How to Register a Charge Under Section 77 of the Companies Act 2013: CHG-1 Filing Process and Timelines

When a company creates a charge on its property, assets, or any part of its undertaking in favour of a lender or creditor, it is legally required to register that charge with the Registrar of Companies (ROC). This requirement is imposed by Section 77 of the Companies Act, 2013, and is implemented through the Companies (Registration of Charges) Rules, 2014. The registration must be completed by filing Form CHG-1 with the ROC within 30 days of the creation of the charge. Failure to register a charge within the prescribed timeline can result in the charge becoming void against the liquidator and other creditors of the company, which has serious implications for the charge holder's priority in the event of insolvency or winding up.

This guide explains the complete process for registering a charge under Section 77, including the filing of Form CHG-1, the timeline for registration, the consequences of delayed or non-filing, and the procedures for modification and satisfaction of charges. For companies dealing with broader compliance, our article on how to register under the Shops and Establishments Act covers another important registration requirement. Companies facing financial difficulties may also want to review our guide on how to respond to a SARFAESI notice from your bank.

Legal Framework: Sections 77 to 87 of the Companies Act, 2013

The registration of charges is governed by Sections 77 to 87 of Chapter VI of the Companies Act, 2013. Section 77 imposes the duty on every company to register charges. Section 78 allows the charge holder to apply for registration if the company fails to do so. Section 79 deals with the effect of non-registration, making the charge void against the liquidator and creditors if not registered. Sections 80 and 81 address the company's duty to maintain a register of charges and the ROC's obligation to maintain a register of charges. Section 82 deals with the company's duty to report satisfaction of the charge, and Section 83 empowers the ROC to make entries of satisfaction even in the absence of intimation from the company.

The procedural aspects are prescribed in the Companies (Registration of Charges) Rules, 2014 (as amended from time to time). These Rules prescribe the forms, timelines, and fees for registration, modification, and satisfaction of charges.

Types of Charges That Must Be Registered

Section 77(1) requires registration of a charge created on the property or assets of the company, or any of its undertakings, whether tangible or otherwise, and situated in or outside India. This includes charges on immovable property (mortgage), charges on movable property (hypothecation, pledge), charges on book debts, floating charges on the undertaking or assets of the company, charges on goodwill, patent, trademark, or copyright, and charges on uncalled share capital. Essentially, any security interest created by the company in favour of a lender must be registered with the ROC.

Step-by-Step Process for Filing Form CHG-1

The registration of a charge involves the following steps.

Step 1: Board Resolution. The board of directors must pass a resolution authorising the creation of the charge and the borrowing that necessitates it. If the borrowing exceeds the limits under Section 180(1)(c), a special resolution of the shareholders is also required (for public companies). The board resolution should specify the nature of the charge, the amount of the borrowing, and the assets over which the charge is being created.

Step 2: Execution of the Charge Instrument. Draft, stamp, and execute the loan agreement and the instrument of charge (mortgage deed, hypothecation agreement, or pledge agreement) with the lender. Ensure that the stamp duty applicable in the relevant state has been paid on the instrument.

Step 3: Filing Form CHG-1. Form CHG-1 is the prescribed form for registration of creation or modification of a charge (other than a charge in the form of a debenture). The form must be filed electronically on the MCA V3 portal. The form requires the following details: company CIN and name; details of the charge holder (lender); date of creation of the charge; description of the property or assets charged; amount secured by the charge; terms and conditions of the charge; and details of the instrument creating the charge.

Step 4: Attach the supporting documents. These include a certified true copy of the instrument creating or modifying the charge, a certified true copy of the board resolution authorising the charge, particulars of all prior charges on the same assets (if any), and a valuation report for the assets charged (if applicable).

Step 5: Digital Signature. The form must be digitally signed by a director or the company secretary, and must also be certified by a practicing professional (a Chartered Accountant, Cost Accountant, or Company Secretary in practice).

Step 6: Pay the prescribed ROC fees and submit the form. Upon successful processing, the ROC issues a Certificate of Registration of Charge in Form CHG-2.

Timeline for Filing and Additional Fees

The filing timeline under Section 77 and Rule 3 of the Companies (Registration of Charges) Rules, 2014, is as follows. The charge must be registered within 30 days from the date of creation. This is the normal filing window with standard ROC fees and no additional penalty.

If the company fails to file within 30 days, the Registrar may, on an application by the company, allow registration within a further period of 30 days (total of 60 days from creation), on payment of additional fees as prescribed. The additional fee for delayed filing is calculated based on the number of days of delay.

