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What is a "charge" and why CHG-1?
A 'charge' under Section 77 of the Companies Act, 2013 is a security interest or lien created by a company over its assets (movable or immovable, tangible or intangible) to secure a loan or obligation. Common examples:
- Bank loan secured by hypothecation of inventory/receivables
- Working capital loan with current assets as security
- Term loan with plant & machinery as security
- Mortgage on factory land/building
- Pledge of shares of subsidiary
- Negative lien (undertaking not to sell or further encumber)
Every such charge MUST be registered with the RoC via Form CHG-1 within 30 days of creation.
Due date and penalty
Due date: 30 days from date of creation/modification of charge
Extended timelines (with additional fee):
- 30-60 days: Additional fee 6x of normal fee
- 60-120 days: Apply for condonation, pay additional fee + ad valorem
- Beyond 120 days: Charge cannot be registered; the security becomes unenforceable in liquidation
Penalty for the company and officers: ₹5 lakh + ₹50,000 per officer in default. The charge holder (lender) loses priority in liquidation if CHG-1 isn't filed on time.
Process for filing
- Get charge document (loan agreement, mortgage deed, hypothecation deed) signed and stamped
- Pass Board resolution authorising creation of charge
- Fill Form CHG-1 with:
- Description of property/asset charged
- Amount secured
- Particulars of charge holder (bank, NBFC, etc.)
- Date of creation
- Terms of charge (fixed/floating, etc.)
- Attach: Charge instrument, board resolution, evidence of stamp duty payment
- Both company and charge holder sign with DSCs
- Pay filing fee (₹200-600 based on capital)
- Submit — Charge Registration Certificate issued by RoC
Modification and satisfaction
Modification (CHG-1 again): If terms change (e.g., loan amount increased, additional assets added), file modified CHG-1 within 30 days of modification.
Satisfaction (CHG-4): When loan is fully repaid and the charge is released, file CHG-4 within 30 days. Without CHG-4 filing, the charge remains on MCA records — affecting:
- Future loan applications (banks see existing charge)
- Due diligence by investors/buyers
- Disposal of assets (clean title is unclear)
Common situations and forms
- Bank working capital loan: Charge on stock, debtors, current assets — CHG-1 filed by company
- Term loan from NBFC: Hypothecation of specific equipment — CHG-1 filed
- Mortgage of property: CHG-1 plus separate stamp duty + registration of mortgage deed with sub-registrar
- Cash credit limit increase: CHG-1 (modification) for new limit
- Loan repaid: CHG-4 for satisfaction