Registration of Charges (section 125):- The company which possess the power to borrow money should have the power to create a charge on its assets, but all this can be done only when it is mentioned in the Memorandum and Articles of Association.
Registration of Charge:– The course of rule of the charge together with instrument, if any by which the charge is to be created, or proved or a copy thereof shall be filed with the Registrar of Companies within the limit of 30 days after the date of the creation of charge. [section 125(1)]
However, the Registrar of Companies is in a position and has the power to extend the period of 30 days by another 30 days with the payment of an additional fee not exceeding 10 times the amount of fee given in schedule X.
Types of Charge to be registered:- Section 125 of the Companies Act, 1956 requires the companies to get registered the following charges with the Registrar of Companies within 30 days of their creation:-
- A charge on uncalled share capital of the company.
- A charge on calls made but not paid.
- A charge for the purpose of securing any issue of debentures.
- A charge on any debt of the company.
- A charge on any immovable property, wherever situate or any interest therein.
- A charge not being a pledge, on any movable property of the company.
- A charge on a ship or any share in a ship.
- A floating charge on the undertaking or any property of the company.
- A charge on goodwill, on a patent or licence under a patent, on a trademark or a copyright or a licence under a copyright.
- A charge created in India compromising property outside India with the instrument creating a charge or a verified copy.
Effect of Non-registration of Charge – Consequences of Non-registration of a Charge:-
- The money secured becomes immediately payable: According to company 125 if the charge becomes valid then the money secured thereby shall become immediately payable. [section 125(3)]
Further nothing in section 125(1) shall prejudice any contract or obligation for payment of the money secured by the charge. [section 125(2)]
- The charges is void:- the charge becomes void, if they are not registered with the Registrar of Companies. It shall be void as against the subsequent encumbrances as well as against the liquidator and the creditors [section 125(1)]
- No right of lien on the document of title: If a charge becomes void for non-registration then no right of lien can be claimed on the documents of title as they are only ancillary to and were delivered pursuant to charge.
- Penalties:– if any default is committed in filing the Registrar of Companies for the registration the particulars:-
(i) Of any charge created by the company.
(ii) Or of the payment of satisfaction of a debt in respect of which a charge has been registered.
(iii) Or of the issue of debenture of a series, requiring registration with the registrar.
Then till the registration has been effected on the application of some other person. Then the company and every officer who is in default shall be punishable with fine which may extend to Rs. 5,000 for every year.
If a company conducts a default in complying with any other requirement to registration with the Registrar of Companies of any charge created by the company, then the company and every officer who is in default will be punishable with a fine of Rs. 10,000.