Registration of charges created on or after 6 April 2013
Changes to the CA 2006 dealing with the formalities for registering security at Companies House came into force on 6 April 2013. The relevant provisions are found in s.859A-Q CA 2006, which replaces ss.860-892 CA 2006. The ‘new’ registration regime is summarised below:
Registration formalities
Most security created by a company needs to be registered on that company’s file with Companies House. This includes charges created by an English company over assets located both within the United Kingdom and abroad. Pursuant to s.859A(2) CA 2006, the Registrar of Companies (the ‘Registrar’) shall register any security created by a company at Companies House provided that the company or any person interested in the charge (i.e. the lender) delivers to Companies House (either electronically or by paper filing) within 21 days beginning with the day after the day on which the charge is created (s.859A(4) CA 2006) the following:
- a section 859D statement of particulars in relation to the charge. This will be set out on Form MR01 (available on the Companies House website), and includes details of:
- the company creating the charge,
- the date of creation of the charge,
- the persons entitled to the charge, and
- a short description of any land, ships, aircraft or intellectual property registered (or required to be registered) in the UK which is subject to a fixed charge;
- a certified copy of the charge (s.859A(3) CA 2006); and
- the relevant fee (currently £23 for a paper filing or £15 for an electronic filing).
On receipt of the relevant documents, the Registrar must allocate to the charge a nique reference code and shall include on the register (i) a note of the unique reference code and (ii) the certified copy of the charge (s.859I(2) CA 2006). The Registrar must issue a signed/authenticated ‘certificate of registration’ stating the registered name and number of the company in respect of which the charge has been registered and the unique reference code allocated to the charge (s.859I(3),(4) and (5) CA 2006). This is conclusive evidence that the charge has been correctly registered.
Who registers?
Section 859A(2) CA 2006 provides that the s.859D statement of particulars may be delivered either by the company that created the charge or any person interested in that charge. The latter would include the lender. In practice it will usually be the lender’s solicitors who will complete the registration formalities, as it is the lender who has most to lose in the event of non-registration.
Effect of failure to register
Under s.859H CA 2006, if the charge is not registered at all, or is not registered within the 21-day period referred to in paragraph 5.1.1 above:
- the charge is void against a liquidator, administrator and any creditor of the company; and
- the debt becomes immediately payable.
As security is taken as protection against the effects of insolvency, the fact that the charge is not valid as against a liquidator or administrator means that the security will effectively be worthless if not registered.
Records to be kept by a company
Under s.859P CA 2006, a company must keep available for inspection a copy of every charge and a copy of every instrument that amends or varies any charge. Such copies may be certified copies rather than originals.
These documents must be kept at either the company’s registered office or such other location as is permitted under the Companies (Company Records) Regulations 2008 (s.859Q(2) CA 2006). A company must inform Companies House of the place where such documents are available for inspection and of any changes to that place (s.859Q(3) CA 2006). These documents must be available for inspection by any creditor or member of the company free of charge and by any other person on payment of a prescribed fee (s.859Q(4) CA 2006). If a company refuses such inspection then the court may order that the company allows an immediate inspection.
Under s.859Q(5) CA 2006, failure to comply with any of the above requirements will be an offence and the company (and every officer of the company who is in default) will be liable to a fine.
In practice
Registration of security is common trainee work. An organised and efficient trainee will have Form MR01 drafted in advance and will register the security as soon as possible after execution of the charge. This will allow time for any errors in the documents to be remedied. It is important to note that Companies House will return Form MR01 if it is incomplete or incorrect, but the 21-day period will continue to run.
Failure to register security within the 21-day period will require the parties to re-execute the security documents and re-attempt a Companies House registration (although this can be legally problematic in view of the insolvency related challenges that can be made, particularly under s.245 Insolvency Act 1986). If other security has been granted in the interim, the lender will lose its priority. In this event, or if the filing is forgotten altogether, the mistake may result in major financial loss for a lending client. This will doubtless be followed by a claim against the law firm.