Registration of Charges with ROC

Navigating business regulations can be overwhelming, especially for newcomers to the corporate world. Among the many legal obligations companies must fulfill, registration of charges with the Registrar of Companies (ROC) is a crucial yet often misunderstood process. This article explains the procedure for registering charges with the ROC.

Understanding a Charge

Under Section 2(16) of the Companies Act, 2013, a charge is defined as an interest or lien created on a company’s assets or property, present or future, to secure repayment of a debt. This can also include a mortgage. Essentially, a charge is a right created by a company—referred to as the borrower—over its assets in favor of a financial institution or bank, known as the lender.

Companies frequently borrow funds from banks and financial institutions to meet both short-term and long-term capital requirements. To formalize the loan and ensure repayment with interest, lenders typically prepare legal documents such as loan agreements, mortgage deeds, and other agreements, which outline the terms and conditions of the borrowing.

Requirement for Creating a Charge

The Companies Act, 2013, under Sections 77 to 87, sets out the rules for charge creation and registration with the ROC.

A charge serves as a form of security for the money lent to a company. Charges can be:

Fixed charges, attached to specific assets such as land or machinery; or
Floating charges, created over movable assets like receivables, cash, or inventory that may change over time.

Once a company creates a charge on its assets, it is legally obligated to register it with the ROC. The purpose of registration is to provide public notice so that any lender or creditor can ascertain the extent to which a company’s assets are encumbered.

Given the rising number of non-performing assets, financial institutions are cautious about lending and often require security in the form of a registered charge. Typically, charges are created through loan agreements, mortgage deeds, or other legal instruments, granting lenders rights over the company’s assets to secure repayment.

Who Can Apply for Registration of Charge with RoC?

The company is primarily responsible for creating and registering a charge. As per Section 77(1) of the Companies Act, 2013, if the company fails to register the charge within 30 days of its creation, it remains liable for any offense under this chapter.

However, the individual or entity in whose favor the charge is created (typically the lender) may also apply for the registration of the charge with the ROC, along with the instrument creating the charge. This individual is entitled to recover the registration fees from the company. Before filing, they must provide the company with 14 days’ notice. If the company fails to register the charge or provide a valid reason, the individual can submit the application directly to the ROC.

Registration of Charge with RoC

Once a charge is created, it is the company’s duty to register the charge with the ROC and submit all required documents evidencing the creation of the charge. Under the Companies Act, 2013, certain charges must be mandatorily registered, including those:

Created to secure debentures or deposits;
On the company’s uncalled share capital;
On immovable property or any interest therein;
On the company’s book debts;
On movable property, including stock-in-trade;
On unpaid calls;
On any share in a ship or a ship; and
On intangible assets, such as patents, trademarks, licenses, goodwill, and copyrights.

Charges on motor vehicles are not mandatory unless required by the lender. Additionally, non-registration of charges must be disclosed in the company’s balance sheet.

Timeline for Registration

The registration of a charge must be completed within 30 days from its creation. In certain cases, registration may be delayed up to 300 days, provided a valid explanation is submitted along with the applicable late filing fees.

Upon submission of a complete application in the prescribed format and satisfaction of the authorities, the ROC issues a certificate of charge. Once registered, the details of the charge on the company’s assets are available online on the MCA portal for public access.

Forms Required for Charge Management

Below is a list of forms needed for e-filing under charge management:

S. No.	E-FORM	Purpose
1	CHG-1	Creation or modification of a charge (excluding debentures)
2	CHG-2	Certificate of registration
3	CHG-3	Certificate for modification of charge
4	CHG-4	Intimation of the Registrar’s satisfaction on the application
5	CHG-5	Memorandum of satisfaction of charge
6	CHG-6	Notice regarding appointment or cessation of a receiver or manager
7	CHG-7	Register of charges
8	CHG-8	Application to the Central Government for condonation of delay
9	CHG-9	Creation or modification of charge for debentures (including rectification)
10	CHG-10	Application to the Registrar for delay

All fees are applicable as per the Companies (Registration Offices and Fees) Rules, 2014, as notified by the Ministry of Corporate Affairs (MCA).

Conclusion

To sum up, registering charges with the Registrar of Companies (RoC) is an essential process that ensures statutory compliance, enhances credibility, and promotes transparency in the corporate sector. This registration provides shareholders with crucial information about a company’s financial liabilities and assets, fostering confidence and trust in the business environment. If you have any questions on this topic, feel free to reach out to the Legal Window Team.

Disclaimer: The content on this website is for informational purposes only and does not constitute legal, financial, or professional advice. Please consult qualified experts before acting on any information. K M GATECHA & CO LLP accepts no liability for errors, omissions, or outcomes from the use of this content. This site is not an advertisement or solicitation.

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