Registering a Charge with the ROC: CHG-1, Deadlines and Consequences

When a company borrows against its assets, the lender's security over those assets is called a charge. The Companies Act, 2013 requires every charge to be registered with the Registrar of Companies within a strict deadline, and the consequences of missing it fall mainly on the lender's security. This guide explains what counts as a charge, how to register it, and what happens if you're late.

What Counts as a Charge

Under Section 2(16) of the Companies Act, a charge is an interest or lien created on a company's property or assets as security. Common examples:

• A mortgage of land or buildings, including an equitable mortgage by deposit of title deeds.
• Hypothecation of stock, receivables, machinery or vehicles, typical for working capital loans and vehicle loans.
• A pledge of shares or other securities.
• A charge on book debts, or a floating charge over the company's assets generally.

A charge has to be registered whether the assets are in India or outside it. Unsecured loans don't create a charge and don't need registration.

The Deadline

Under Section 77, the company must register a charge within 30 days of creating it. If it misses that window:

• The Registrar can allow registration within 60 days of creation, on payment of additional fees.
• If that's missed too, the Registrar can allow registration within a further 60 days, on payment of ad valorem fees, which are based on the amount secured.
• Once all these windows have passed, the company has to apply to the Regional Director in Form CHG-8 under Section 87 to have the delay condoned, explaining why it happened, before the charge can be registered.

How to Register

1. Collect the loan and security documents as soon as they're signed: the sanction letter, loan agreement, and the mortgage, hypothecation or pledge deed.
2. Prepare Form CHG-1, or CHG-9 for charges securing debentures, with the date of creation, amount secured, assets charged and charge holder's details.
3. Attach the instrument creating the charge.
4. Have it signed with the DSCs of a director of the company and the lender's authorised signatory.
5. File it on the MCA portal within 30 days, paying the fee, which depends on the company's authorised capital.
6. The Registrar issues a certificate of registration, which is conclusive evidence that the registration requirements were complied with.
7. Enter the charge in the company's register of charges, Form CHG-7.

What Happens If a Charge Isn't Registered

The security is void against a liquidator and creditors

Under Section 77(3), a charge that isn't registered isn't taken into account by a liquidator or any creditor. The loan itself remains payable, but the lender loses the benefit of its security if the company goes into liquidation, and ranks alongside unsecured creditors. That's why lenders care so much about registration.

The lender can register it

If the company fails to register a charge, the charge holder can apply to register it and recover the fees from the company.

Penalties

Failing to register a charge can also lead to penalties on the company and its officers in default.

Commonly Missed Charges

• Vehicle loans, where a company car or commercial vehicle is hypothecated to the lender.
• Equipment finance, where machinery is hypothecated.
• Overdraft limits secured against fixed deposits.
• Additional security added to an existing loan, which is a modification that also needs filing.

Getting Help

Think Filing registers charges within the 30-day window, coordinates the lender's signature on CHG-1, and handles late registration and condonation applications where the deadline has already passed.