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Charge on Assets of a Company – All You Need To Know

charge on assets

A charge is a form of security offered by a business in exchange for a loan, like a mortgage. It’s an interest or right that a lender or creditor acquires in a company’s assets to guarantee that the company will repay the debt.

When a company experiences bad debts, a charge on assets is made against that company’s assets. The company must disclose the number of bad debts secured by a charge against the company’s assets annually.

Types of Charge on Assets

There are typically two types of charges that entities create over the assets. They are as follows:

Fixed charges

These charges are levied against specific traceable property that remains the same throughout the loan’s tenure and is never variable. A fixed charge is a security interest in a particular property, and the corporation forfeits the right to sell that item until the charge is paid in full.

Floating charge

These accusations are not made against a specific item of property that might be recognisable. In general, what assets will be subject to floating charges is unknown. The benefit of this charge is that the business may continue to use the charged property in any manner.

Crystallisation of charge

In some cases, a floating charge may change to a fixed charge. Turning a floating charge into a fixed charge is known as the crystallisation of charge. When this conversion occurs, the floating charge is no longer floating on assets that are not static. In the event of a debt repayment default, it turns into a fixed charge, transferring full ownership over certain assets to the creditor. The following conditions lead to such an occurrence:

  • The debtor cannot afford to repay the debts.
  • The business will soon stop operations.
  • When the creditor initiates legal action against the debtor for failing to settle the debts and in all other situations mentioned under the applicable sections of the Companies Act 2013, it cannot operate the firm.

Registration of charge by the company

Within 30 days of the creation of the charge, every company must register it. Charges may be registered for an additional 30 days with additional fees if they are not registered within the allotted time. It may extend charges not registered within the previous 30 days for 60 days with additional fees.

Registration of charge by the charge holder

Charge holders must apply to ROC for charge registration if a corporation fails to do so within 30 days. If the corporation responds to the registrar’s 14-day show reason notice, the ROC will approve the charge to be registered. The charge holders are permitted to reclaim charge fees from companies.

Register of charge

Every company must maintain a register of charges at its registered office, in which all debts and mortgages affecting the company’s assets must be recorded. The register must include a brief description of the property being charged, the charge’s amount, the name of the party being charged, etc., and must all be included in the register.

Forms required for charge

  • CHG-1 – Application for charge registration 
  • CHG-2 – ROC registration certificate 
  • CHG-3 – Registration certificate
  • CHG-4 – The charge’s complete information and supporting documents
  • CHG-5 – Memorandum regarding the charges being brought
  • CHG-6 – Notice of the appointment or removal of the responsible management
  • CHG-7 – Charge register (to be kept up by the organisation)
  • CHG-8 – Submission of a request to the Central Government for an extension of the designated term
  • CHG-9 – Making changes to the charge or turning it to Debentures
  • CHG-10 – Submission of a delay request to the registrar


Along with making a charge for the debt, registering it is another crucial step. Otherwise, the creditor will not be eligible to receive the benefits of secured creditor status. Only when a company enters liquidation in these extraordinary and challenging circumstances. Therefore, it is always advisable to record the charge the creditor has put against the company’s assets.

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