Room No.6, 4 th Floor, Commerce House 2A, Ganesh Chandra Avenue, Kolkata Connect : (033) ; (033) ; Visit : Companies Act, 2013-Chapter VI By CS Mamta Binani Past Chairperson (Year 2010), EIRC of ICSI Practising Company Secretary Presentation for Chartered Accountants B.B. D Bagh Study Circle-EIRC of ICAI at Kolkata dated :

Chapter VI The heading of the Chapter is: ‘Registration of Charges’ under the Companies Act, 2013 It consists of sections 77 to 87 (11 sections) Section 86 (Punishment for contravention) has become effective from

Section 77 (old sections 125,132) Duty to register charges etc. A company creating a charge, shall, register the particulars of the said charge with the ROC within 30 days of its creation. This charge could be: a. on its property or assets or b. any of its undertakings c. whether tangible or otherwise Situated in or outside India Signed by both the Company and the charge-holder Together with the instruments creating the charge

Section 77(1)-1 st Proviso In the previous slide, we mentioned 30 days (section 77(1)) ROC may on application by the company, allow this registration within 300 days (30+270), on payment of additional fees This application shall be supported by a declaration from the company by its secretary or director that such belated delay shall not adversely affect rights of any other creditors of the company If not within 300 days, company to seek extension of time from the CG; applicable section 87 (akin section 141)-Form no. 6.8.

Forms for registration of charge Form no both for creation or modification

Attachments with Form 6.1 Rule 5 (rules are still in draft mode) 1. where the instrument or deed relates solely to the property situate outside India, the copy (instrument evidencing the creation/mod) shall be verified by: a. a certificate issued either under the seal of the company or b. under the hand of any director or company secretary of the company or c. an authorised officer of the charge holder or d.under the hand of some person other than the company who is interested in the mortgage or charge, stating that it is a true copy;

Attachments with Form 6.1 Rule 5 (rules are still in draft mode) 2. where the instrument or deed relates, whether wholly or partly, to the property situate in India, the copy shall be verified by: a. a certificate issued under the hand of any director or company secretary of the company or b. an authorised officer of the charge holder stating that it is a true copy.

Charges requiring registration (a) a charge created for the purpose of securing any issue of debentures or deposits; (b) a charge on uncalled share capital of the company; (c) a charge on any immovable property, wherever situate, or any interest therein; (d) a charge on any book debt of the company; (e) a charge, not being a pledge, on any movable property of the company;

Charges requiring registration…. (f) a floating charge on the undertaking or any property of the company including stock-in- trade; (g) a charge on calls made but not paid; (h) a charge on a ship or any share in a ship; (i) a charge on intangible assets, including goodwill, patent, a licence under a patent, trade mark, copyright or a licence under a copyright. (comments: the list above is same as was in section 125(4). The underlined words have been added)

Registration certificate by Registrar Creation of charge: ROC shall issue a certificate of registration of such charge in Form no. 6.2 Modification of charge: ROC shall issue a certificate of modification of charge in Form no. 6.3 The certificate issued by the Registrar shall be conclusive evidence that the requirements of Chapter VI of the Act and the rules have been complied with.

Section 77 (3) The liquidator or any other creditor shall not take into account any charge created unless registered with the Registrar.

Vehicle hypothecation requires charge? No charge by way of hypothecation of a motor vehicle shall require registration Unless the financier, so requires If not registered, the disclosures shall be given in the Balance Sheet regarding all such charges created by way of hypothecation of motor vehicles and the fact that charge has not been registered and the financiers have not required so

Section 78 (old section 134) Application for registration of charge In case the company fails to get the charge registered, then the charge-holder may apply to ROC for the registration of the same On receiving such application, the ROC shall send notice to company And within 14 days, unless the company doesn’t show sufficient cause as to why the said charge should not be registered, shall register the charge without signature of company

Section 78….contd If the company fails to register a charge within the period of 30 days of its creation, the particulars of the charge together with a copy of the instrument, if any, creating or modifying the charge may be filed by the charge-holder, in Form no. 6.1 The form can be just duly signed by the charge- holder and submitted along with additional fees The said charge-holder shall be entitled to recovery of fees and additional fees paid to ROC from the company

Section 79 (old sections 127,135) The provisions of registration of charges shall equally apply to: (a) a company acquiring any property subject to a charge; or (b) any modification in the terms or conditions or the extent or operation of any registered charg e

Section 80 (old section 126) It provides that if any person acquires a property, asset or undertaking for which a charge is already registered Then it would be deemed that he has complete knowledge of that charge from the date the said charge is registered with the ROC

Section 81 (old section 130) The Registrar shall, in respect of every company, keep a register containing particular of charges so registered The register shall be open for inspection by any person on payment of fee as specified in ‘Annexure B’ Rule 6.5 (draft): The particulars of charges maintained on the MCA portal shall be deemed to be the register of charges for the purposes of section 81.

