CREATION, MODIFICATION AND
SATISFACTION OF CHARGE UNDER THE COMPANIES ACT 1956
All
the companies borrow money for the purpose of its business. When they borrow
money the lender normally insists for securities. The lender may be a Bank or a
Company registered under the Companies Act 1956 or a Foreign Company or a Body
Corporate.
Whenever
any security is given for the purpose of obtaining loan a charge is created in
favour of the lender. The loan may be borrowed by one charge holder or it may
be from two charge holders or more as in case of consortium. Whenever any loan
is taken on consortium, the Banks normally insists creation of charge
separately in respect of all charge holders.
In
accordance to Section 125 when a charge in respect of security on the company’s
property or undertaking if not created is void against the liquidator. In view
of this the charge holder is to ensure registration of charge of the property
provided as security for the loan given. In case if it is not done the charge
holder looses his right to claim the sale proceeds of the property in case of
default by the borrower. In other words, the charge holder who has given the
money later but his charge is registered first will have priority over the
other charge holders in case of settlement of loan by sale of property.
CHARGES TO BE REGISTERED UNDER
SECTION 125(4) OF COMPANIES ACT 1956:
As
per section 125(4) of the Companies Act 1956, the following charges are
required to be filed with the Registrar of Companies (ROC).
1. a charge for the purpose of securing any issue of
debentures;
2. a charge on uncalled share capital of the company;
3. a charge on any immovable property, wherever situate,
or any interest therein;
4. a charge on any book debts of the company;
5. a charge, not being a pledge, on any movable property
of the company
6. a floating charge on the undertaking or any property
of the company including stock in trade
7. a charge on calls made but not paid;
8. a charge on a ship or any share in a ship;
9. a charge on goodwill, on a patent or a license under a
patent, on a trade mark, or on a copyright or a license under a copyright.
MODIFICATION OF CHARGE:
A
modification of the loan amounts to charge. And particulars of modification are
required to be filed with Registrar of Companies (ROC) in Form 8. Once a new
charge is registered charge id will be created. The same can be viewed through
index of charges option in the MCA website.
The
Form 8 has to be filed within 30 days from the date of creation of charge or
modification of charge. Another 30 days is given as a grace period for the
filing of Form 8 with additional fees. In other words, form 8 has to be filed
within 60 days from the date of creation of Charge or modification of charge
failing which application for Condonation of delay has to be made to the
concerned Regional Director, department of company affairs.
FORM 8 AND ROC FILING:
The
steps for filing form 8 is given below
1. To fill up the CIN no or Foreign Company Registration
no (FCRN) and click prefill option
2. To select whether creation of charge or modification
of charge.
3. In case of modification, fill up the charge id
4. To fill up whether the charge is in favour of Asset
Reconstruction Company or whether the charge is assigned based on an assigned
agreement.
5. To click the type of charge
a. Uncalled Share Capital g. Floating Charge
b. Immovable property h. Calls made
but not paid
c. Any interest in immovable property i. Ship
d. Book debts j. Good will
e. Movable property not being a pledge k. Patent, license under patent
f. Trademark
l. Copyright or license under copyright
m. Others
6. If the type of charge is others, the nature of charge
has to be mentioned
7. Whether Consortium of charge is involved
8. Whether joint charge is created
In case of item no. 7 the particulars of other charge
holder and in case of item no. 8 the particulars of joint charge holder/s
should be given by way of attachment in Form 8
9. The charge holder’s detail has to be given. The charge
holders name can be selected from the prescribed list. If the name of the
charge holder is not given in the prescribed list ‘others’ can be selected.
10. If ‘others’ is selected enter CIN no if the charge
holder is an Indian Company and click prefill button. The name, register
offices address and email id of the charge holder will be prefilled by the
system. If the charge holder is not an Indian Company the name, address and the
email id of the charge holder can be typed and the CIN no is not mandatory.
11. The charge creation is based on the instruments. The
nature of instrument like loan agreement, deed of hypothecation, deed of
equitable mortgage, promissory note are to be mentioned
12. Date of instrument creation or modification of charge
has to be mentioned
13. The details of amount secured have to be given in
figures. It will be automatically prefilled in words. In case the amount
secured is in foreign currency enter the rupee equivalent and the details of
the foreign currency.
14. The rate of interest, terms of repayment, margin,
extent and operation of charge has to be mentioned.
15. In case of acquisition of property is subject to charge,
the date of acquisition, amount of charge, nature of agreement and particulars
of property charged are to be given.
16. Short
particulars of assets or property charged including complete address and the
location of the property.
17. Whether any of the property or interest therein under
reference is not registered in the name of the company. If yes is selected, in
whose name it is registered to be mentioned.
18. Date of last modification prior to present
modification to be mentioned
19. Particulars of present modification to be mentioned.
Whatever particulars are given the same will be reflected in the certificate of
the charge given by the registrar of companies (ROC).
20. Attachments to form 8 are
a. Instruments of creation or modification of charge,
b. Particulars of all joint charge holders or
Consortium holders,
c. Optional attachments if any
SATISFACTION OF CHARGE:
In
accordance with section 138 of Companies Act 1956, the company shall file
particulars regarding satisfaction of charge in Form 17. For this purpose a
letter has to be obtained from the bank stating that the loan is satisfied and
the letter will be attached as evidence of satisfaction.
