A company upon payment or satisfaction in full of any charge registered under Chapter VI of the Companies Act 2013 shall give intimation of satisfaction to the Registrar of Companies. The procedure for applying for the certificate of satisfaction of charges registered under the companies act is as under.
Mandatory Attachment:
Letter of the charge holder stating that the amount has been satisfied (NOC from Charger holder (Bank/Financial Institution). The date of satisfaction of charge should be the date as written in the NOC received from the Charger holder (Bank/Financial Institution). The Company or Charger holder (Bank/Financial Institution) both can file Form CHG 4 to ROC for the satisfaction of the Charge.
The form will be processed by the office of the Registrar of Companies so the approval of this Form is dependent on the ROC. Certificate Certificate of satisfaction of charge is generated after the eForm is registered with the authority concerned and sent to the user as an attachment to the email id of the company.
The company shall approach the lender bank/financial institution to issue a ‘letter of satisfaction’ stating that no dues exist from the company towards credit facilities provided by them. After getting the letter of satisfaction from the bank/financial institution, the company has to conduct a board meeting. In the meeting, the board has to pass a resolution authorizing a Director /Company Secretary or any other authorized person to file the satisfaction of charge (CHG-4) with ROC. The entries of satisfaction of charges are to be made in the register of charge maintained by the company in form CHG-7 format which shall be authenticated by a Director/ Company Secretary or any other authorized person. The company shall give intimation to ROC within a period of thirty days from the date of the satisfaction of the charge. The resolution passed copy and the letter of satisfaction issued by the bank/financial institution to be attached to CHG-4 along with the fee for the registration of the satisfaction charge. The memorandum of satisfaction (certificate of satisfaction) of the specified charge will be issued by ROC in form No.CHG-5.
MCA vide Companies (Registration of Charges) Second Amendment Rules, 2022 dated 29th August 2022 notifies revised Form No. CHG-1, Form No. CHG-4, Form No. CHG-6, Form No. CHG-8 and Form No. CHG-9. Further, it also notifies rule 13 for the Signing of charge e-forms by insolvency resolution professionals or resolution professionals or liquidators for companies under resolution or liquidation.
A Charge means an interest or lien created on the property and assets of the company or any of its undertakings or both as security and includes a mortgage.
When a charge created on the property and assets of a company is registered by ROC, it is a notice of such charge to the public from the date of such registration. Any person dealing or acquiring such property or part thereof shall be deemed to have notice of such charge from the date of registration of the charge.
What happens to the lender if the charge created is not registered?
The charge created over security offered becomes void if it is not registered within the stipulated period prescribed under section 125 of companies’ acts. Where a charge is void for non-registration, no right of lien can be claimed by the creditor on the documents of title, as they were only supplementary to the charge and were delivered pursuant to the charge. Further, the unregistered charge becomes unenforceable on the date of winding up order; as the Official Liquidator would treat such creditor whose charge is not registered as an ordinary creditor instead of a secured creditor. Even in the case of going concern, the first charge holder loses the priority of a charge holder if the charge created by him has not been registered. For instance, if the subsequent charge is created on the same property by another lender, the subsequent charge holder who has registered the charge would enjoy priority of charge over such property or assets. In such cases, the second charge-holder (who registered the charge first) may at any time attach the exact property of the borrower and get the charge enforced by selling or disposing–off such property to recover his dues.
The important point to be noted here is that the borrower company is not discharged from its liability and obligations to the creditor just because the security offered for such liabilities turn out to be invalid. The consequence of non-registration of charge is that it badly hits the creditor as explained above i.e. the lender loses the security offered to him for the money financed and also he loses his secured creditor status against the liquidator and other creditors.
In terms of section 125(3) of companies acts, when a charge becomes void, the money secured thereby shall immediately become payable by the company. Further, the company, and every officer of the company or other people who are in default, shall be punishable for not registering the charge (section 142(2) of company acts).
A Charge means an interest or lien created on the property and assets of the company or any of its undertakings or both as security and includes a mortgage.
When a charge created on the property and assets of a company is registered by ROC, it is a notice of such charge to the public from the date of such registration. Any person dealing or acquiring such property or part thereof shall be deemed to have notice of such charge from the date of registration of the charge.
What happens to the lender if the charge created is not registered?
The charge created over security offered becomes void if it is not registered within the stipulated period prescribed under section 125 of companies’ acts. Where a charge is void for non-registration, no right of lien can be claimed by the creditor on the documents of title, as they were only supplementary to the charge and were delivered pursuant to the charge. Further, the unregistered charge becomes unenforceable on the date of winding up order; as the Official Liquidator would treat such creditor whose charge is not registered as an ordinary creditor instead of a secured creditor. Even in the case of going concern, the first charge holder loses the priority of a charge holder if the charge created by him has not been registered. For instance, if the subsequent charge is created on the same property by another lender, the subsequent charge holder who has registered the charge would enjoy priority of charge over such property or assets. In such cases, the second charge-holder (who registered the charge first) may at any time attach the exact property of the borrower and get the charge enforced by selling or disposing–off such property to recover his dues.
The important point to be noted here is that the borrower company is not discharged from its liability and obligations to the creditor just because the security offered for such liabilities turn out to be invalid. The consequence of non-registration of charge is that it badly hits the creditor as explained above i.e. the lender loses the security offered to him for the money financed and also he loses his secured creditor status against the liquidator and other creditors.
In terms of section 125(3) of companies acts, when a charge becomes void, the money secured thereby shall immediately become payable by the company. Further, the company, and every officer of the company or other people who are in default, shall be punishable for not registering the charge (section 142(2) of company acts).
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