Under Section 2(16) of the Companies Act, 2013, a Charge refers to any interest or lien created on the property, assets, or undertaking of a company as security for a loan or other financial obligation, and includes a mortgage. The definition applies to both tangible and intangible assets, and covers assets located within or outside India.
Charges are created in favour of banks, financial institutions, or lenders to secure repayment of credit facilities, and must be mandatorily registered with the Registrar of Companies (ROC) under the Act.
Under Section 82, once the debt secured by a registered charge is fully paid or satisfied, the company must notify the ROC and apply for recording of satisfaction.
Nature & Classification of Charges
Charges may be classified based on the nature of assets they attach:
Fixed Charge
Created on specific and identifiable assets such as land, buildings, plant, and machinery.
This charge attaches immediately and cannot be disposed without lender approval.
Floating Charge
Created on assets which are dynamic and constantly changing, such as inventory, receivables, or stock-in-trade.
It remains “floating” until crystallization occurs (e.g., winding up, default).
Statutory Duty to Register Charges
Section 77 of the Companies Act mandates every company to file particulars of a charge with the ROC.
Registration ensures that the charge is legally enforceable, publicly searchable, and recognized for priority in insolvency situations.
Failure to register does NOT invalidate the debt, but the security becomes void against:
- the liquidator, and
- creditors,
- in the event of winding-up.
Forms & Time-Frames for Charge Registration
Standard Deadline
A company must register a charge within 30 days of creation or modification.
Applicable e-Forms
- CHG-1 – Creation/Modification of charge (other than debentures)
- CHG-9 – For creation/modification relating to debentures
Upon registration, the Registrar issues:
- CHG-2 – Certificate of registration of charge
or - CHG-3 – Certificate of modification
Delayed Registration Mechanism
Where not filed within 30 days:
- Additional time may be allowed with additional fees as per Section 77 read with Section 87.
- In further delay cases, condonation is sought through Form CHG-8, upon approval of Central Government.
Maintenance of Charge Records
Companies are required to:
- Maintain a Register of Charges at their registered office (Form CHG-7)
- Preserve all instruments creating or modifying a charge
- Record every satisfaction, modification, and release in the register
- Allow inspection of the register by members and creditors
Simultaneously, the Registrar maintains a central digital Register accessible through the MCA portal.
Key Requirements for Satisfaction Of Charges
- File intimation in Form CHG-4
- Within 30 days of satisfaction date
Upon verification, ROC enters a memorandum of satisfaction and issues:
- CHG-5 – Certificate of satisfaction of charge
If the company files late, further time may be granted with fees or by obtaining condonation under Section 87 (via CHG-8).