Charges under Companies Act 2013: Rules & Penalties. Under the Companies Act 2013, a “charge” signifies an interest or lien created on a company’s assets as security, impacting various stakeholders. This article delves into the definition, types, and legal provisions surrounding charges. GST Registration.

What is a Charge?

Definition: As per Section 2(16) of the Companies Act 2013, a “charge” refers to an interest or lien created on the property or assets of a company or its undertakings as security, including a mortgage.

Relation to Pledge and Hypothecation

• Pledge: According to Section 172 of the Indian Contract Act, 1872, a “pledge” involves the bailment of goods as security for payment of a debt or performance of a promise.


• Hypothecation: As defined in Section 2 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, “hypothecation” is a charge on movable property created by a borrower in favor of a secured creditor without delivering possession to the creditor, as security for financial assistance. This includes floating charges and their crystallization into fixed charges on movable property. In contrast to a pledge, possession of the asset remains with the debtor. GST Filing.

Provisions under Companies Act 2013 & Companies (Registration of Charges) Rules, 2014

Section & Rule: Section 77 with Rule 3 & Rule 6

Description: Duty to Register Charges: Every company must register the charge with the Registrar of Companies (ROC) within 30 days of creation or modification, along with the fee. This obligation extends to all types of charges created, whether within or outside India.

Forms and Processes:

• CHG-1: For creation or modification of charge other than debenture.


• CHG-9: For creation or rectification of charge related to debentures.

Registration Process:

• Before Companies (Amendment) Ordinance 2019: Charges created must be registered within 300 days of creation.


• After Companies (Amendment) Ordinance 2019: Charges created on or after the commencement of the ordinance must be registered within 60 days of creation, with payment of additional fees.

Post Registration:

• Upon registration, the ROC issues a registration certificate (CHG-2) to the person in whose favor the charge is created.


• Modifications to charges are recorded using Form CHG-3.

Penalties for Non-Compliance

Failure to register charges within the stipulated timelines can result in penalties under the Companies Act 2013. These penalties are substantial and can affect the validity of the charge, potentially impacting the priority of creditors and the enforceability of security interests.

Understanding these provisions is crucial for companies to ensure compliance with the law and to safeguard their interests in transactions involving charges on assets. Proper adherence to registration requirements not only enhances legal compliance but also strengthens the security of financial transactions within the regulatory framework.

This overview provides a foundational understanding of charges under the Companies Act 2013, highlighting the importance of timely registration and adherence to legal requirements in securing corporate assets.