Company Law Chapter 6: Registration of Charges
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Questions and Answers

What does the certificate issued by the Registrar signify?

  • It serves as evidence for tax compliance.
  • It provides a guarantee against company insolvency.
  • It confirms the payment of all company debts.
  • It indicates compliance with charge registration requirements. (correct)

    • Which entities are not subject to the provisions of Section 77?

  • Companies dealing exclusively in technology.
  • Banking companies under certain conditions. (correct)
  • Companies solely involved in real estate.
  • All types of companies without exception.

    • What is implied by constructive notice in the context of registered charges?

  • It forces individuals to file claims regarding the charges.
  • Individuals are considered to have knowledge, regardless of whether they consulted the document. (correct)
  • It eliminates the need for written agreements for transactions.
  • All individuals have physical access to the documents.

    • Which certificate is issued for the fresh registration of a charge under Section 77?

    <p>Certificate in Form No.CHG-2.</p> Signup and view all the answers

    What legal effect does a deeming provision have in the context of charges?

    <p>It creates a legal fiction that equates implied knowledge with actual knowledge.</p> Signup and view all the answers

    What is the definition of a 'charge' under the Companies Act?

    <p>An interest or lien created on a company's property as security.</p> Signup and view all the answers

    Which section specifically outlines the duty to register charges?

    <p>Section 77</p> Signup and view all the answers

    What are the consequences of non-registration of a charge?

    <p>The charge becomes subordinate to other claims.</p> Signup and view all the answers

    What is a fixed charge?

    <p>A charge against specific assets that cannot be sold without consent.</p> Signup and view all the answers

    Step one in the registration of a charge involves what?

    <p>Providing a certified copy of the original document creating the charge.</p> Signup and view all the answers

    Which of the following is NOT a step for registering the satisfaction of a charge?

    <p>Applying for a public notice regarding satisfaction.</p> Signup and view all the answers

    What penal provisions apply in case of default in registration of a charge?

    <p>Both B and C are applicable.</p> Signup and view all the answers

    Which section deals with the satisfaction of charge?

    <p>Section 82</p> Signup and view all the answers

    What is the maximum time frame for the charge-holder to show cause after receiving notice from the Registrar?

    <p>14 days</p> Signup and view all the answers

    Which document must be filed to exempt the need for a notice to be sent to the charge-holder?

    <p>Form CHG-4</p> Signup and view all the answers

    What happens if the charge-holder shows cause in response to the Registrar's notice?

    <p>The Registrar will enter a memorandum of satisfaction in the register.</p> Signup and view all the answers

    What is the maximum time frame for registering a charge created before 02-11-2018 if it was not registered within the original 30 days?

    <p>300 days</p> Signup and view all the answers

    If a charge created before 02-11-2018 is not registered after 300 days, what is the next step?

    <p>It must be registered within 6 months from 02-11-2018 with additional fees.</p> Signup and view all the answers

    For what duration can specified IFSC public and private companies apply for registration of charge after its creation?

    <p>300 days</p> Signup and view all the answers

    How long is the grace period for registering a charge created on or after 02-11-2018 if the initial registration period of 30 days is missed?

    <p>30 days</p> Signup and view all the answers

    What must the Registrar issue upon entering a memorandum of satisfaction of charge in full?

    <p>Form CHG-5</p> Signup and view all the answers

    What may the Registrar require for the extended registration period for charges created before 02-11-2018?

    <p>Prescribed additional fees</p> Signup and view all the answers

    What was the change regarding the time period for giving intimation as per Rule 8?

    <p>Increased from 30 to 300 days</p> Signup and view all the answers

    What happens to the registration of a charge if it is not registered within the prescribed period after creation?

    <p>It cannot be registered unless an application is made.</p> Signup and view all the answers

    What condition applies for the Registrar to allow late registration of charge for specified IFSC companies?

    <p>An application must be made along with an additional fee.</p> Signup and view all the answers

    What is the first action the Registrar takes upon receiving intimation regarding a charge?

    <p>Send a notice to the charge-holder.</p> Signup and view all the answers

    For charges created before 02-11-2018, what type of fees may apply?

    <p>Different fees for different classes of companies</p> Signup and view all the answers

    What is the consequence if a charge created on or after 02-11-2018 is not registered within the extended 60 days?

