In India, companies are required to register details of any charges created on their assets with the Registrar of Companies (RoC). This ensures transparency for stakeholders, especially potential lenders, about the company's financial encumbrances. The process involves two key forms: Form CHG-1 for the creation or modification of a charge, and Form CHG-4 for the satisfaction (or release) of a charge. Both forms are filed electronically through the Ministry of Corporate Affairs (MCA) portal.

Let's break down the process for each:

Form CHG-1: Creation or Modification of Charge

Purpose: Form CHG-1 is filed by a company with the Registrar of Companies (RoC) to register the particulars of a charge created or modified on its assets or undertakings. This includes charges created in India or outside India, and in favor of various lenders like banks, financial institutions, or other entities.

What is a "Charge"? A charge is an interest or lien created on the property or assets of a company (or any of its undertakings) as security for a loan or debt. It includes mortgages. This registration ensures that any person dealing with the company's property is aware that it is already subject to an encumbrance.

Due Date for Filing: Form CHG-1 must be filed within 30 days from the date of creation or modification of the charge.

Consequences of Delay in Filing CHG-1: The Companies Act, 2013, has strict provisions for delays.

• Beyond 30 days but within 60 days: An additional fee (multiple times the normal fee) is levied.

• Beyond 60 days but within 120 days: A higher additional fee and an ad valorem fee (a percentage of the secured amount, subject to a maximum) are levied.

• Beyond 120 days (for charges created/modified on or after November 5, 2018): Filing is generally not allowed without obtaining an order for Condonation of Delay from the Central Government (through the Regional Director/NCLT), by filing Form CHG-8 and Form INC-28. This is a lengthy and complex process involving court intervention and significant penalties.

Documents Required for Filing CHG-1:

1. Instrument(s) of creation or modification of charge: This is the most crucial document. It includes the loan agreement, sanction letter, mortgage deed, hypothecation deed, or any other document that legally creates or modifies the charge.

2. Particulars of all joint charge holders (if applicable): If there are multiple lenders in a consortium or joint charge, their details are required.

3. Instrument(s) evidencing acquisition of property which is already subject to charge (if applicable): If the company is acquiring an asset that is already charged, documentation proving both the acquisition and the pre-existing charge is needed.

4. Board Resolution (Optional but good practice): Although not always mandatory as an attachment, a Board Resolution authorizing the creation/modification of charge and the filing of Form CHG-1 should be passed by the company's Board of Directors.

5. Any other relevant information/document.

Process for Filing Form CHG-1:

1. Preparation of Instrument: Draft and execute the charge document (e.g., loan agreement, mortgage deed) as per the terms and conditions agreed upon with the lender.

2. Board Resolution: Convene a Board Meeting to approve the creation or modification of the charge and authorize a director/company secretary to sign and file Form CHG-1.

3. Collection of Details: Gather all necessary details including:

   • CIN/FCRN of the company.

   • Details of the charge (nature, description, date of instrument, amount secured, type of charge - e.g., immovable property, movable property, floating charge, book debts, etc.).

   • Particulars of the charge holder(s) (Name, address, PAN, email ID).

   • Details of the property charged.

   • Terms and conditions of the charge (e.g., rate of interest, repayment terms).

4. Fill e-Form CHG-1: Log in to the MCA V3 portal and fill out the e-Form CHG-1. This form is divided into sections covering company details, charge particulars, and charge holder details.

5. Attach Documents: Attach all the mandatory documents (as listed above) to the e-Form.

6. Digital Signatures: The e-Form CHG-1 must be digitally signed by a Director/Manager/Company Secretary/CEO/CFO of the company. Additionally, a declaration by the charge holder must be digitally signed by an authorized signatory of the charge holder (e.g., bank official). The form must also be certified by a practicing professional (Company Secretary, Chartered Accountant, or Cost Accountant).

7. Payment of Fee: Pay the prescribed MCA filing fee based on the company's authorized share capital and any additional fees for delay.

8. Upload the Form: Upload the digitally signed e-Form CHG-1 on the MCA portal.

9. Processing by RoC: The RoC processes the form. If found in order, the RoC registers the charge and issues a Certificate of Registration of Charge (Form CHG-2) (or Form CHG-3 for modification) to the company's registered email ID. This certificate is proof of the charge being officially recorded.

