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| Charge Of a Company |
Charge means to create a security
over the assets and charge is made by any company for taking the loan. So
charge is a type of security which is created by company for taking loans, for
issuing debentures and drafts etc.
A charge is created as per the
provisions of companies act and the purpose of charge is to borrow money.
Types of charge:
Charge is of two types, Fixed
charge and Floating Charge.
Fixed charge:-
Fixed
Charge is a charge which is created upon the fixed assets of company. This
charge is created upon the assets like land and building.
Floating Charge:-
It is a charge upon
the current assets of company. This charge is created upon the assets like
debtors, prepaid expenses, bank balance and cash in hand.
When the floating charge is
created on assets then the debtor can deal on assets and these assets keep on
changing. In this case it is not compulsory that the debtor must have the same
assets this is because the assets are of fluctuating nature.
Creation of Charge:
Charges are created when the
loans are taken and charges are always created by written documents charge
cannot be created by oral agreements. After creation of charge it is compulsory
that the charges are registered, hence without registration charges cannot be
made.
Registration of charge with ROC:
Every charge created by company
must be registered with the ROC and after registration the charge will be valid
if not the charge will be invalid and it will not have any legal effect. In
this case charge is not created and the loan agreement is not valid.
Register of charge:
The company as well as ROC have
to maintain a register of charge in which all the particulars regarding the
charge must be mentioned. These particulars include following information
regarding the charge:
- Date of creation of charge
- Amount of loan
- Date of repayment of loan
- The nature of charge
The register of charge is a
public document and it can be inspected by anyone from the public. The purpose
of register of charge is to provide information to any person dealing with the
company regarding the assets of company.
Modifications in charge:
If there is any modification in
the loan agreement or there is a modification in the nature of charge the
modifications must be mentioned in the register of charge. In this case the
information is given to the ROC also, ROC will also enter the modifications in
his register of charge. If the modification is not registered the charge will
become invalid and the company will be liable to penalties.
Satisfaction of Charge:
When a charge is repaid then the
charge is satisfied. In this case the charge will be terminated and both
parties are freed from liabilities. The company will inform the ROC at the same
time the company will make entries in the register of charge. At the same time
ROC will also enter the repayment in his register.
Default in satisfaction:
When a debtor makes a default in
repayment of loan then the creditor may file a court case against the debtor
for recovery of money. Hence the creditor will apply to the court for sale of
assets. If the assets are fixed then the creditor may sell the assets of the
debtor however if the assets are fluctuating assets then the creditor will give
a notice to the debtor and the floating will become fixed after which the
creditor will sell the assets of debtor. This is known as crystallisation of
charge.
Due dates of intimation to ROC:
Whenever a charge is created then
the intimation must be given within 30 days of
creation/modification/satisfaction. Otherwise the company is liable to
penalties.
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