Registration of Charges
A Small note on “Registration of Charges”
What is meant by a charge?
The word ‘charge’ is to used to mean any form of security for debt, unless the word is used otherwise. A company having power to borrow money is empowered also to charge its assets, subject however to any limitations in its Memorandum or Articles. Under Companies Act,1956(S.124), the expression ‘charge’ includes ‘Mortgage’.
What is meant by a fixed and a floating charge?
A ‘fixed charge’ is also called a ‘specific charge’. It extends over a specific property or properties of the company. In other words, the charge attaches to the property that is identified at the time when the charge is created. eg., land, heavy machinery, buildings. The essence of the fixed charge is that though the possession of the specified asset is with the company, the legal title belongs to the holders of the charge. The consequence of this charge is that the company cannot dispose of that asset, free from charge, without the consent of the holders of the charge.
A ‘floating charge’, is not attached to a definite property but covers property of a fluctuating type, eg. Stock in trade. It is a charge
-that floats over the present and future property of the Company which are subject of the charge. That means it does not fasten on or attach to any particular or specific property.A floating charge is an equitable charge which does not fasten on any specific property but covers the whole of the Company’s property, whether it is or not subject to fixed charge. When a floating security or charge upon all the property or assets of the company become fixed, it constitutes a Charge upon all the property or assets then belonging to the Company. It has priority over subsequent equitable charges and over unsecured creditors. Equitable charge is a charge that does not pass on the ownership or possession to a creditor but gives him the right to judicial process of recovery of the loan amount in case of
What is meant by a charge?
The word ‘charge’ is to used to mean any form of security for debt, unless the word is used otherwise. A company having power to borrow money is empowered also to charge its assets, subject however to any limitations in its Memorandum or Articles. Under Companies Act,1956(S.124), the expression ‘charge’ includes ‘Mortgage’.
What is meant by a fixed and a floating charge?
A ‘fixed charge’ is also called a ‘specific charge’. It extends over a specific property or properties of the company. In other words, the charge attaches to the property that is identified at the time when the charge is created. eg., land, heavy machinery, buildings. The essence of the fixed charge is that though the possession of the specified asset is with the company, the legal title belongs to the holders of the charge. The consequence of this charge is that the company cannot dispose of that asset, free from charge, without the consent of the holders of the charge.
A ‘floating charge’, is not attached to a definite property but covers property of a fluctuating type, eg. Stock in trade. It is a charge
-that floats over the present and future property of the Company which are subject of the charge. That means it does not fasten on or attach to any particular or specific property.A floating charge is an equitable charge which does not fasten on any specific property but covers the whole of the Company’s property, whether it is or not subject to fixed charge. When a floating security or charge upon all the property or assets of the company become fixed, it constitutes a Charge upon all the property or assets then belonging to the Company. It has priority over subsequent equitable charges and over unsecured creditors. Equitable charge is a charge that does not pass on the ownership or possession to a creditor but gives him the right to judicial process of recovery of the loan amount in case of