    <p>The company must make an application for further alllowance.</p> Signup and view all the answers

    Which statement is true regarding charges registered under the created timeframe?

    <p>Charges created before 02-11-2018 have a longer maximum registration time.</p> Signup and view all the answers

    What must a company do within 30 days of payment or satisfaction in full of any charge?

    <p>Give intimation to the Registrar</p> Signup and view all the answers

    What happens if a company fails to send intimation of satisfaction of charge to the Registrar?

    <p>The Registrar may enter a memorandum of satisfaction</p> Signup and view all the answers

    What does the Registrar issue after recording the modification of charge?

    <p>A certificate of modification of charge</p> Signup and view all the answers

    What is the consequence for a company that contravenes provisions related to registering charges?

    <p>The company and defaulting officers are punishable</p> Signup and view all the answers

    When an individual acquires a property subject to a charge, when are they deemed to have notice of the charge?

    <p>From the date of registration</p> Signup and view all the answers

    What can the Registrar do if no cause is shown after issuing a notice regarding payment or satisfaction of a charge?

    <p>Order recording of memorandum of satisfaction</p> Signup and view all the answers

    How long after payment or satisfaction can intimation be made with an additional fee?

    <p>300 days</p> Signup and view all the answers

    Where must a company maintain a Register of Charges?

    <p>At their Registered Office</p> Signup and view all the answers

    What is the initial time frame within which particulars of a charge must be filed with the Registrar after its creation?

    <p>30 days</p> Signup and view all the answers

    If a company fails to register a charge within the initial 30 days, what is the maximum extension period available on payment of an additional fee?

    <p>60 days</p> Signup and view all the answers

    What must Renuka Soaps and Detergents Limited do to file particulars of charge after the 30-day period?

    <p>Make an application detailing sufficient cause</p> Signup and view all the answers

    When does the additional 60-day period for registration of charge expire if the charge was created on 2nd May, 2024?

    <p>9th May, 2024</p> Signup and view all the answers

    What fee is required for the registration of a charge after the first 60 days has lapsed?

    <p>Ad valorem fee</p> Signup and view all the answers

    What action must be taken if Renuka Soaps and Detergents Limited realizes its mistake on 7th June, 2024 regarding charge registration?

    <p>Apply for registration and show sufficient cause</p> Signup and view all the answers

    Which section of the Companies Act, 2013 provides for the registration of charges?

    <p>Section 77</p> Signup and view all the answers

    What is necessary for a company to register a charge after the additional 60 days period has expired?

    <p>Paying an ad valorem fee</p> Signup and view all the answers

    Study Notes

    Chapter 6: Registration of Charges

    • Learning Outcomes: Define charge, understand fixed and floating charges, explain registration steps, identify consequences of non-registration, and steps for registering charge satisfaction, and the applicability of penal provisions in case of default.

    Chapter Overview

    • Definition of Charge: Defined as per Section 2(16) of the Companies Act, 2013, includes an interest or lien on company assets or undertakings, as security (including mortgages).
    • Duty to Register Charges: Duty outlined in Section 77.
    • Application for Registration: Applying for registration of charge per Section 78.
    • Notice Dates: Date of Notice of Charge (Section 80).
    • Register of Charges: Keeping of the register (Section 81 & 85).
    • Satisfaction of Charge: Procedures for satisfaction (Section 82 & 83).
    • Punishment and Rectification: Sections regarding penalties and rectifications (86 & 87).

    Introduction

    • Chapter VI Scope: Details sections 77 to 87 and the Companies (Registration of Charges) Rules, 2014.

    Registration of Charges

    • Definition of Charge (Detailed): Section 2(16) of the Companies Act, 2013 defines "charge" as an interest or lien created on a company's property or assets (or any of its undertakings, or both). It's a security interest and includes a mortgage. Charges are created as security for loans (term loans or working capital).
    • Types of Charge: Fixed and Floating.
    • Fixed Charge: A charge on specific, permanent assets (like land, buildings, machinery). The company can't sell these assets without permission from the lender.
    • Floating Charge: A charge on fluctuating assets (like raw materials, stock, etc.). The company can use these assets in normal business operations.

