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What is charge on assets

What is charge on assets?

Charge means interest created on assets of company or any of its undertaking as a security. Provisions of charge specified under companies Act, 2013. Sec 77 of companies Act,2013 every company shall create charge on properties or assets whether situated india or outside india  to register charge with payment of fees.


There are two types of charge on assets of company-

  1. Fixed Charge

Fixed charge created against specified property of company which is identified, specified and certain in nature.

It does not change over period of time.

  • Floating Charge

Floating charge created on assets which involved in ordinary course of business.

Company may deal in such assets without approval of creditor.

Floating charge not created on specified property or assets of company. Generally cover property which is fluctuating in nature like stock in trade, debtor.

Crystallization of charge:

When charge holder take steps to enforce charge floating charge become fixed charge called crystallization . Once floating charge 

 Crystallizes company can not dispose of assets without pay off to charge holder. Floating charge crystallizes in following situations:

  1. Upon commencement of winding up process of company.
  2.  Company ceases to carry business
  3.  On happening of event as may specified in agreement.

Registration of charge by company:

  • Every company needs to register charge within 30 days of creation of charge.
  • If charge not registered within specified period of time then may registered further 30 days with an additional fees ( after commencement of companies amendment ordinance ,2019).
  • In case charge not registered within above 30days may allow in further 60 days with ad-valorem fees.

Registration of charge by charge holder:

  • If company fails to register charge within 30 days then charge holder  shall apply to ROC for registration of charge
  • Registrar send 14 days show cause notice to company that why charge shouldn’t be registered if company doesn’t take any action ROC grant permission to register the same.
  • Charge holder entitled to recover charge fee from company.

Register of charge:

  • Company shall kept register of charge at registered office.
  • Registered to be maintained permanently.

FORMS required for charge:

  1.  CHG-1 is required to filed for registration of charge other than debenture.
  2.  CHG-2 form for certificate of registration of charge by registrar.
  3.  CHG-3 form for certification for modification of charge by registrar.
  4.  CHG-4 form to be filed for payment or satisfaction of charge.
  5.  CHG-5 for certificate for registration or satisfaction of charge.
  6.  CHG-6 for notice for appointment or cessation of receiver.
  7.  CHG-7 register of charge maintained by company.
  8.  CHG-8 required for modification or satisfaction of charge.
  9.  CHG-9 is to be require for registration of debenture.

Conclusion: Before entering into contract contracting party must overlook whether property under charge or not. Provision regarding charge made under Companies Act, 2013 to ascertain the validity and creditability of the financial aspect/ proposal. If you have any doubt regarding the topic, you can contact company suggestion.

CS Shweta Sharma

CS Shweta Sharma having experience of three years under CS firm and also having degree of B. Com and M. Com. Having expert knowledge of ROC related work and other company related compliances with MCA.

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