registration of charges
This query is : Resolved
29 December 2007
pls tell me detailed theory abt registration of charges by the cos....wat is a charge...why it is created....etc etc....
29 December 2007
30 December 2007
CHARGES*
131.1 Background note
A company may raise funds through borrowings from Banks/Financial Institutions
etc. for its term loan/working capital requirements and such loans may
be secured or unsecured. In the case of secured loans, a charge is created on
the assets of the company.The term “Charge” includes a mortgage. The Act
provides for registration of charges with the Registrar of Companies which will
help a prospective lender to ascertain whether the assets are mortgaged or not.
131.2 Approval from the financial institutions
Wherever required, approvals from the financial institutions or banks or
debenture holders should be obtained for creation/modification of charge.
131.3 Applicability
Registration wih RoC is compulsory in respect of a charge :
u for the purpose of securing any issue of debentures.
u on uncalled share capital of the company.
u on any immovable property wherever situate or any interest therein. For
this purpose, the holding of debentures entitling the holder to a charge
on immovable property shall not be deemed to be an interest in immovable
property.
u on any book debts of the company. However, where a negotiable
instrument is given to secure the payment of book debts, the deposit of
the instrument for the purpose of securing an advance to the company
shall not be treated as a charge on those book debts.
u on any movable property of the company (not being a pledge).
u being a floating charge, on the undertaking or any property of the
company including stock-in-trade.
u on calls made but not paid.
u on a ship or any share in a ship.
u on goodwill, on a patent or a licence under a patent, on a trade mark, or
on a copyright or a licence under a copyright.
131.4 Power of lender to register charge
The charge may be effected on the application of the person in whose favour
the charge is created and in such a case the lender has the right to recover the
filing fees paid to the Registrar for registration of charge.
131.5 Board Resolution
A Board Resolution (Annex 131.1) should be passed for approving the proposal
to create/modify charge over the assets of the company, for approving the draft
notice fixing the date, time, venue and agenda of the General Meeting and for
authorising execution of documents.
131.5-1 Approval from members
Since creation of charge amounts to disposal of assets, the approval of members
is required to be obtained before creation of charge for every loan. A blanket
permission cannot be obtained.
131.5-2 Exemption to private company
In the case of a private company which is not a subsidiary of a public company,
no approval from members is required and the Board is empowered to create
charge over the assets.
131.6 Issue of notice of general meeting
The notice of the general meeting (Annex 131.2) together with the explanatory
statement should be sent to all eligible members and auditors of the company.
131.7 General Meeting Resolution
The general meeting should accordingly be held and the ordinary resolution
(Annex 131.3) for creation of charge should be duly passed.
131.8 Filing of eForm No. 23 with the Registrar of Companies
Within 30 days of passing the resolution, a return in eForm No. 23 should be
filed with the Registrar of Companies through MCA Portal www.mca.gov.in.
Refer Chapter 171 for applicable guidelines.
131.9 Creation of charge
The authorised person should execute documents for creation of charge under
the common seal of the company. The instrument creating the charged should
be duly stamped in accordance with the stamp duty applicable to the State in
which the registered office of the company is situated. In case of creation of
charge outside India, the provisions of Foreign Exchange Management Regulations
should also be duly complied with.
131.10 Filing of eForm No. 8 with the Registrar of Companies
Within 30 days from the date of creation of charge, a return in eForm No. 8
(Annex 131.4) should be filed with the Registrar of Companies within 30 days
through MCA Portal www.mca.gov.in.
131.10-1 Who can file?
The eform 8 shall be filed by the managing director or director or manager or
secretary duly authorised by the Board. The signatory must hold a valid digital
signature certificate. (Refer Chapter 360 for Digital Signature Certificates)
131.10-2 Time Limit
The eform 8 should be filed within 30 days of creation of charge. If the charge
relates to property to be acquired, the eform should be filed within 30 days of
acquisition. If the charge is to be created outside India but comprises a property
outside India, the eform should be filed within 30 days after the date on which
it could have been received by India, if despatched with due diligence. This
return should be filed nothwithstanding the further proceedings required to
make the charge valid or effective according to the law of the country in which
the property is situated.
131.10-3 Extension of time
The e-form shall be filed within 30 days of creation of charge. Registrar has
powers to extend the time by another 30 days on payment of standardised
additional filing fee. Further extension shall have to be obtained from Company
Law Board.
131.10-4 Attachment
Instrument creating the charge should be attached.
131.10-5 Digital Signature
The eform should be digitally signed by the managing director or director or
manager or secretary duly authorised by the Board and also by the charge
holder. The signatory must hold a valid digital signature certificate. (Refer
Chapter 360 for Digital Signature Certificates)
It should be certified by a CA/ICWA/CS (in whole-time practice by digitally
signing the e-form).