For charges created before November 2, 2018, the earlier regime permitted the Registrar to allow registration up to 300 days, and the NCLT could permit registration beyond 300 days. For charges created on or after November 2, 2018, the maximum window for filing with the ROC is 60 days from the date of creation (30 days normal plus 30 days with additional fees). Beyond this period, the charge cannot be registered with the ROC, and the company would need to approach the NCLT for condonation of delay under Section 87, if applicable.

Companies facing related corporate restructuring challenges should also be aware of the process for filing a petition for winding up of a company under the Companies Act, 2013, as unregistered charges become particularly relevant in winding-up proceedings.

Modification of Charge: Form CHG-1

If the terms of an existing charge are modified (for example, an increase in the amount secured, a change in the property charged, or a change in the terms and conditions), the company must file a fresh Form CHG-1 with the ROC to register the modification. The same 30-day filing window and additional fee structure apply to the modification as to the original creation. The modification filing must include the original charge registration number and details of the changes being made.

Satisfaction of Charge: Form CHG-4

When the debt or obligation secured by the charge has been fully paid or satisfied, the company must file Form CHG-4 with the ROC under Section 82 of the Companies Act, 2013, to report the satisfaction of the charge. This filing must be made within 30 days from the date of payment or satisfaction in full. The filing can also be made beyond 30 days but within 300 days of the date of satisfaction, with payment of additional fees.

Form CHG-4 must be digitally signed by a director or the company secretary and by the charge holder. If the charge holder does not join in the application, the company can still file Form CHG-4 independently, and the ROC will issue a notice to the charge holder before recording the satisfaction. Upon processing, the ROC issues a Certificate of Registration of Satisfaction of Charge.

It is important to file CHG-4 promptly after satisfaction of the charge. An unsatisfied charge on the ROC register can create difficulties when the company seeks fresh borrowing, as new lenders will check the charge register and may raise concerns about existing charges. For companies managing their GST compliance alongside charge-related filings, our guide on how to apply for revocation of GST registration cancellation addresses another important regulatory filing.

Charge Holder's Right to Apply for Registration (Section 78)

If the company fails to register the charge within the prescribed period, Section 78 gives the charge holder the right to apply to the ROC for registration. The charge holder must file the application along with the instrument creating the charge, within the time and in the form prescribed. The ROC will issue a notice to the company and, after considering the response, may allow the registration. The charge holder is entitled to recover from the company the amount of fees paid for the registration.

Effect of Non-Registration: Section 79

The consequences of failing to register a charge are significant. Under Section 79, if a charge required to be registered under Section 77 is not so registered, the charge becomes void against the liquidator and any creditor of the company. This means that in the event of winding up or insolvency proceedings, the charge holder loses priority and is treated as an unsecured creditor. However, the underlying debt is not affected; it remains payable. Non-registration only affects the security interest, not the obligation to repay.

For companies that are converting from a private company to a public company, it is critical to audit the charge register and ensure all charges are properly registered and up to date before the conversion.

Penalties for Non-Filing

Under Section 86 of the Companies Act, 2013, if a company contravenes the provisions of Sections 77 to 87, the company is punishable with a fine of up to INR 5,00,000, and every officer of the company who is in default is punishable with a fine of up to INR 50,000. These penalties are in addition to the charge becoming void against the liquidator and creditors under Section 79.

Priority of Charges

Registration of a charge establishes its priority. In the event of multiple charges on the same assets, the charge registered first with the ROC generally has priority over subsequently registered charges. This is why timely registration is critical not just for compliance but also for protecting the charge holder's commercial interests. Lenders routinely search the MCA charge register before disbursing loans to verify the existence and priority of existing charges.

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Conclusion

Registration of charges under Section 77 of the Companies Act, 2013, is a critical compliance obligation that protects both the company and the charge holder. The 30-day filing window for Form CHG-1, the additional fee structure for delayed filing, and the severe consequences of non-registration (charge becoming void against the liquidator and creditors) make timely filing essential. Companies should establish internal processes to ensure that every charge creation, modification, or satisfaction is promptly reported to the ROC. In-house counsel and company secretaries should maintain a charge register, track filing deadlines, and coordinate with lenders to ensure that CHG-4 is filed upon satisfaction. A clean charge register not only ensures compliance but also facilitates smoother future borrowing and corporate transactions.