Almost all the large and small companies depend upon share capital and borrowed capital for financing their projects. Borrowed capital may consist of funds raised by issuing debentures, which may be secured or unsecured, or by obtaining financial assistance from financial institution or banks.
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 etc.
We at Taxoservice would assist you in creation/cessation or modification of charge.
FAQ on Charge Creation:
What are the compliances for Charge Creation?
CHG-1 Application for registration of creation, modification of charge (other than those related to debentures) CHG-4 Particulars for satisfaction of charge thereof CHG-6 Notice of appointment or cessation of receiver or manager CHG-8 Application to Central Government for extension of time for filing particulars of registration of creation / modification / satisfaction of charge OR for rectification of omission or misstatement of any particular in respect of creation/ modification/ satisfaction of charge CHG-9 Application for registration of creation or modification of charge for debentures or rectification of particulars filed in respect of creation or modification of charge for debentures GNL-3 Details of persons/directors/charged/specified CHG-10 Application for creation of charge beyond 30 days but not beyond 300 days with a duly signed declaration that by the company secretary/director stating that such belated filing shall not adversely affect rights of any other intervening creditors of the company.
What are the kinds of charges?
- Fixed Charge: A charge which is identifiable with specific and clear asset/property at the time of creation of charge. The Company cannot transfer such identified and defined property unless the charge holder (creditor) is paid off his dues.
- Floating Charge: It covers the floating and circulating nature of properties of a company, like sundry debtors, stock in trade etc., The nature of the property charged may change from time to time .The floating charge crystallizes into fixed charge if the Company crystallizes or the undertaking ceases to be a going concern.
What is the time limit for the intimidation to ROC in regard with creation of charge?
- All types of charges with ROC within 30 days of its creation.
What will be the step taken by ROC after creation of charge?
- ROC will issue a Certificate of Registration of Charge in form CHG-2.
For which type, charge filing is not necessary?
- Guarantee doesn’t require registration
- Charge created by operation of law need not be filed
- Negotiable Instrument (Hundi) is not a ‘Charge’ and registration not required.
What is the penalty for not filing charges?
Company Minimum fine-1,00,000, Maximum Fine-10,00,000 Officer in Default Minimum-25,000, Maximum-1,00,000 or Imprisonment for 6 months or both.