Registering Charges Flashcards
What is a Charge?
- A form of security interest;
- Created by a company (the Debtor);
- Over its assets and undertakings;
- In favor of a counterparty (the Creditor);
- To collateralize an obligation it owes thereto.
The term ‘security interest’ can include liens, mortgages, fixed and floating charges, or any other type of formal or informal collateralizing instrument. Accordingly, prudence demands you register any charge, including any charges attached to any properties a company acquires.
How is a Charge Registered?
- Either the Chargor, Chargee, or their representatives;
- Submit the appropriate Forms MR; alongside
- A certified copy of the instrument creating or evidencing the Charge (Certified Copy); and
- The registration fee of £15;
- To Companies House; within
- 21 days of the Charge’s creation.
CA 2006 — s. 859A(2)-(4).
Authentication codes are needed for online registration. The Chargor can use its company code, but the Chargee cannot; it would require a lender’s code.
What information may be redacted from a Certified Copy of an Instrument?
- Signatures.
- Identifiers of bank or securities accounts.
- Personal information, other than an individual’s name.
CA 2006 — s. 859G.
Redactions require an appropriate notification on the copy itself.
When is a Charge made by way of a Deed deemed Created?
If the Deed was executed and:
* Has immediate effect on execution and delivery, the date of delivery;
* Held in escrow, the date of delivery into escrow;
* Held as undelivered, the date of delivery.
CA 2006 — s. 859E.
When is a Charge not made by way of a Deed deemed Created?
- If the instrument has immediate effect on execution, the date of execution;
- If the instrument does not have immediate effect on execution, the date on which it takes effect.
CA 2006 — s. 859E.
What Evidence of Registration of a Charge does Companies House provide?
- A Certificate of Registration.
- The publishing of the Certified Copy.
- A unique Reference Code for the Charge.
CA 2006 — s. 859I.
For all purposes, the Certificate of Registration is conclusive and overriding evidence.°
° National Provincial v Charnley [1924] 1 KB 431.
What is the effect of failing to properly Register a Charge?
- The Charge becomes void against a liquidator, an administrator, or any secured creditor° of the Chargor, leaving the Chargee an unsecured creditor.
- The monies secured by the Charge become immediately payable.
CA 2006 — s. 859H.
° Re Ehrmann Bros [1906] 2 Ch 697.
What options are available to a Chargeholder whose Charge has not been properly Registered?
Release and recreate the Charge, ensuring it is properly registered the second time.
Application to the Court for an extended deadline is possible, but highly unreliable, and even if successful, will delay the official registration date.
Why is the Release and Recreation of a Charge still adverse for the Chargeholder?
- The Charge’s Hardening Period is extended, meaning it is vulnerable to challenge for longer.
- The Charge’s registration date is later, meaning it ranks below any other Charges registered in the interrim.
Can a Registered Charge be amended?
Yes, namely to:
* Include a Negative Pledge; or
* To update how the Charge’s ranking vis-à-vis any other Charge.
Form MR07 is the relevant document.
CA 2006 — s. 859O.
Bear in mind that Charges usually include a Negative Pledge by default and that Creditors’ ranking is usually governed by a separate Deed.
What Records of Charges must a Company keep?
- Copies of every Instrument creating a registrable Charge.
- Copies of every Instrument amending or varying a registrable Charge.
- Copies of any document containing particulars that must be set out in registration forms.
- Copies of any translations.
CA 2006 — s. 859P.
These records must be kept at the company’s registered office.
Once a Charge is satisfied, what can the Chargor do update its status?
Submit a Form MR04 or MR05 to the Registrar.
CA 2006 — s. 859L.
It does not have to do this, but it nevertheless should to provide third-parties with the most relevant information. Notice of enforcement, however, must be notified under s. 859K.