CHARGES*
131.1 Background note
A company may raise funds through borrowings from Banks/Financial Institutions
etc. for its term loan/working capital requirements and such loans may
be secured or unsecured. In the case of secured loans, a charge is created on
the assets of the company.The term “Charge” includes a mortgage. The Act
provides for registration of charges with the Registrar of Companies which will
help a prospective lender to ascertain whether the assets are mortgaged or not.
131.2 Approval from the financial institutions
Wherever required, approvals from the financial institutions or banks or
debenture holders should be obtained for creation/modification of charge.
131.3 Applicability
Registration wih RoC is compulsory in respect of a charge :
u for the purpose of securing any issue of debentures.
u on uncalled share capital of the company.
u on any immovable property wherever situate or any interest therein. For
this purpose, the holding of debentures entitling the holder to a charge
on immovable property shall not be deemed to be an interest in immovable
property.
u on any book debts of the company. However, where a negotiable
instrument is given to secure the payment of book debts, the deposit of
the instrument for the purpose of securing an advance to the company
shall not be treated as a charge on those book debts.
u on any movable property of the company (not being a pledge).
u being a floating charge, on the undertaking or any property of the
company including stock-in-trade.
u on calls made but not paid.
u on a ship or any share in a ship.
u on goodwill, on a patent or a licence under a patent, on a trade mark, or
on a copyright or a licence under a copyright.
131.4 Power of lender to register charge
The charge may be effected on the application of the person in whose favour
the charge is created and in such a case the lender has the right to recover the
filing fees paid to the Registrar for registration of charge.
131.5 Board Resolution
A Board Resolution (Annex 131.1) should be passed for approving the proposal
to create/modify charge over the assets of the company, for approving the draft
notice fixing the date, time, venue and agenda of the General Meeting and for
authorising execution of documents.
131.5-1 Approval from members
Since creation of charge amounts to disposal of assets, the approval of members
is required to be obtained before creation of charge for every loan. A blanket
permission cannot be obtained.
131.5-2 Exemption to private company
In the case of a private company which is not a subsidiary of a public company,
no approval from members is required and the Board is empowered to create
charge over the assets.
131.6 Issue of notice of general meeting
The notice of the general meeting (Annex 131.2) together with the explanatory
statement should be sent to all eligible members and auditors of the company.
131.7 General Meeting Resolution
The general meeting should accordingly be held and the ordinary resolution
(Annex 131.3) for creation of charge should be duly passed.
131.8 Filing of eForm No. 23 with the Registrar of Companies
Within 30 days of passing the resolution, a return in eForm No. 23 should be
filed with the Registrar of Companies through MCA Portal www.mca.gov.in.
Refer Chapter 171 for applicable guidelines.
131.9 Creation of charge
The authorised person should execute documents for creation of charge under
the common seal of the company. The instrument creating the charged should
be duly stamped in accordance with the stamp duty applicable to the State in
which the registered office of the company is situated. In case of creation of
charge outside India, the provisions of Foreign Exchange Management Regulations
should also be duly complied with.
131.10 Filing of eForm No. 8 with the Registrar of Companies
Within 30 days from the date of creation of charge, a return in eForm No. 8
(Annex 131.4) should be filed with the Registrar of Companies within 30 days
through MCA Portal www.mca.gov.in.
131.10-1 Who can file?
The eform 8 shall be filed by the managing director or director or manager or
secretary duly authorised by the Board. The signatory must hold a valid digital
signature certificate. (Refer Chapter 360 for Digital Signature Certificates)
131.10-2 Time Limit
The eform 8 should be filed within 30 days of creation of charge. If the charge
relates to property to be acquired, the eform should be filed within 30 days of
acquisition. If the charge is to be created outside India but comprises a property
outside India, the eform should be filed within 30 days after the date on which
it could have been received by India, if despatched with due diligence. This
return should be filed nothwithstanding the further proceedings required to
make the charge valid or effective according to the law of the country in which
the property is situated.
131.10-3 Extension of time
The e-form shall be filed within 30 days of creation of charge. Registrar has
powers to extend the time by another 30 days on payment of standardised
additional filing fee. Further extension shall have to be obtained from Company
Law Board.
131.10-4 Attachment
Instrument creating the charge should be attached.
131.10-5 Digital Signature
The eform should be digitally signed by the managing director or director or
manager or secretary duly authorised by the Board and also by the charge
holder. The signatory must hold a valid digital signature certificate. (Refer
Chapter 360 for Digital Signature Certificates)
It should be certified by a CA/ICWA/CS (in whole-time practice by digitally
signing the e-form).
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