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Filing of Charge Creation/Modification/Satisfaction Documents

A charge means an interest or right which a lender or creditor obtains in the property of the company by way of security that the company will pay back the debt.

NEED FOR CREATING A CHARGE ON COMPANY’S ASSET

At present time in India almost all the large and small companies depend upon share capital and borrowed capital for financing their projects/business. Borrowed capital may consist of funds raised by issuing debentures, which may be secured or unsecured, or by obtaining financial assistance from Financial institution or banks. The financial institutions/banks do not lend their monies unless they are sure that their funds are safe and they would be repaid as per agreed repayment schedule along with payment of interest. In order to secure their loans they resort to creating right in the assets and properties of the borrowing companies, which is known as a charge on assets. This is done by executing loan agreements, hypothecation agreements, mortgage deeds and other similar documents, which the borrowing company is required to execute in favour of the lending institutions/ banks etc.

Type of Charge:

 

Fixed Charge:

A fixed charge is a charge or mortgage secured on particular property, for examaple land and buildings, a ship, machinery, shares, intellectual property such as copyrights, patents, trade marks, etc.

Floating Charge:

A floating charge is a particular type of security, available only to companies. It is an equitable charge on (usually) all the company's assets both present and future, on terms that the company may deal with the assets in the ordinary course of business. Example of floating charge is stock,debtors etc.
 

DOCUMENTS REQUIRED FOR CREATION/MODIFICATION/SATISFACTION OF CHARGE

  • A Copy of agreement with bank by the company.
  • A Copy of sanctional letter of loan
  • A Copy of Board resolution or special resolution passed in the general meeting
  • A Copy of satisfaction letter from the bank (in case of satisfaction)

Different type of form and time limit for filing of charge documents:

Description Applicable form
Application for registration of creation, modification of charge (other than those related to debentures) CHG-1
Particulars for satisfaction of charge CHG-4
Notice of appointment or cessation of receiver or manager CHG-6
Application for registration of creation or modification of charge for debentures or rectification of particulars filed in respect of creation or modification of charge for debetures CHG-6

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