When a company takes a bank loan secured against its factory, or pledges inventory for working capital, or mortgages its office premises for a term loan - a charge is created on the company's assets. This charge must be registered with the ROC within 30 days through Form CHG-1. When the loan is fully repaid, the charge must be marked as satisfied through Form CHG-4. This is not optional compliance - an unregistered charge is void against the liquidator and creditors, meaning the lender loses its security priority.
This guide covers the complete charge lifecycle: creation and registration (CHG-1), modification, satisfaction (CHG-4), the consequences of non-registration, and the forms ecosystem that connects CHG-1 through CHG-9.
What Is a Charge and Why Must It Be Registered?
A charge is a security interest created by a company on its assets (property, equipment, receivables, intellectual property, or any undertaking) to secure a debt or obligation. The charge gives the creditor (charge-holder) a right to recover the debt from the proceeds of those assets if the company defaults.
Section 77 of the Companies Act, 2013, requires every company to register the particulars of every charge created - whether within or outside India, whether on tangible or intangible assets - with the ROC within 30 days. The charge instrument (loan agreement, mortgage deed, hypothecation agreement) must be filed alongside the form.
Registration serves a critical public notice function. Once registered, the charge appears on the company's MCA profile under 'Index of Charges.' Banks, lenders, and investors check this index before lending or investing. For companies after private limited company registration, any secured borrowing - even a simple overdraft facility - triggers charge registration obligations.
Key Terms You Should Know
- Fixed Charge: A charge on a specific, identifiable asset - e.g., mortgage on a building, lien on specific machinery. The company cannot dispose of the asset without the charge-holder's consent.
- Floating Charge: A charge on a class of assets that changes over time - e.g., receivables, inventory, cash balances. The company can deal with the assets in the ordinary course of business until the charge 'crystallises' (becomes fixed) upon default or a specified trigger.
- Charge-Holder: The lender or creditor in whose favour the charge is created - typically a bank, NBFC, or financial institution.
- CHG-1: Form for registration of creation or modification of a charge (other than debentures). Must be signed by both the company and the charge-holder.
- CHG-4: Form for intimation of satisfaction (full repayment) of a registered charge. Filed by the company within 30 days of satisfaction.
- CHG-2 / CHG-5: Certificates issued by the ROC - CHG-2 for registration of charge, CHG-5 for satisfaction of charge. CHG-2 is conclusive evidence that the charge was registered.
- Section 77(3): If a charge required to be registered is not registered, it is void against the liquidator and any creditor of the company. The underlying debt remains enforceable, but the security interest is lost.
The CHG Forms Ecosystem: Which Form for Which Event
| Form | Purpose | Filed/Issued By | Deadline |
|---|---|---|---|
| CHG-1 | Registration of creation or modification of charge (non-debenture) | Company + Charge-holder | 30 days of creation |
| CHG-4 | Intimation of satisfaction (full payment) of charge | Company (or charge-holder) | 30 days of satisfaction |
| CHG-9 | Registration of charge for debentures | Company + Debenture trustee | 30 days of creation |
| CHG-2 | Certificate of registration of charge | Issued by ROC | On registration |
| CHG-3 | Certificate of modification of charge | Issued by ROC | On modification |
| CHG-5 | Certificate of registration of satisfaction | Issued by ROC | On satisfaction |
| CHG-6 | Intimation of appointment/cessation of receiver or manager | Appointed person | 30 days of appointment |
| CHG-7 | Register of charges (maintained by company) | Company - internal | Permanent record |
| CHG-8 | Application to Central Government for rectification | Company/charge-holder | When omission was accidental |
Types of Charges That Must Be Registered
Section 77 requires registration of charges on any property or assets or any of its undertakings, whether tangible or otherwise. In practice, this covers:
- Mortgage on immovable property - factory, office, land, building
- Hypothecation of movable assets - machinery, equipment, vehicles, inventory
- Pledge of securities - shares, debentures, bonds held as security
- Floating charge on receivables, book debts, and current assets
- Charge on goodwill, intellectual property (trademarks, patents, copyrights)
- Charge on uncalled share capital
- Charge on calls made but not paid
- Charge on property acquired subject to an existing charge (Section 79) - important for companies acquiring assets through accounting services coordinated M&A transactions
How to Register a Charge (CHG-1): Step-by-Step
1. Execute the charge instrument with the lender. The loan agreement, mortgage deed, hypothecation agreement, or pledge agreement creates the charge. The instrument must clearly identify: the assets charged, the debt secured, the charge-holder, and the terms. Ensure the instrument is properly stamped (stamp duty varies by state and instrument type).
