Premium

19999 All-Inclusive Price
  • Registration Modification or Satisfaction of Charge after 180 days of event.
  • Govt. Fees and other expenses as actual

FAQ'S

As per principle rule, Personnel guarantee of the Promoters are not assets of the Company. Therefore, there is no need to create charge on the personnel guarantee of the promoters.

Earlier there was list of transaction on which charge was required to create. With the enactment of the Companies Act, 2013, tire list of charges requiring registration done away with. Thus, in the absence of a specific list of charges to be registered, and the wide definition of the word “charge”, ‘pledges’ and ‘liens’ were also required to be registered.

Sometimes companies give counter-guarantee to banks for the guarantee given by the banks to the Government or other authorities. Such a guarantee does not create any encumbrance on the company’s properties.Whether charge can be create on future assets of the Company

As per principle rule, Future assets are not part of the assets side of the balance sheet of the Company. Company can’t create security on the same. Therefore, no need of creation of charge on the future assets of the Company.

The provisions of charge shall apply to One Person Company.

A hire purchase agreement place the financier in the position of a secured creditor. So a hire purchase agreement must be registered as a charge.

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