WHAT IS CHARGE CREATION??
Charge is 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;
Principle rule of Creation of Charge is that “Charge will be creating on the Assets of the Company”
NEED FOR CREATING A CHARGE ON COMPANY’S ASSETS:
The financial institutions/banks do not lend their monies unless they are sure that their funds are safe and they would be repaid as per agreed repayment schedule along with payment of interest. In order to secure their loans they resort to creating right in the assets and properties of the borrowing companies, which is known as a charge on assets. This is done by executing loan agreements, hypothecation agreements, mortgage deeds and other similar documents, which the borrowing company is required to execute in favour of the lending institutions/ banks.
Companies are required to register ALL TYPES OF CHARGES, with ROC within 30 days of its creation.
For Creation of Charge Form will be filed with fees prescribed under Act. Form should be signed by the Company and the Charge-holder and should be filed together with instrument creating charge.
DUTY OF REGISTRATION OF CHARGE:
It is duty of Company to Create charge.
If Company fails to file form for registration of charge then, the person in whose favour charge is created will file form for creation of charge. The person is entitled to recover from the company the amount of fees.
CERTIFICATE OF REGISTRATION OF CHARGE:
After filling of Creation of charge ROC will issue a certificate of registration of charge in form CHG-2.
TIME LIMIT FOR FILLING FOR CREATION OF CHARGE
With in 30 days -Application should be made within 30 days of creation of charge in specified form.
MODIFICATION OF CHARGE
Provisions of Modification of charge are completely same as provisions of Creation of Charge. After filling form for Modification of Charge registrar will issue certificate for modification of charge in form CHG-3.
Any modification in the terms or conditions or the extent or operation of any charge registered under that section also required registration.