Companies (Registration of Charges) Amendment Rules, 2022

Ministry of Corporate Affairs (MCA) has notified the Companies (Registration of Charges) Amendment Rules, 2022 to further amend the Companies (Registration of Charges Rules, 2014 vide notification no. G.S.R. 320(E) dated April 27, 2022. Amendments have been made in rule 3 (Registration of creation or modification of charge). It is important to note that the amendment rules are made effective from 27th April 2022. The present article briefs the provisions introduced vide the Companies (Registration of Charges) Amendment Rules, 2022.

Amendment in Rule 3 of Companies (Registration of Charges Rules, 2014

Ministry of Corporate Affairs (MCA) notifies that the rule 3 shall not apply to any charge required to be created or modified by a banking company under section 77 (Duty to register charge) in favor of the Reserve Bank of India when any loan or advance made to it under section 17 (4) (d) of the Reserve Bank of India Act, 1934.

Rule 3 of Companies (Registration of Charges Rules, 2014)

Rule 3 cast a duty on the Company that the particulars of the creation/modification of the charges shall be filed with the Registrar of Companies in E form CHG-1 (for other than debentures) or CHG-9 (for debentures).

Section 17 of the RBI Act

Section 17 of the Reserve Bank of India Act, 1934 Act defines how the RBI (the central bank of India) can conduct business. As per section 17 (4) (d), the RBI can grant a loan against the security of promissory notes of any scheduled bank or State co-operative Bank, supported by documents of title to goods [such documents having been transferred], assigned, or pledged to any such bank as security for a [loan or advance made] for bona fide commercial or trade transactions, or to finance agricultural operations or the marketing of crops

Registration of Charges in Company

When a company is financial assistance, or working capital finance as a loan or debt, the bank or financial institution requires security (i.e., property, vehicle, etc.,) for the loan provided. If proper security is created over the assets of the company, then the bank or financial institution can take possession of the assets secured and conduct the sale, to repay the loan. The Companies Act, 2013 requires all companies to file the requisite particulars with the ROC for all security created over the assets of the company. The process of creating security over assets of the company is referred to as registration of charges or creation of charges Click here for more details on Registration of Charges in the Company

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Frequently Asked Questions

Common questions about Companies Registration of Charges Amendment Rules.

The Companies (Registration of Charges) Amendment Rules, 2022 are amendments made by the Ministry of Corporate Affairs (MCA) to further modify the Companies (Registration of Charges) Rules, 2014. These amendments have been made effective from April 27, 2022.

The amendment in Rule 3 states that the rule will not apply to any charge required to be created or modified by a banking company in favor of the Reserve Bank of India (RBI) when any loan or advance is made to it under section 17(4)(d) of the Reserve Bank of India Act, 1934.

Rule 3 requires companies to file the particulars of the creation or modification of charges with the Registrar of Companies in E-form CHG-1 (for other than debentures) or CHG-9 (for debentures).

Section 17(4)(d) of the Reserve Bank of India Act, 1934, allows the RBI to grant a loan against the security of promissory notes of any scheduled bank or State co-operative Bank, supported by documents of title to goods, which have been transferred, assigned, or pledged to any such bank as security for a loan or advance made for bona fide commercial or trade transactions, or to finance agricultural operations or the marketing of crops.

The registration of charges is important for companies because when they obtain financial assistance, loans, or working capital finance, the bank or financial institution requires security (such as property, vehicles, etc.) for the loan provided. If proper security is created over the assets of the company, the bank or financial institution can take possession of the secured assets and conduct the sale to repay the loan in case of default.

The Companies Act, 2013 requires all companies to file the requisite particulars with the Registrar of Companies (ROC) for all security created over the assets of the company. The process of creating security over the assets of the company is referred to as the registration of charges or creation of charges.

The amendment in Rule 3 exempts banking companies from the requirement of filing particulars of charges created or modified in favor of the RBI when taking loans or advances under Section 17(4)(d) of the Reserve Bank of India Act, 1934.

The Companies (Registration of Charges) Amendment Rules, 2022, have been made effective from April 27, 2022. This means that the amendments, including the changes to Rule 3, are applicable from this date onwards.

The registration of charges protects the interests of banks and financial institutions by ensuring that the security created over the assets of the company is properly recorded and documented. This enables the lenders to exercise their rights over the secured assets in case of default by the borrowing company.

Section 77 of the Companies Act, 2013, imposes a duty on companies to register charges created over their assets with the Registrar of Companies. The amendment in Rule 3 specifically refers to this section while exempting banking companies from the requirement of registering charges created in favor of the RBI under certain conditions.