Form CHG-1: Registration of Creation or Modification of Charge

When CHG-1 is needed

Section 77 requires every company creating a charge on its property or assets, in India or outside, tangible or intangible, to register it with the Registrar within 30 days. Common examples are hypothecation of stock and debtors for working capital, mortgage of property for a term loan, and charges on vehicles. Modification of an existing charge, such as an increase in the amount secured, is also registered in CHG-1.

Charges securing debentures are filed in CHG-9 instead, and satisfaction of a charge is reported in CHG-4. Registration gives public notice of the lender's security, so anyone checking the company's charges on the MCA portal can see what has been pledged and to whom.

Time limits and additional fee

If the company misses 30 days, the Registrar may allow registration within 60 days of creation on payment of additional fee. If that is also missed, a further 60 days are available on payment of ad valorem fee. Beyond these windows, condonation must be sought from the Central Government under Section 87.

Attachments and signatures

CHG-1 is signed with the DSCs of both the company and the charge holder, usually the bank. Banks often file through their own corporate DSC process, which can take time, so start soon after the loan documents are executed. The form is also certified by a practising professional.

• Instrument creating or modifying the charge, such as loan agreement or deed of hypothecation
• Particulars of all modifications, where relevant
• Property details, including survey or registration numbers for immovable property
• Board resolution authorising borrowing and creation of charge

Consequences of not registering

Section 77(3) provides that a charge not registered is not taken into account by the liquidator or any other creditor, though the debt itself remains payable. For lenders this is a serious weakness, which is why Section 78 allows the charge holder to apply for registration if the company fails, and recover the fees from the company.

Section 86(1) adds a penalty for contravening the charge provisions: ₹5 lakh on the company and ₹50,000 on every officer in default. Section 86(2) punishes wilfully furnishing false or incorrect information about a charge under Section 447.

Common mistakes

The certificate of registration issued by the Registrar is conclusive evidence that the requirements for registration were complied with. Lenders usually treat it as a condition before releasing further tranches, so delays in CHG-1 can delay funding.

Problems include missing the 30-day window while waiting for the bank's signature, describing the property inadequately, leaving out modifications, and filing CHG-1 for debentures. After registration, the company must also keep the register of charges in Form CHG-7 up to date. Refogo's partner professionals can coordinate CHG-1 with your lender for a fixed fee.

Step by step

1. 1Execute loan documents

   Sign the agreement and security documents with the lender.

2. 2Prepare CHG-1

   Enter charge details, amount secured and property description.

3. 3Attach instrument

   Upload the instrument creating the charge.

4. 4Certify and sign

   A practising professional certifies; company and charge holder sign with DSC.

5. 5Pay within 30 days

   Pay the fee and obtain the certificate of registration of charge.

6. 6Update CHG-7

   Record the charge in the company's register of charges.