Registration/Modification of Charge (CHG-1)

Every company is obligated to submit details for the registration of charges created or modified within the stipulated timeframe to the relevant Registrar of Companies. Each charge initiated by the company must be documented using Form CHG-1. These charges may pertain to diverse asset types located within or outside India and may be established in favor of lenders, including banks or financial institutions.

The act of filing a charge provides security and empowers the charge holder. In the event of the company defaulting on the loan repayment, the charge holder has the authority to claim the outstanding amount from the security pledged by the company in favor of the charge holder.

The filing of a charge is essential to safeguard both the lender and any third party involved. It ensures that any third party engaging with the same property is informed of the existing charge held by a lender. Prior to executing any transaction, all parties must mutually agree on the details of the charge.

Laws Governing the Form CHG-1

Section 77, 78, 79 and Section 384 and Rule 3(1) of the Companies Rules, 2014.

As per Section 2(16) of Companies Act, 2013, “Charge” means 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.

Section 77 of the Companies Act

The section 77 of companies act states that it is the duty of every company creating a charge on its property or assets or any of its undertakings, to register the particulars of the charge in a prescribed format. Such charges have to be reported to the Registrar within thirty days of its creation.

Due Date

Company shall file the particulars of the Charge with ROC within 30 days of execution of the instrument creating or modifying charge. Form can be filed after the expiry of 30 days but within additional period of 30 days on payment of additional fees.

Where the instrument for creating or modification of charge is not filed within a period of 60 days, Company shall make an application for extension of time-limit for filing the relevant forms and ROC may allow such registration to be made within a period of further 60 days after payment of advalorem fees.

Section 86: Punishment for Contravention

The company shall be liable to a penalty of Rs.5 Lakhs and every officer in default shall be liable to a penalty of Rs. 50,000/-. If any person willfully furnishes any false or incorrect information or knowingly suppresses any material information, required to be registered in accordance with the provisions of section 77, he shall be liable for action under section 447.