UPLOADING OF FORM 8 AND FORM
17:
1.
Form 8 or Form 17 has to be digitally signed by the director of the Company, by
the charge holder and the practicing professional like, Practicing Company
Secretary or Practicing Chartered Accountant or Practicing Cost Accountant.
2.
The form 8 or Form 17 filing is under Straight through Process method.
Therefore one has to be very careful before uploading the form as Form 8 filed
once cannot be rectified easily and it may require another form 8 for
modification.
3.
Once the form is approved the registration of charge certificate will be
generated and available and the approval email will go to the charge holder’s,
Company’s and practicing profession’s email id.
4.
The roll check for the banker’s digital signature is also mandatory. Some times
while uploading the remarks will come that the banker’s digital signature is
revoked. In that case it is to be ensure that the banker’s digital signature is
roll checked or the uploading may be tried after some time as at times the
website may not be working.
OTHER POINTS RELATING TO
CHARGES:
1.
In case of pledge Form 8 is not required to be filed. Fore example Car loan
from bank. However, if the company is availing car loan from a bank, the bank
may be interested to file Form 8 in view of the loan amount. This can be done at
the instance of the company or of any interested person by filing Form 8 with
prescribed fees.
2.
In case of any security is given by the public limited company to a private
limited company in which a director of a public limited company is a director
or a member in a private limited company sec. 295 of the companies act is
attracted. Hence, care should be taken not to give security by a limited
company to a private limited company.
3.
Whenever loan is granted and agreements are entered the bank or lender is
interested to file Form 8 even without the company’s knowledge also the bank
may file form 8 after taking the digital signature of the director. In case of
satisfaction of loan the bank is least bothered to file Form 17 and it is only
the company’s duty to follow up and file Form 17.
4.
In many cases there are number of redundant charges are appearing on the index
of charges of the company. The company is required to obtain satisfaction
letter from the bank and file Form 17 and remove the unnecessary charges from
the MCA website.
5.
A company wants to exist under Section 560 of the Companies Act, has to ensure
that no charge is pending in the index of charges of MCA website.
6.
The form 8 and Form 17 has to be signed by the Director, Company Secretary or
Managing Director or the Manager of the Company or authorised representative in
case of foreign company.
7.
In case any charge is created or modified in favour of chargeholder by issue of
debentures then Form 10 has to be filed with Registrar of Companies (ROC) in
accordance with Section 125(4)(a) of the Companies Act 1956. In case repayment
of loan and satisfaction of charges Form 17 has to be filed with ROC.
8.
In case of paripasu charge, Form 8 has to be filed in respect of all the
chargeholders.
9.
In case of the Charge is created outside India, comprising solely property
situated outside India, Form 8 shall be filed within 30 days from the date of
receipt of the instrument creating or evidencing the charge by post.
10.
When the charge is created in India, but comprises property situated outside
India, the instrument creating the charge verified in the prescribed manner has
to be filed with ROC.
11.
The bank or chargeholder normally requires search report to find out what are
the charges the company has created. The search report has to be prepared based
on Charge ID and forms relating to charge filed which is available in MCA
website. The registered charge certificates are also available in the MCA
website. But, in certain circumstances the Charge ID in MCA website may not
contain all the charges. Hence, wherever the search report is relating to
charges prior to the year 2006 then it is advisable to make physical inspection
of documents at ROC and give the search report.
LATE FILING OF FORM 8, FORM 10 AND FORM 17 AND
CONDONATION OF DELAY:
1.
If there is a delay in filing Form 8 or Form 10 and Form 17 even if it is one
day or one year a petition for Condonation of delay has to be filed with
concerned Regional Director, Ministry of Corporate affairs. The due dates for
filing the above forms are as follows:
a.
Form 8 for creation or modification of charge - within 30 days from the date of
creation or modification of charge. Another 30 days is given as a grace period
for the filing of Form 8 with additional fees.
b.
Form 10 for creation or modification of charge of issue of debentures - within
30 days from the date of creation or modification of charge. Another 30 days is
given as a grace period for the filing of Form 10 with additional fees.
c.
Form 17 for satisfaction of charge – within 30 days from the date of
satisfaction of loan.
2.
In case of delayed filing beyond the due date, 60 days from the date of
creation of charge or 30 days from the date of satisfaction of charge the forms
can be filed with one time payment of fees. However, a remark will appear in
the challan that a delay of filing is of so many days and condonation of delay
is required.
3. For
condonation of delay petition has to be prepared containing the reasons for the
delay and Form 61 has to be filed with ROC prescribed filing fees (Rs. 1000)
4.
Form 24AAA has to be filed with Regional Director (RD) containing the petition
and affidavits with the filing fees (Rs. 1000)
5.
After the petitions are filed with RD the order will be issued condoning the
delay and in the order the amount of fees to be paid will also be mentioned (as
may be decided by RD)
6.
The order issued by RD has to be filed with ROC in Form 21 with prescribed
filing fees.
7.
Once the form 21 is filed the ROC will approve Form 8 or Form 10 or Form 17.
To
conclude delay in filing of particulars of charges will attract cumbersome
procedure for filing petition which will further delay the process; it is
advisable to file the ROC forms in time.