2. Prepare the CHG-1 form on MCA V3 portal. Enter company CIN, nature of charge (fixed/floating/both), date of charge creation, amount secured, details of the charge-holder (name, PAN, address), description of property/assets charged, and details of the instrument.
3. Attach the charge instrument and supporting documents. Upload the charge instrument and Board Resolution. Companies undergoing statutory audit should ensure the auditor cross-verifies the charge register against the balance sheet borrowings - any discrepancy is a CARO reportable matter.
4. Obtain DSC signatures from both company and charge-holder. CHG-1 requires dual signing - by a director/CS of the company AND by the charge-holder (or authorised representative of the bank/NBFC). This dual signature requirement is unique to charge forms.
5. Submit within 30 days of charge creation. Pay the filing fee. Submit. ROC processes the form and issues CHG-2 (certificate of registration). The charge is now visible on the company's MCA profile under 'Index of Charges.'
6. Maintain the charge in CHG-7 register at registered office. Update the company's internal register of charges (CHG-7) with details of the registered charge. Preserve the charge instrument for 8 years from the date of satisfaction.
How to File Satisfaction of Charge (CHG-4)
When the loan secured by the charge is fully repaid, the company must file CHG-4 within 30 days to record the satisfaction.
Step 1: Obtain a No Dues Certificate or loan closure letter from the charge-holder (bank/NBFC) confirming full repayment of the secured debt.
Step 2: File CHG-4 on MCA V3 portal - enter company CIN, charge ID (as per MCA records), date of satisfaction, and details of full payment.
Step 3: Attach the No Dues Certificate and proof of full payment.
Step 4: Sign with DSC. If the charge-holder also signs CHG-4, the ROC records satisfaction immediately without the 14-day notice period. If only the company signs, the ROC issues a 14-day notice to the charge-holder to show cause.
Step 5: If no cause shown by the charge-holder within 14 days, ROC records satisfaction and issues CHG-5 (certificate of satisfaction). The charge status on MCA portal changes to 'Satisfied.'
Critical point: Companies commonly forget to file CHG-4 after repaying loans. The charge remains as 'Open' on the MCA portal indefinitely - showing the company as encumbered even though the debt is fully repaid. This creates problems during due diligence, bank account changes, new lending, and company closure.
Documents Required
For CHG-1 (Charge Creation):
- Copy of the charge instrument (loan agreement, mortgage deed, hypothecation agreement, pledge agreement)
- Board Resolution authorising the borrowing and creation of charge
- Details of the charge-holder (name, PAN, CIN/registration, address)
- Description of assets charged (for fixed charges: specific identification; for floating charges: class description)
- Stamp duty payment proof for the charge instrument
- DSC of both company director/CS and charge-holder representative
For CHG-4 (Satisfaction):
- No Dues Certificate / loan closure letter from charge-holder
- Proof of full repayment (bank statement, payment receipt)
- Charge ID as per MCA records
- DSC of company director/CS (and optionally charge-holder to skip 14-day notice)
What Happens If a Charge Is Not Registered?
| Consequence | Section/Rule | Details |
|---|---|---|
| Charge becomes void against liquidator | Section 77(3) | In liquidation, the lender loses priority - unsecured creditors may recover ahead of the unregistered charge-holder |
| Charge void against other creditors | Section 77(3) | Other creditors with registered charges get priority over the unregistered charge-holder |
| Debt remains enforceable | Section 77(3) proviso | The underlying loan/debt is still valid - the lender can sue for recovery. Only the security interest is lost |
| Penalty on company | Section 86 | Rs 5,00,000 penalty |
| Penalty on officers in default | Section 86 | Rs 50,000 per officer |
| False information | Section 447 | Fraud provisions - imprisonment + fine |
| Charge-holder can register independently | Section 78 | If company defaults, the charge-holder can file CHG-1 after giving the company 14 days' notice |
Common Mistakes to Avoid
Mistake 1: Not obtaining the charge-holder's DSC for CHG-1. CHG-1 requires dual signatures - company AND charge-holder. Banks/NBFCs often delay providing their DSC. Start the coordination with the lender's compliance team immediately after loan disbursement - do not wait until the 30-day deadline approaches.
