Filing of charge gives security and empower the charge holder that in case the Company makes a default for the repayment of the loan, then charge holder can get the claim amount from the security which was charged by the Company in favor of the charge holder.
Filing of Charge is necessary to secure the lender as well as to secure the third party, that, as and when any third party dealing with the same property it must be aware that the property is already under charged with some lender and before executing the transaction all the charge details must be agreed with all the parties.
LAWS GOVERNING THE FORM CHG-1
Section 77, 78, 79 and Section 384 and Rule 3(1) of the Companies Rules, 2014.
CHARGE
As per Section 2(16) of Companies Act, 2013, “Charge” means 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.
BELOW MENTIONED PROCEDURE NEEDS TO BE FOLLOWED
A. REGISTRATION OF CHARGE WITHIN 120 DAYS
1. File Particulars of the Charge with ROC
a. Company shall file the particulars of the Charge with ROC within 30 days of execution of the instrument creating or modifying charge and attach the following documents with:
Form CHG-1 (Other than Debentures)
- A Certified copy of the instrument or deed.
- Instrument evidencing creation of charge in case of acquisition of property which is already subject to charge together with the instrument evidencing such acquisitions.
- In case of Joint charge, particulars of all joint charge holders
- In case of filing of form beyond 30 days of creation of charge, declaration from the company signed by its director.
- Any other document, as applicable.
Form CHG-9 (For Debentures)
- Certified true copy of resolution authorizing the issue of the Debentures.
- Instrument containing details of the charge created or modified is mandatory in all cases.
- Order of the CG in case e-Form is being filed for rectification of charges.
- In case of filing of form beyond 30 days of creation of charge, declaration from the company signed by its secretary or director.
- Any other document, as applicable.
b. These forms can be filed after the expiry of 30 days but within additional period of 30 days on payment of additional fees.
c. Where the instrument for creating or modification of charge is not filed within a period of 60 days, Company shall make an application for extension of time-limit for filing the relevant forms and ROC may allow such registration to be made within a period of further 60 days after payment of advalorem fees.
2. Certificate of Registration of Charge
ROC will register the charge and issue Certificate of Registration of Charge in Form CHG-2 or Form CHG-3 (in case of modification of charge).
3. Entries in Register of Charges
Company shall make necessary entries in the Register of Charges in Form CHG-7 maintained by the Company. Director or CS or any other person authorized by the Board shall authenticate these entries.
B. REGISTRATION OF CHARGE BEYOND 120 DAYS
CONDONATION OF DELAY
1. Company shall file Form CHG-1/CHG-8as applicable with additional fees. Once the form is filed, the status of the form shall be shown as “Pending for INC-28”.
2. Convey a BM and pass a BR authorizing one of the director and Professional for making petition for Condonation of delay.
3. File Form GNL-2with the Registrar of Companies (ROC) with the following attachments:
- CTC Board resolution regarding condonation of delay for filling E Form CHG 1/CHG 4 form and its Challan.
- Petition before Regional Director on Rs.100/- stamp paper and the set to be taken on legal paper.
- Affidavit on stamp paper of Rs.100/-.
- Affidavit verifying the petition.
- Memorandum of appearance on stamp paper of Rs.100/- (To be notarized)
- MOA and AOA of the Company
4. File form CHG 8(Application to Central Government for extension of time for filing particulars of registration of creation / modification / satisfaction of charge) with the following attachments:
- CTC Board resolution regarding condonation of delay for filling E form
- CHG 1/CHG 4 form and its Challan
- Form GNL 2 and Challan
- Hypothecation deed for the creation of charge
- No due certification in case of satisfaction of a charge
- Petition before Regional Director on Rs.100/- stamp paper and the set to be taken on legal paper.
- Affidavit on stamp paper of Rs.100/-.
- Affidavit verifying the petition
- MOA and AOA of the Company
5. File INC-28 with the ROC within 30 daysof passing order with the following attachments:
- Copy of order
- Challan of penalty
6. Afterwards RD will call for hearing where order for Condonation of delay will be passed with the additional Fees. The fees need to be paid to ROC with reference to SRN No in the miscellaneous fee payment.
7. After filling of form INC-28, Condonation of delay comes to end and form CHG- gets approved.
REGISTER OF CHARGES
Liability on the Registrar – Section 8 mandates to keep a register containing particulars of the charges registered and that particulars are being maintained on the Ministry of Corporate Affairs portal.
Index of Charge registered with the MCA can be viewed:
Liability on the Company – Every Company shall have to maintain register of charge in form CHG-7 along with copy of the instrument creating the charge at its registered office of the Company which shall include all types of charges.
The register of charges shall be preserved permanently and the instrument creating a charge or modification thereon shall be preserved for a period of eight years from the date of satisfaction of charge by the company.
SATISFACTION OF CHARGES
Every Company shall intimate to the ROC in form CHG-4 of the payment or satisfaction in fullof any charge registered before the Registrar within a period of 30 days from the date of such payment or satisfaction in full.
if charge is partially satisfied than in that case CHG 4 shall not be filed and CHG 1 shall be filed for modification in existing charge.
However, the registrar may on an application by the Company or the Charge holder may allow a further time period of 270 days after the expiry of 30 days on payment of additional fees.
SECTION 86: PUNISHMENT FOR CONTRAVENTION
- The company shall be liable to a penalty of Rs.5 Lakhs and every officer in default shall be liable to a penalty of Rs. 50,000/-.
- If any person willfully 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.
LIST OF FORMS RELATED TO CHARGE
| CHG 1 | Creation of new charge or modification in existing charge for other than Debenture. |
| CHG 2 | Certificate of registration. |
| CHG 3 | Certificate of modification in existing charge. |
| CHG 4 | Payment or satisfaction in full of any charge. |
| CHG 5 | Certificate of registration of satisfaction of charge. |
| CHG 6 | Notice of appointment or cessation of receiver or manager. |
| CHG 7 | Register of charges made by the Company. |
| CHG 8 | Application to Central Government for extension of time for filing particulars of modification / satisfaction of charge OR for rectification of omission or misstatement of any particular in respect of creation/ modification/ satisfaction of charge. |
| CHG 9 | Creation of new charge or modification in existing charge for debenture. |
