Register of Charges

Definition of Register of Charges

A Register of Charges is an official record maintained either by the Registrar of Companies or internally by the company to document details of charges created over the company’s assets. A charge grants a creditor the legal right to claim repayment from specific company assets if the debt is not repaid. The purpose of this register is to ensure transparency and to provide creditors with the ability to assess the financial commitments of a company.

Key Points:

Registrar’s Register of Charges:
- Maintained by the Registrar of Companies.
- Charges must be registered by companies within 21 days of their creation.
- The Companies Act stipulates the types of charges that must be registered.
- Unregistered charges are void against a liquidator or other creditors but the underlying debt remains valid as an unsecured debt.
Company’s Internal Register of Charges:
- Maintained at the company’s registered address or principal place of business.
- Must be available for inspection during normal business hours.
- Non-maintenance may result in fines for the company’s directors and officers.

Examples

Mortgage-backed charge: A company secures a loan by giving a mortgage over its real estate property; this charge must be registered with the Registrar of Companies to be enforceable.
Floating charge: A company creates a charge over its inventory and receivables; upon the event of default, the creditor can claim repayment from the sale of inventory. This charge must also be registered.

Frequently Asked Questions

Q1: What happens if a charge is not registered within 21 days?

A: If a charge is not registered within 21 days, it becomes void against the liquidator and other creditors. The underlying debt remains but is treated as an unsecured debt.

Q2: Who is responsible for registering the charge?

A: It is typically the company’s responsibility to register the charge, although mutual consent of the company and creditor usually ensures compliance.

Q3: Can the details of the Register of Charges be inspected by the public?

A: Yes, the Registrar’s Register of Charges is available for public inspection, while the company’s internal register should be available for inspection at the company’s office during business hours.

Q4: Is there a penalty for not maintaining the internal register of charges?

A: Yes, failure to maintain the internal register may result in fines for the directors and company officers.

Q5: What types of charges must be registered?

A: Specific types of charges include fixed charges over tangible or intangible property, floating charges over the company’s assets, and other security interests as defined by the Companies Act.

Charge: A legal right granted by a company over its assets to a creditor as security for a debt.
Fixed Charge: A charge fixed specifically on particular assets.
Floating Charge: A general charge over a company’s fluctuating assets like stock or receivables.
Secured Debt: Debt that is backed by collateral in the form of the company’s assets.
Unsecured Debt: Debt that is not backed by collateral and ranks lower in repayment priority.

Online Resources

Suggested Books for Further Studies

“Principles of Corporate Finance” by Richard A. Brealey, Stewart C. Myers, Franklin Allen
A comprehensive guide to corporate finance principles, including detailed discussions on secured transactions and charges.
“Company Law” by Alan Dignam and John Lowry
This book offers in-depth coverage on company law, including obligations around the maintenance and registration of charges.
“Mayson, French & Ryan on Company Law” by Derek French
A thorough resource on company law covering various aspects including the creation and registration of charges.

Accounting Basics: “Register of Charges” Fundamentals Quiz

### Within how many days must a charge be registered with the Registrar of Companies to be enforceable? - [ ] 14 days - [x] 21 days - [ ] 30 days - [ ] 60 days > **Explanation:** A charge must be registered within 21 days of its creation with the Registrar of Companies. ### What happens to an unregistered charge in case of the company liquidation? - [ ] It becomes a priority debt. - [x] It becomes void against the liquidator and other creditors. - [ ] It gains interest. - [ ] It remains as valid as a secured debt. > **Explanation:** An unregistered charge becomes void against a liquidator and other creditors, though the underlying debt remains valid as an unsecured debt. ### Which law stipulates the details that must be included in the Register of Charges? - [ ] Financial Instruments Reporting Act - [x] Companies Act - [ ] Banking Regulation Act - [ ] Corporate Obligations Act > **Explanation:** The Companies Act details the types of charges that must be registered and the information required. ### Where must a company maintain its internal Register of Charges? - [ ] At the city hall. - [x] At its registered address or principal place of business. - [ ] At the Registrar of Companies office. - [ ] With its legal counsel. > **Explanation:** Companies are required to maintain their internal Register of Charges at their registered address or principal place of business. ### If a charge is not registered, what is the status of the underlying debt? - [ ] It is dissolved. - [ ] It remains secured as initially. - [x] It remains valid but as an unsecured debt. - [ ] It becomes a priority lien. > **Explanation:** The underlying debt remains but is treated only as an unsecured debt if the charge is not registered. ### Who faces penalties for failing to maintain the internal register of charges? - [x] Company directors and officers - [ ] The company's shareholders - [ ] The company's legal counsel - [ ] The company's employees > **Explanation:** Directors and officers can be fined for failing to maintain the internal register of charges. ### What types of assets can a charge be created over? - [x] Both tangible and intangible assets - [ ] Only tangible assets - [ ] Only cash and equivalents - [ ] Only receivables > **Explanation:** Charges can be created over both tangible and intangible assets as specified under the Companies Act. ### Are details of charges available for public inspection? - [x] Yes, at the Registrar's Register of Charges - [ ] No, they are confidential - [ ] Only to creditors - [ ] Only to shareholders > **Explanation:** The Registrar's Register of Charges is open for public inspection, while the company’s internal register is available for inspection at the company’s premises. ### What is the primary benefit of registering a charge? - [ ] Ensuring asset delivery - [x] Ensuring enforceability against other creditors and liquidators - [ ] Reducing interest rates - [ ] Avoiding taxes > **Explanation:** Registering a charge ensures it is enforceable against other creditors and liquidators. ### What can a creditor do with a registered charge in case of default? - [ ] File for bankruptcy - [ ] Increase the interest rate - [x] Claim repayment from the specific assets tied to the charge - [ ] Extend the loan term > **Explanation:** A registered charge allows the creditor to claim repayment from the specific assets secured by the charge in case of default.

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