A charge does not stay still. Sections 223 and 224 of the Companies Act 1997 keep the register current as it changes hands and changes terms.
Section 223 — charges on property acquired
(a) a company acquires property that is subject to a charge of a kind that would have been registrable had the company created it after the acquisition; or
(b) an overseas company becomes registered in the country and had, before that registration, created a charge that would have been registrable had it been created while registered here; or
(c) an overseas company becomes registered in the country and had, before that registration, acquired property subject to a charge of a kind that would have been registrable,
the company shall submit to the Registrar, within two months after the acquisition is completed or the date of registration in the country — (d) a notice in the prescribed form; and (e) a certified copy of the document creating or evidencing the charge.
The company did not create the charge, so the two months run from the date the acquisition is completed — or, for an overseas company, from the date of its registration here.
Where default is made, each director commits an offence, penalty under section 414(1).
Note the practical point for any asset purchase: due diligence must identify existing charges on the property being bought, because the buying company then bears the registration obligation. Section 225(2)(b)(ii) requires the register to record the date of the acquisition in such a case, rather than a date of creation.
An overseas company that registers under Part XX brings its existing security arrangements with it. Those charges must be registered here within two months of its registration — subject to section 221, under which nothing in Part XIII applies to a charge on property of an overseas company located outside the country.
Section 224(1) — a new holder of the charge
Where, after the creation of a registrable charge, a person other than the original chargee becomes the holder of the charge, that person shall, within two months after becoming the holder —
(a) submit a notice in the prescribed form to the Registrar to the effect that he has become the holder; and
(b) give to the company a copy of the notice.
Unlike sections 222 and 223, where the duty falls on the company, section 224(1) places it on the incoming chargee — which makes sense, since the company may not know the charge has been assigned.
Both limbs matter. The notice keeps the register accurate under section 225(2)(vi), which records details of any assignment or variation. The copy to the company tells the debtor who now holds the security — relevant to who may release it under section 227, and who may appoint a receiver.
Under section 224(4), where the charge is constituted by a debenture and there is a trustee for debenture holders, a reference to the chargee is a reference to the trustee.
Section 224(2) — registrable variations
(a) increasing the amount of the debt or increasing the liabilities (whether present or prospective) secured by the charge; or
(b) prohibiting or restricting the creation of subsequent charges on the property,
the company shall, within two months after the variation occurs, ensure that notice in the prescribed form setting out particulars of the variation is submitted, accompanied by a certified copy of the document (if any) effecting the variation.
Not every amendment must be registered — only one that increases the secured amount or liabilities, or that prohibits or restricts later charges. Both directly affect other creditors: the first by taking more of the company’s assets, the second by limiting what security remains available.
Paragraph (b) is closely connected to section 231(3). The holder of a registered floating charge is deemed to have consented to postponement to a later fixed charge unless the later charge contravened a provision of the instrument creating the floating charge and a notice indicating the existence of that provision was submitted to the Registrar before the later charge was created. Registering a negative pledge under section 224(2)(b) is how a floating chargee preserves its priority.
Section 224(3) — drawing down is not a variation
Where a charge secures a debt of an unspecified amount, or a debt of a specified amount and further advances, a payment or advance made by the chargee in accordance with the terms of the charge shall not be taken to be a variation increasing the amount or the liabilities secured.
So an all-obligations security, or a facility with a further advances clause, does not require a fresh notice each time the borrower draws down. What triggers section 224(2)(a) is a change in the terms that increases the secured amount — not the use of a limit already registered.
Section 224(5) completes the point: nothing in section 222 requires a fresh section 222 notice merely because the terms of a charge are varied only in a manner mentioned in section 224.
Practical points
| Event | Who registers | Time |
|---|---|---|
| Company creates a registrable charge | The company — but see section 230, under which any interested person may do it and recover the fee | 2 months from creation |
| Company acquires property subject to a charge | The company | 2 months from completion |
| Overseas company registers here with existing charges | The company | 2 months from registration here |
| Charge is assigned | The new holder — and give the company a copy | 2 months from becoming holder |
| Terms varied to increase the debt, or to restrict later charges | The company | 2 months from the variation |
| Document executed outside the country | As above | Extended by one month automatically — s 229 |
| Deadline missed | Apply to the Registrar under s 228, then the Court | As soon as possible |
Section 222(12) makes a fresh charge taken within two months of an unregistered prior charge, over the same property for the same debt, not operative and of no validity — unless the Court is satisfied it was given in good faith to correct a material error. The proper route is the section 228 application.
Sources
- Companies Act 1997 — ss 221–231, 414; Schedule 15; Part XX
Before relying on anything here, read the current text of the Companies Act 1997 and check for later amendments. If a decision matters to you, get advice — start with the Office of the Public Solicitor, or find a firm in the law firms directory.