    Fixed Charge

    • Nature: A charge on specific, permanent assets of the borrowing company (land, buildings, machinery, office premises).
    • Identification: Assets are identified at the time of creating the charge.
    • Restrictions on Sale: The borrowing company is not permitted to sell assets subject to the fixed charge during the term of the charge.
    • Discharge of Charge: The fixed charge ceases once the borrowed amount is repaid in full.

    Floating Charge

    • Nature: A charge on assets that fluctuate (raw materials, stock-in-trade, debtors).
    • Flexibility: Allows the borrowing company to trade or use assets.
    • Crystallization: The floating charge transforms to a fixed charge when the borrowing company enters liquidation or defaults on the terms of the charge.

    Duty to Register Charges [Section 77]

    • Registration Responsibility: The company creating a charge is required to register it within 30 days of creation.
    • Registrar of Companies: Registration is done with the Register of Companies.
    • Consequences of Non-Registration: Charges that are not registered are effectively void against the liquidator and the creditors, and the charge holder drops to unsecured creditor status.
    • Additional Time: Potential extensions to the 30 day registration period, with fees applicable.

    Verification of Instrument of Charge

    • Verification Procedures: Copies of instruments must be verified following specific procedures depending on the location of the property.

    Extension of Time Limits

    • Default Period: The standard registration period is 30 days
    • Extended Periods: Potential extensions to the initial time period under specific circumstances (e.g., if the charge was made before a certain date), with fees applicable.

    Registration of Charges (by Charge Holder) [Section 78]

    • Registrar's Role: If the company creating the charge doesn't register it, the charge holder can apply to the Registrar for registration of the charge.
    • Notice to the Company: The Registrar gives notice to the original company.
    • Objection Handling: If the original company objects, they must provide a valid reason for not registering the charge.
    • Company Registration: If no objection is received, the registrar registers the charge.

    Acquisition of Property Subject to Charge [Section 79]

    • Transfer of Existing Charges: Any company acquiring property subject to a registered charge is responsible to register the charge in their name.
    • Modification of Charges: Any change or amendment to an existing charge is treated as a new charge, requiring registration with the Registrar.

    Register of Charges [Section 81]

    • Maintained by the Registrar: The Registrar is responsible for maintaining a register of charges.
    • Information to be Included: The register should include details of registered charges, property or assets, and associated particulars.

    Company's Register of Charges [Section 85]

    • Company's Role: Companies are required to maintain the register of charges within their registered office.
    • Register Content: The register should include details of all charges (and floating charges) affecting any of the company's assets or undertakings.

    Intimation of Satisfaction of Charge [Section 82]

    • Company Notification Requirement: When a charge is fully or partially satisfied, the company must inform the Registrar within 30 days, or within a longer extended time period.
    • Notice to Charge Holder: The Registrar will send a notice to the charge holder to verify the satisfaction.
    • Registrar's Action: If no cause is shown, entry of satisfaction is made, and the charge holder is informed. If a cause is shown, details will be amended in the register.

    Registrar's Entry on Absence of Intimation [Section 83]

    • Registrar's Authority: The Registrar has power to register satisfaction of charges or release of charges even if there's no intimation from the company.
    • Evidence of Satisfaction: The Registrar can record entries based on appropriate evidence of satisfaction.

    Appointment of Receiver or Manager [Section 84]

    • Receiver/Manager Appointment: If a receiver or manager is appointed for assets subject to a charge, the details (including copy of the order) need to be submitted to the company and the Register and registered.

    Punishment for Contravention [Section 86]

    • Default Penalties: Companies and officers who default in complying with charge registration provisions face penalties.
    • Incorrect Information: Providing false or incorrect information can attract penalties.

    Rectification by Central Government [Section 87]

    • Central Government's Power: The Central Government can order rectification of the register under specific default circumstances.

    Chapter Summary

    • Key Principles: Registration of charges, handling charges created before and after a specific date, company's duty, penalties, and procedures for extensions and rectification of mistakes.

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    Description

    This quiz covers Chapter 6 of Company Law, focusing on the registration of charges as per the Companies Act, 2013. It includes definitions, duty to register, application procedures, and consequences of non-registration. Test your knowledge on key sections and processes involved in charge registration.

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