When a company borrows against its assets, by mortgage, hypothecation, pledge or any other form of security, the charge it creates is required to be registered with the Registrar of Companies. Registration gives public notice of the lender’s security interest and protects its priority. An unregistered charge is not taken into account by a liquidator or other creditors, even though the debt itself remains payable.

This article walks through the procedure for registering a new charge and for registering a modification of an existing charge, including the approvals that may be needed before the company can borrow, with the timeline for each step. Satisfaction of charge is covered in a separate article.

Approvals Needed Before Creating a Charge

Step-by-Step Procedure

Step 1: Identification of the Charge and Review of Documents – before execution
(Applicable to All Companies)
Sections 2(16), 77 and 79 of the Companies Act, 2013 read with Rule 3

• The company is required to identify whether it is creating a new charge, modifying a registered charge, or acquiring property already subject to a charge, all of which are registrable.
• The sanction letter, loan agreement, deed of hypothecation, mortgage deed or debenture trust deed is required to be reviewed for the date, amount secured, assets charged, charge-holder and nature of the charge (fixed or floating).
• Existing charges on the same assets are required to be checked on the MCA portal and in the Register of Charges, to see whether pari passu or second charge consent is needed.
• Charges created by a banking company in favour of the RBI are exempt (Rule 3(5)).

Step 2: Notice and Agenda for the Board Meeting – at least 7 days before the meeting
(Applicable to All Companies)
Section 173(3) of the Companies Act, 2013 read with SS-1

• Notice of the Board Meeting is required to be given in writing to every director at the address registered with the company, by hand, post or electronic means.
• The notice is required to be accompanied by the agenda, notes on agenda, draft resolutions and supporting papers for the proposed borrowing and creation of charge.
• A meeting to transact urgent business may be called at shorter notice, provided at least one independent director (if any) is present. If none is present, the decisions are final only on ratification by at least one independent director.

Step 3: Board Meeting to Approve Borrowing and Charge – before execution of documents
(Applicable to All Companies)
Sections 173, 179(3)(d) and 180 of the Companies Act, 2013 read with SS-1

• The Board is required to approve the borrowing, the creation of charge on the specified assets, and the execution of the loan and security documents, and to authorise directors or officers to sign them and file the charge forms.
• Where Section 180 limits are exceeded, the Board is required to approve the notice of the general meeting seeking a special resolution.

Step 4: Disclosure of Outcome to Stock Exchanges and Website – within 30 minutes of conclusion of the meeting
(Applicable in case of Listed Company)
Regulation 30(6) and 30(8) read with Schedule III of the SEBI (LODR) Regulations, 2015

• The outcome of the meeting, including any material borrowing or creation of charge, is required to be disclosed to the stock exchanges within 30 minutes of the conclusion of the meeting, along with the time of commencement and conclusion of the meeting.
• If the meeting ends after trading hours but more than 3 hours before the next trading session starts, the disclosure is required within 3 hours of its conclusion.
• The same disclosure is required to be hosted on the company’s website simultaneously and retained there for at least 5 years (Regulation 30(8)).
• Where the charge secures listed non-convertible securities, disclosures under Regulation 51 and Part B of Schedule III also apply.

Step 5: Filing of Board Resolution with ROC – within 30 days of the meeting
(Applicable to Public Companies)
Section 117 read with Section 179(3) of the Companies Act, 2013

The Board resolution for borrowing of money falls under Section 179(3) and is required to be filed with the Registrar of Companies in e-Form MGT-14. Private companies are exempt from filing resolutions passed under Section 179(3).

Step 6: Minutes of the Board Meeting – draft within 15 days, signed within 30 days
(Applicable to All Companies)
Section 118 of the Companies Act, 2013 read with Paragraph 7 of SS-1

• Draft minutes are required to be circulated to all members of the Board within 15 days of the meeting. Members may give their comments within 7 days of receipt.
• Minutes are required to be entered in the Minutes Book within 30 days of the meeting and signed by the Chairman.
• A copy of the signed minutes is required to be circulated to all members within 15 days of signing.

Step 7: Notice of General Meeting to Members – at least 21 clear days before the meeting
(Applicable to All Companies)
Sections 101 and 102 of the Companies Act, 2013 read with Rule 18 of the Companies (Management and Administration) Rules, 2014 and SS-2

• Notice is required to be sent to every member, the legal representative of a deceased member, the assignee of an insolvent member, every director and the statutory auditors (and the secretarial auditor and debenture trustee, where applicable), by hand, post, courier or e-mail.
• Notice is required to be given at least 21 clear days before the meeting, excluding the day of sending and the day of the meeting, and placed on the company’s website, if any.
• An explanatory statement under Section 102 is required to be annexed, setting out the material facts, including the nature of concern or interest of directors, KMP and their relatives.
• The explanatory statement is required to set out the borrowing limits proposed under Section 180(1)(c) or the undertaking to be charged under Section 180(1)(a).
• The meeting may be called at shorter notice with the consent of a majority in number of members entitled to vote who represent at least 95% of the paid-up share capital carrying voting rights.

Step 8: Submission of Notice to Stock Exchanges – within 12 hours of dispatch of notice
(Applicable in case of Listed Company)
Regulation 30 read with Para A, Part A of Schedule III of the SEBI (LODR) Regulations, 2015

The notice of the general meeting is required to be submitted to the stock exchanges and hosted on the company’s website simultaneously.