Mistake 2: Not filing CHG-4 after loan repayment. Companies repay loans and move on - forgetting to file satisfaction. The charge remains 'Open' on MCA for years. During due diligence for acquisition, funding, or IPO, unsatisfied charges create red flags. New lenders may refuse to lend against assets that appear encumbered.
Mistake 3: Missing the 30-day window and facing condonation. For charges created after 02.11.2018, the ROC may allow filing up to 60 days with additional fees. Beyond 60 days, the company needs condonation. Companies managing ROC compliance through Patron Accounting get charge filing alerts integrated into their compliance calendar.
Mistake 4: Not registering modification of charge. When loan terms change (increased facility, additional assets charged, change in interest rate affecting the security), a modification must be registered via CHG-1 within 30 days. Companies often treat modifications as informal - but the MCA requires formal registration of every change to the charge terms.
Mistake 5: Not registering charge on acquired property. Section 79 requires that if a company acquires property already subject to a charge (e.g., buying a factory with an existing mortgage), the company must register that charge as if it created it. Missing this is common in asset acquisitions.
How Charge Registration Connects with Financial Reporting and Audits
CARO 2020 Clause 3(iv) requires the statutory auditor to report whether the company has complied with Section 77 regarding registration of charges. Any unregistered charge is a reportable matter in the audit report. Companies planning authorised capital change for fundraising should ensure all existing charges are properly registered - investors and their legal counsel always verify the Index of Charges before closing.
The balance sheet's Schedule of Borrowings must reconcile with the MCA's Index of Charges. If the balance sheet shows secured borrowings of Rs 5 crore but the MCA shows charges totalling Rs 3 crore, the Rs 2 crore gap signals either unregistered charges or data errors - both of which are audit findings.
For company closure (voluntary winding up or strike-off), all charges must be satisfied and CHG-4 filed before the company can proceed. An unsatisfied charge on the MCA portal blocks the strike-off process - the ROC will not accept the STK-2 form until the Index of Charges shows all charges as 'Satisfied.'
Charge Lifecycle Timeline
| Stage | Action | Notes |
|---|---|---|
| Day 0 | Loan disbursed, charge created | Charge instrument executed by company and lender |
| Within 30 days | File CHG-1 with ROC | Signed by both company and charge-holder |
| After ROC processing | CHG-2 issued | Certificate of registration - conclusive evidence |
| During loan term | Modification (if any) | File CHG-1 for modification within 30 days |
| Loan fully repaid | Obtain No Dues Certificate | From the charge-holder (bank/NBFC) |
| Within 30 days of repayment | File CHG-4 with ROC | Signed by company (optionally also charge-holder) |
| 14 days after CHG-4 | ROC notice period (if only company signed) | Charge-holder may show cause |
| After notice period | CHG-5 issued | Certificate of satisfaction - charge marked 'Satisfied' |
Key Takeaways
Every charge (mortgage, hypothecation, pledge, floating charge) on a company's assets must be registered with the ROC within 30 days via CHG-1. An unregistered charge is void against the liquidator and creditors - the lender loses its security priority even though the debt remains enforceable.
CHG-1 requires dual signatures - both the company and the charge-holder must sign. This dual-signing requirement is unique to charge forms and requires coordination with the lender's compliance team from Day 1.
When a loan is fully repaid, file CHG-4 within 30 days to record satisfaction. If the charge-holder also signs CHG-4, the 14-day ROC notice period is waived and satisfaction is recorded immediately. Unsatisfied charges remain on MCA indefinitely and block due diligence, new lending, and company closure.
The statutory auditor reports on charge compliance under CARO 2020. The balance sheet borrowings must reconcile with the MCA Index of Charges. Any discrepancy is a reportable audit finding.
Companies acquiring property subject to existing charges must register those charges as if they created them (Section 79). This is commonly missed in asset acquisitions and creates hidden compliance gaps.
Need Help with Charge Registration or Satisfaction?
Charge compliance involves coordination between the company, the lender, and the ROC - all within tight 30-day windows. Missing the deadline means losing security priority; missing satisfaction means carrying phantom encumbrances on your MCA record.
Explore our ROC compliance services for charge management - CHG-1 registration, CHG-4 satisfaction, modification filings, and Index of Charges reconciliation with your balance sheet.
For queries, reach out at +91 945 945 6700 or WhatsApp us directly.
