CREATION, MODIFICATION, AND SATISFACTION OF CHARGE

Creation of Charge:

When a company borrows money the lender asks for securities. The lender may be a Bank or a Company or even a Body Corporate.

Whenever any security is given to obtain a loan a charge is created in favor of the lender. The loan may be borrowed by one charge holder or it may be from two charge holders or more this is known as a consortium. Whenever any loan is taken on the consortium, the Banks generally ask for the creation of charge of all charge holders separately in respect.

A charge in respect of security on the company’s property or undertaking if not created is not valid for the liquidator as he has no right over the same. Because of this, the charge holder is to ensure registration of charge of the property provided as security for the loan given. If it is not done the charge holder loses his right to claim the sale proceeds of the property in case there is a default by the borrower. For the creation of charge, you have to file Form 8.


Charges to be registered:

The charges are required to be filed with the Registrar of Companies (ROC) the list of following charges are as follows:

  • Charge on the issue of debentures.
  • Charge on uncalled share capital.
  • Charge on immovable property, wherever situated.
  • The charge is created on the book debts of the company.
  • The charge created on any movable property of the company.
  • A floating charge on any property of the company including stock in trade.
  • Charge on calls made but not paid.
  • A charge on goodwill, on a patent or a license under a patent, on a trademark, or a copyright or a license under copyright.

 Modification of Charge:

A modification of the loan amounts to charge. And the details of the modification are required to be filed with the Registrar of Companies (ROC) in Form 8. Once you create a new charge, a registered charge id will be created on MCA. You can view through the index of charges option on the MCA site. Form 8 has to be filed within 30 days from the date of creation of charge or modification of charge. And another 30 days is also given as a grace period for the filing of Form 8 but you have to pay the additional fees.

 SATISFACTION OF CHARGE:

Satisfaction is the date on which a company completes payment of debt towards which the charge on assets the company was created, shall file a satisfaction of charge in Form 17. When the charge is complete you have to take a certification of completion which you have to attach while filing of Form 17.

 

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