1)What is meant by a charge created by a company in favour of a bank?
Answer The term charge has been defined in Section 2(16) of the Companies Act, 2014 as ” an interest or lien created on the property or assets of a company or any of its undertakings or both, as security and includes a mortgage”
Example – Company A raised a term loan from Bank-B. It created hypothecation on the assets of the company acquired by using the loan proceeds. Here, the company has created an interest (i.e. charge) on the assets, as security for the loan.
2) What are essential features of the charge created by a company, according to definition in Companies Act 2013?
Answer – There two parties to this contract for creating charge. One is creator (the company) and other is charge holder (bank). The charge has been created on assets of the company. While creating the charge, the intention of the company is to provide this charge as security for the loan.
3) What is difference between creation of charge and registration of charge?
Answer : Charge is creating by signing security documents by authorised signatory of the company. As regards the registration, it is the process of filing details of the charge, with the Registrar of Company, for the purpose of registration, in records of Registrar.
4) What is fixed and floating charge?
Answer : When specific, identifiable assets (like land, building etc.) are charged, such charge is known as fixed charge. When charge is created on a group of non-constant assets (like raw material, stock in process, finished goods) is created, it is called floating charge.
5) What are different forms of charge, created by borrowers?
Answer: Depending upon the type of assets (movable, immovable, actionable claims etc.) the different type of charge shall be created that includes hypothecation (created on movable assets), mortgage (on immovable assets), assignment (on actionable claims).
6) What is the legal requirement for registration of charge with Registrar of Companies?
Answer : As per provisions of Section 77(1) of Companies Act, 2013 (within Chapter VI), it is duty of a company, which creates charge, on its property or assets, tangible or otherwise, situated within or outside India, to register the particulars of such charge within the prescribed period.
7) Which form shall be used by a company to file particulars of charge with Registrar of Companies u/s 77(1) of Companies Act?
Answer: Application for registration of creation of charge or modification of charge shall be filed on Form CHG-1 (as e Form)
8) What is the prescribed period during which a company can file details for registration of charge or modification of charge, with Registrar of Companies?
Answer The time line is maximum thirty days of its creation of charge or modification of an existing charge.
9) If a company fails to file the particulars of charge for registration within prescribed period of 30 days, as per Section 77(1), what is the remedy?
Answer If company makes an application, the Registrar may allow the registration within 60 days, from date of creation of charge by recovering additional fee.
10) If a company fails to file the particulars of charge for registration within 60 days, from date of creation, what is the remedy?
Answer If company makes an application, the Registrar may allow the registration within further period of 60 days i.e. within 61st to 120th day from date of creation of charge, by recovering additional / ad valorem fee
11) If a charge is not registered with Registrar of Company, what are the legal consequences?
Answer Section 77(3) provides that ‘no charge created by a company shall be taken into account by the liquidator appointed under Companies Act or Insolvency and Bankruptcy Code, 2016, unless it is duly registered under sub-section 77(1) and a certificate of registration of such charge is given by the Registrar under sub-section 77 (2). This means, if charge is not registered, at time of liquidation of the company, bank shall be treated as unsecured creditor, which makes it difficult to recover the loan.
12) Can a bank file particulars of charge created by a company in bank’s favour, with Registrar of Companies for registration?
Answer Section 78 of Companies Act provides that where a company fails to register the charge within the period of thirty days as per Section 77(1), the person in whose favour the charge is created (i.e. bank) may apply to the Registrar for registration of the charge along with the instrument created for the charge, within prescribed period.
13) If application for registration of charge is received by the Registrar from the bank, after period of 30 days, as per Section 78, what action is initiated by the Registrar?
Answer Section 78 of Companies Act, 2013 provides that the ‘Registrar may, on such application, within a period of fourteen days after giving notice to the company, allow such registration’. This means that bank as a creditor, can file the particulars of charge for its registration, where company fails to do that and get the charge registered.
14) How does, a bank giving loan to a company would come to know, if the company has availed any loan from any other bank by creating any charge on its assets?
Answer As per provisions of Section 81, the office of Registrar of Companies, is required to maintain a Register of Charges for every company, and this register is open for inspection by any Person, on payment of prescribed fee. Hence, bank can inspect this register to check, if company has obtained any loan and created charge.
15) If a company has repaid the loan and wants de-registration (satisfaction) of charge, in the records of Registrar of Charges, what it needs to do?
Answer As per provisions of Section 82 (i), Companies Act, 2013, the company shall intimate the Registrar about payment / satisfaction in full, of any registered charge, within 30 days from such full payment / satisfaction.
16) If a company makes full payment of the loan for which charge is registered but fails to intimate Registrar of Companies within 30 days period as prescribed u/s 82 (i), what is the remedy?
Answer The company can make application to Registrar, and the Registrar may, allow such intimation within a period of three hundred days of such payment or satisfaction on payment of such additional fees as may be prescribed.
17) What Form is to be used for filing particulars of full payment / satisfaction of charge, with Registrar?
Answer For filing particulars of satisfaction, Form CHG-4 (e-Form) is required to be used.
18) After receipt of an intimation from a company as per Section 82 of Companies Act, 2013, for satisfaction of charge, what action is taken by the Registrar?
Answer: Registrar shall send a notice to the holder of the charge advising him to show cause within maximum fourteen days, as to why satisfaction should not be recorded. If no cause is shown, by such holder of the charge, the Registrar shall enter the full payment details in the register of charges.
19) Is there any time limit for Registrar of Companies to provide intimation to parties related to charge registered with Registrar, if alterations are affected?
Answer U/s 83(2) of Companies Act 2013, Registrar is required to inform the affected parties, within thirty days of making the entry in the register of charges.
20) If a company fails to comply with the provisions of Chapter VI of Companies Act 2013 (related to Registration of Charge), what are the provision regarding penalties?
Answer U/s 86 of Companies Act, 2013, for such failure, the company can be imposed a penalty of Rs.5 lakh  and every officer of the company who is in default shall be liable to a penalty of Rs.50000.