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Creation of charge by company

CA Rachit Agrawal (CA Practice) (400 Points)

24 May 2017

My Private Limited company had taken loan from bank, but Director had given his personal assets as a Security to Bank.

So please let me know whether, company had to create any Charge or not?

And how to treat Directors assets?

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6 Replies

prasad_1905 (Chartered Accountant) (57 Points)
Replied 24 May 2017

the opening lines of section 77(1) reads as follows:
"(1) It shall be the duty of every company creating a charge within or outside India, on its property or assets or any of its undertakings, whether tangible or otherwise, and situated in or outside India, to register the....."

section clears the issue by using the words 'its'. hence property of director need not be included in charge against company. bank will register the memorandum of deposit of title deeds by such directors with district registrar.

however practically, banker may insist to include the properties of directors in charge. howsoever illogical that may seem, we need to oblige his request to obtain sanction of funds from bank. clear?

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prasad_1905 (Chartered Accountant) (57 Points)
Replied 24 May 2017

also in form chg1 there is a field asking to state whether all the properties in the charge are owned by the company and if not state the names of owner. so chg1 recognises third party security while act doesn't call for such.
feel free to correct me, if I was wrong.

P C Agrawal (Registered independent director Past Chairman of Aurangabad Chapter of ICSI Practicing Company Secretary at Aurangabad) (8229 Points)
Replied 25 May 2017

Company is NOT required to file charge for personal property of director.