Form CHG-4: Satisfaction of Charge

Purpose: Form CHG-4 is filed by a company (or the charge holder) with the RoC to intimate the Registrar about the payment or satisfaction in full of any registered charge. This is crucial to remove the encumbrance from the company's assets in the public record.

Due Date for Filing: Form CHG-4 must be filed within 30 days from the date of payment or satisfaction in full of the charge.

Consequences of Delay in Filing CHG-4: Similar to CHG-1, delays attract additional fees:

• Beyond 30 days but within 300 days: An additional fee (multiple times the normal fee) is levied.

• Beyond 300 days: Filing is only possible after obtaining an order for Condonation of Delay from the Central Government (through the Regional Director/NCLT) by filing Form CHG-8 and Form INC-28. This involves court intervention and significant penalties for both the company and its officers.

Documents Required for Filing CHG-4:

1. Letter from the Charge Holder (No Dues Certificate / NOC): This is a mandatory and crucial document. It must be a letter from the bank or financial institution (charge holder) explicitly stating that the loan amount has been fully repaid or the charge has been satisfied, and that they have no objection to the release of the charge. This letter should clearly mention the charge ID (obtained when CHG-1 was filed).

2. Board Resolution (Optional but good practice): A Board Resolution noting the satisfaction of the charge and authorizing a director/company secretary to file Form CHG-4.

3. Optional attachment(s): Any other relevant documents.

Process for Filing Form CHG-4:

1. Repayment of Loan/Satisfaction of Charge: The company must first fully repay the loan or satisfy the obligation for which the charge was created.

2. Obtain No Dues Certificate/NOC: Request and obtain a formal "No Dues Certificate" or "No Objection Certificate" from the charge holder (lender), clearly stating the full satisfaction of the charge and the date of satisfaction.

3. Board Meeting: Convene a Board Meeting to take note of the satisfaction of the charge and authorize a director/company secretary to sign and file Form CHG-4.

4. Collection of Details: Gather necessary details including:

   • CIN/FCRN of the company.

   • Charge Creation Identification Number (CIN) - this is an 8-digit number generated by the MCA when Form CHG-1 was approved.

   • Date of satisfaction of charge (as per the charge holder's letter).

   • Particulars of the charge holder (Name, address).

5. Fill e-Form CHG-4: Log in to the MCA V3 portal and fill out the e-Form CHG-4.

6. Attach Documents: Attach the mandatory "No Dues Certificate" or "NOC" from the charge holder.

7. Digital Signatures: The e-Form CHG-4 must be digitally signed by a Director/Manager/Company Secretary/CEO/CFO of the company. It must also be digitally signed by an authorized signatory of the charge holder (e.g., bank official) and certified by a practicing professional (Company Secretary, Chartered Accountant, or Cost Accountant).

8. Payment of Fee: Pay the prescribed MCA filing fee based on the company's authorized share capital and any additional fees for delay.

9. Upload the Form: Upload the digitally signed e-Form CHG-4 on the MCA portal.

10. Processing by RoC:

    • Upon receiving Form CHG-4, the RoC may issue a notice to the charge holder (lender) allowing them 14 days to raise any objections to recording the satisfaction of the charge. (This step might not be required if the charge holder themselves files Form CHG-4 directly).

    • If no objection is received or if the RoC is satisfied, it will enter a memorandum of satisfaction of charge in the register.

    • The RoC then issues a Certificate of Registration of Satisfaction of Charge (Form CHG-5) to the company's registered email ID. This certificate confirms that the charge has been officially released.

Key Considerations for Both Forms:

• MCA V3 Portal: Both forms are filed through the MCA V3 portal, which might require familiarity with its interface and new processes.

• Digital Signatures (DSC): Valid Class 2 or Class 3 Digital Signature Certificates (DSCs) of the authorized signatories (Company Director/CS/CFO, Charge Holder's authorized signatory, and Practicing Professional) are essential.

• Accuracy: Ensure all details entered in the forms match the supporting documents precisely to avoid rejection or resubmission.

• Professional Help: Given the strict timelines and potential penalties for non-compliance, it is highly recommended to seek the assistance of a Company Secretary or Chartered Accountant for filing CHG-1 and CHG-4. They can ensure accurate filing and adherence to all legal requirements.