Following a number of BIS consultations, new regulations, Companies Act 2006 (Amendment of Part 25) Regulations 2012, came into force on 6 April 2013 changing both the requirement and the way that charges, debentures and other security are registered at Companies House.
Corporate Partner Kate Hackett commented “Whilst often the lender will take control of the registration process, it has always been and remains the primary responsibility of the Company. Both companies and lenders need to be aware of these changes”.
The aim of the changes is to:
- provide a single scheme applicable to all UK companies for the registration, alteration and satisfaction of charges;
- create a system that is easier to use;
- improve access to information about registered charges.
What needs to be registered?
The old regime set out categories of charges which must be registered whereas under the new regime a company that has created a charge, or any person interested in that charge, may, subject to certain exceptions register that charge. Therefore registration is now no longer compulsory and failure to register a charge is no longer a criminal offence.
However, in practice, because of the sanctions for non-registration of a charge created by a company, a prudent charge holder will register any charge it takes from a company.
Charges that cannot be registered at Companies House are; a rent deposit, a charge created by a member of Lloyd’s and charges excluded from registration by other legislation ie financial collateral pursuant to Financial Collateral Arrangements (No 2) Regulations 2003.
Consequences of non registration:
- security is void against a liquidator, an administrator and any creditor of the company;
- amount secured becomes immediately payable.
- criminal offence for failing to register a charge has been removed.
How do you register the charge?
You can either register by post (as with the old regime) (fee £13) or by a new online registration service (fee £10). You will need to apply for the necessary access codes from Companies House to register online. The Companies House forms have changed from the old ‘MG’ series of forms to ‘MR’ forms.
The new forms require a new simplified ‘statement of particulars’ (company name, number, date charge created etc). Short particulars are needed for land, ship, aircraft or intellectual property but less detail is needed on the extent of the assets charged. You do have to specify whether the charging instrument contains a floating charge (and, if so, whether it covers all the property) and whether the charge prohibits or restrict the company from creating further security that will rank equally with or ahead of the charge.
A certified copy of the charging instrument must be sent to the Registrar. An original document must not be submitted as Companies House will not return it. If filing electronically, the certified copy must be in PDF form (format 1.2 to 1.7 only and maximum file size of 10MB). Certain information may be redacted from the certified copy document, including personal information (excluding a person’s name), number/identifier of a bank and a signature.
When must a charge be registered?
The period allowed for delivery is 21 days beginning with the day after the date of creation of the charge (unless an order allowing an extended period is made).
How is registration of the charge evidenced?
A 12 digit unique reference code is allocated to the charge and a note is placed on the register recording that reference code. A copy of the registration form and charging instrument will be kept on the public record.
What information do companies have to retain?
Companies are no longer required to maintain their own registers of security with their statutory books. However, companies do need to have copies of relevant charging instruments (creating or amending a charge) available for inspection. These may be certified rather than original copies.
When do the new provisions apply?
The new provisions apply to all charges created on or after 6 April 2013. Any charges created before 6 April 2013 must be registered in accordance with the old regime even if they are registered at Companies House after 6 April 2013. The new provisions relating to amendments to charges, enforcement of security, release and satisfaction will apply to any notifications made on or after 6 April 2013, regardless of when the charge was created.
The proposed new security registration regime for LLPs is largely the same as that for companies.
If you would like to discuss any of the issues arising from the above please contact either Kate Hackett or another member of the Corporate Department.