Section 82 (old sec 138, 140) A company shall give intimation to the ROC in Form no. 6.4 of the satisfaction in full of any registered charge within a period of 30 days from the date of such satisfaction In case of delay upto 300 days beyond 30 days (30+270), the same procedure of application to ROC is to be followed like in case of creation of charge If the form is filed without the signature of charge- holder, ROC shall send notice to the charge-holder calling upon him to show cause within such time not exceeding 14 days, as to why the satisfaction should not be recorded. If no cause shown, ROC will register

Section 83 (old section 139) Power of ROC to make entries of satisfaction in absence of intimation from company Sometime, it may be possible that company fails to send intimation of satisfaction of charge to the Registrar but registrar receive evidence of satisfaction from any other person. This person may be charge – holder, Shareholder, Purchaser or any one. Of course, the section mentions about evidences that will have to be produced.

Section 83 (old section 139) Evidence needs to be produced to the ROC of satisfaction with respect to any registered charge: a. That the debt for which the charge was given has been satisfied in whole or in part; or b. That part of the property or undertaking charged has been released from the charge; or c. That part of the property or undertaking charged has ceased to form part of the company’s property or undertaking The ROC, on being satisfied, may enter in the register of charges that the charges are satisfied And shall inform the affected parties within 30 days of making the entry in the register of charges

Memorandum of Satisfaction Where the ROC enters a memorandum of satisfaction of charge in full in pursuance of section 82 or in pursuance to section 83, he shall issue a certificate of registration of satisfaction of charge in Form no. 6.5.

Section 84 (old section 137) Intimation of appointment of Receiver or Manager SITUATION 1 – 84(1) If any person obtains an order: a. for the appointment of a receiver; or b. of a person to manage; the property, which is already subject to a charge of a company; or SITUATION 2 – 84(1) If any person appoints such receiver/ manager under any power contained in any instrument

Section 84 (old section 137) That person shall, within 30 days of the order/appointment, give notice of such appointment: a. to the company; and b. to the ROC along with copy of the order/ instrument ROC to register particulars of receiver/ manager/ person/ instrument in the register of charges 84(2): The person so appointed shall give notice, on cessation of his appointment, to the company and the ROC and the ROC to register the same

Intimation to ROC- Form no.6.6 Notice of appointment; Or cessation of appointment of a receiver or of a manager; for The property, subject to charge, of a company- Shall be filed with the Registrar in Form no. 6.6 along with fee as specified in Annexure ‘B’

Section 85 ( old section 143,144 ) Company’s Register of Charges 85(1): Every company shall keep at its registered office a register of charges which shall include therein all charges and floating charges affecting any property or assets of the company or any of its undertakings The instrument creating the charge shall also have to be kept along with the register Rule 6.8 (draft): The register of charges shall be in Form no. 6.7 and enter therein particulars of all the charges registered with the Registrar as well as particulars of any modification of charge and that of satisfaction of charge

Register of charges As per Rules (draft) The entries in the said register shall be made forthwith after the creation, modification or satisfaction of charge, as the case may be. Entries in the register shall be authenticated by the secretary of the company or any other person authorised by the Board for the purpose. The register shall be preserved permanently and the instrument creating a charge shall be preserved for a period of 8 years from the date of satisfaction of charge by the company.

Inspection of the register of charges 85(2): The register of charges and instrument of charges, kept under sub-section (1) shall be open for inspection during business hours: (a) by any member or creditor without any payment of fees; or (b) by any other person on payment of such fees as prescribed in Annexure B and subject to such reasonable restrictions as the company may, by its articles, impose.

Section 86 (old section 142) Punishment for Contravention If any company contravenes any provision of this Chapter (i.e. Chapter VI); The company shall be punishable with fine which shall not be less than Rs.1.00 lakh but which may extend to Rs lakhs; And every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to 6 months or with fine which shall not be less than Rs.25,000 but which may extend to Rs.1.00 lakh, or with both (Comments: Penal provisions increased manifold)

Section 87 (old section 141) Rectification by Central Government (CG) in register of charges CG on being satisfied that an omission that has occurred: a. was accidental or b. due to inadvertence or c. some other sufficient cause or d. it is not of a nature to prejudice the position of creditors or shareholders of the company or e. on any other grounds, it is just and equitable to grant relief

Condonation of delay by CG CG may on an application: a. of the company; or b. any person interested direct that the time for filing be extended or as the case may require, that the omission/ mis-statement be rectified Rule 6.10(1): Where the instrument creating, modifying or satisfying a charge is not filed within 300 days, the ROC shall not register the same unless the delay is condoned by the Central Government The application for condonation of delay shall be filed with the CG in Form no. 6.8 along with the fee as specified in Annexure ‘C’

Room No.6, 4 th Floor, Commerce House 2A, Ganesh Chandra Avenue, Kolkata Connect : (033) ; (033) ; Visit : of the Companies Act, 2013