Step 9: Cut-off Date and Remote E-Voting – e-voting open for at least 3 days, closing at 5:00 p.m. on the day before the meeting
(Applicable to Listed Companies and Companies having 1,000 or more members)
Section 108 of the Companies Act, 2013 read with Rule 20 of the Companies (Management and Administration) Rules, 2014

• The cut-off date for determining voting eligibility is required to be not earlier than 7 days before the meeting.
• A scrutiniser is required to be appointed, after obtaining his or her consent, to scrutinise the e-voting and the voting at the meeting.
• Remote e-voting is required to remain open for at least 3 days and to close at 5:00 p.m. on the date preceding the meeting.

Step 10: Holding the General Meeting – on the date fixed
(Applicable to All Companies)
Sections 100, 103 and 108 of the Companies Act, 2013 read with SS-2 and Section 180

• The meeting is required to have the prescribed quorum present: for a public company, 5, 15 or 30 members personally present depending on whether the membership is up to 1,000, between 1,000 and 5,000, or more than 5,000; for a private company, 2 members.
• Members are required to approve the borrowing limit or creation of charge by a special resolution. A resolution under Section 180(1)(c) usually fixes an overall limit that covers future borrowings.

Step 11: Proceedings, Scrutiniser’s Report and Voting Results – proceedings within 12 hours; voting results within 2 working days
(Applicable in case of Listed Company)
Regulations 30 and 44(3) of the SEBI (LODR) Regulations, 2015 read with Rule 20(4) of the Companies (Management and Administration) Rules, 2014

• A summary of the proceedings of the meeting is required to be submitted to the stock exchanges within 12 hours of its conclusion.
• The scrutiniser is required to submit a consolidated report of the votes cast to the Chairman, who declares the result.
• Voting results, along with the scrutiniser’s report, are required to be submitted to the stock exchanges within 2 working days of the conclusion of the meeting and hosted on the company’s website.

Step 12: Filing of Resolution with ROC – within 30 days of passing the resolution
(Applicable to Public Companies)
Section 117 of the Companies Act, 2013

The special resolution under Section 180 is required to be filed in e-Form MGT-14, with the notice and explanatory statement.

Step 13: Execution and Verification of the Charge Instrument – on the date of creation of charge
(Applicable to All Companies)
Section 77(1) of the Companies Act, 2013 read with Rule 3(4)

The instrument creating or modifying the charge is executed with the charge-holder. The copy filed with the Registrar is required to be verified by a director, company secretary or authorised officer of the company or of the charge-holder. The date of execution is the date of creation, from which the filing period runs.

Step 14: Filing of e-Form CHG-1 or CHG-9 – within 30 days of creation or modification
(Applicable to All Companies)
Section 77(1) of the Companies Act, 2013 read with Rules 3 and 4

• Particulars of the charge are required to be filed with the Registrar in e-Form CHG-1 (or CHG-9 for a charge securing debentures), signed by the company and the charge-holder, with the verified instrument and the prescribed fee.
• If not filed within 30 days, the Registrar may allow registration within 60 days of creation on payment of additional fee, and within a further 60 days on payment of ad valorem fee with a declaration that the delay does not adversely affect the rights of intervening creditors.
• Where the company fails to register the charge, the charge-holder may apply for registration. The Registrar gives the company notice, and the fees paid by the charge-holder are recoverable from the company (Section 78).

Step 15: Modification of Charge – within 30 days of modification
(Applicable to All Companies)
Section 79 of the Companies Act, 2013 read with Rule 6

• Any change in the terms or conditions, or the extent or operation, of a registered charge is required to be registered in the same way, through CHG-1 or CHG-9. Examples include enhancement or reduction of the amount secured, change in interest rate or repayment terms, addition or release of assets, and a pari passu arrangement.
• Property acquired by the company that is already subject to a charge is also required to be registered (Section 79(a)).

Step 16: Certificate of Registration or Modification – on approval of the form
(Applicable to All Companies)
Section 77(2) and Section 79 of the Companies Act, 2013 read with Rule 6

The Registrar issues a certificate of registration of charge in Form CHG-2, or a certificate of modification in Form CHG-3. The certificate is conclusive evidence that the requirements of registration have been complied with.

Step 17: Register of Charges and Copies of Instruments – on registration
(Applicable to All Companies)
Section 85 of the Companies Act, 2013 read with Rule 10

• Particulars of every charge and modification are required to be entered in the Register of Charges in Form CHG-7 at the registered office, authenticated by a director, the Company Secretary or a person authorised by the Board.
• A copy of every instrument creating or modifying a charge is required to be kept with the register. The register and instruments are open for inspection by members and creditors free of charge, and by others on payment of a fee.
• The register is preserved permanently, and instruments for 8 years from the date of satisfaction of the charge.

Appointment of receiver or manager. Where a receiver or manager is appointed over property subject to a charge, notice of the appointment, and later of the cessation, is required to be given to the company and the Registrar within 30 days in Form CHG-6 (Section 84). Rectification. An omission or misstatement in any charge filing can be rectified, or the time for filing extended, by the Central Government on an application in Form CHG-8 (Section 87).

Filings and Disclosures

Penalties for Non-Compliance

Registration of Charge at a Glance

Day 0 = Date of creation or modification of charge