Registration of Charges under the Companies Act, 2013

Registration of Charges under the Companies Act, 2013

When a company borrows money and offers its assets as security, that security interest — called a 'charge' — needs to be publicly registered so that other lenders, investors and creditors know the asset is already encumbered. The Companies Act, 2013 makes charge registration mandatory and time-bound, protecting the integrity of the credit system.

A charge means an interest or lien created on the property or assets of a company or any of its undertakings as security, and includes a mortgage. It can be a fixed charge (on specific, identifiable assets, like land or machinery) or a floating charge (on a class of assets that changes in the ordinary course of business, like inventory or receivables).

Every company creating a charge on its property, assets, or undertakings, whether tangible or intangible, situated in or outside India, must register the charge with the Registrar in Form CHG-1 (for most charges) or CHG-9 (for debentures) within 30 days of its creation, along with the instrument creating the charge and the requisite fee.

If registration is not done within 30 days, it can still be registered within a further 30 days (i.e., up to 60 days from creation) with additional fee. Beyond 60 days, the company must apply to the Registrar (or Central Government, as applicable) for condonation of delay, along with justification and payment of the prescribed ad-valorem fee, subject to a maximum permissible period specified under the Rules.

Once a loan secured by a charge is fully repaid, the company must file Form CHG-4 with the Registrar within 30 days of the date of satisfaction (full payment or satisfaction of the charge), so that the Registrar can update its records to reflect the asset is no longer encumbered.

An unregistered charge is void against the liquidator and any creditor of the company. This does not mean the underlying loan itself becomes unenforceable against the company; it simply means the lender loses the priority and protection that registration would have given them in the event of the company's insolvency or winding up.

•      Missing the 30/60-day charge registration window and having to go through the condonation-of-delay process.

•      Forgetting to file CHG-4 after full repayment, leaving a 'phantom' open charge that confuses future lenders.

•      Assuming charges on assets located outside India don't need Indian registration.

•      Creating a new charge without checking for existing registered charges on the same asset, risking priority disputes.

Q1. Who is responsible for registering a charge — the company or the lender?

Primarily, it is the company's duty to register the charge; however, the person in whose favour the charge is created (the lender) can also file the particulars of the charge if the company fails to do so, and recover the registration fee from the company.

Q2. Is registration required for charges created outside India?

Yes, Section 77 covers charges on property, assets, or undertakings of the company situated in or outside India, so foreign-asset charges must also be registered with the Indian Registrar.

Q3. What happens if a charge is not satisfied and reported even after full repayment?

The charge continues to appear as an open/active charge on the MCA portal, which can create confusion for future lenders or investors examining the company's encumbrance status, until Form CHG-4 is filed confirming satisfaction.

Q4. Is there a public register of charges that anyone can check?

Yes, the Registrar maintains a register of all charges, accessible to the public (typically for a fee) on the MCA portal, allowing prospective lenders and investors to check a company's existing encumbrances before dealing with it.

Q5. Who bears the cost of charge registration — the company or the lender?

Typically, the company bears the registration fee and stamp duty as the primary obligor, though loan agreements may contractually allocate these costs, including reimbursement arrangements, between the parties.

Q6. What is a 'floating charge' and how does it differ from a 'fixed charge'?

A fixed charge attaches to specific, identifiable assets (like a particular building), restricting the company from dealing with that asset freely, while a floating charge hovers over a changing pool of assets (like inventory) until it 'crystallises' into a fixed charge upon a triggering event, such as default.

Q7. Can a charge be registered after the company has already gone into liquidation?

Registering a charge after liquidation proceedings have commenced is generally not effective to secure priority against the liquidator, reinforcing why timely registration during the company's normal operation is critical.

Charge registration is a small procedural step with outsized consequences — an unregistered charge can leave a lender unprotected in insolvency, and an unsatisfied charge on record can complicate future fundraising. Companies should track charge creation and satisfaction as diligently as any other statutory deadline.