Form CHG-1 in Surat
Ask our experts now
Online Chartered can help you form a producers company in most convenient way.
Get Free Consultation
Understanding CHG-1 Form & Charge Creation in Companies
What is the Meaning of Charge?
When a company secures loans from banks or financial institutions by pledging its assets as collateral it generates a charge. Until the borrower repays the loan, the lender possesses a legal entitlement to control the asset.
To officially record this charge, the company must file Form CHG-1 with the Registrar of Companies (ROC). Additionally, a mortgage deed must be executed while pledging property with a bank.
What is CHG-1 Form?
Form CHG-1 is an official application for registering the creation or modification of a charge (excluding debentures). This form is very mandatory when a company secures a loan by pledging its assets.
Key Details Required for Filing CHG-1
When submitting Form CHG-1, the following details must be provided:
1. Nature and description of the charge
Also called Nominal or Registered Share Capital.
This is the maximum capital a company can raise, as specified in its Memorandum of Association (MoA).
The company can increase this limit by following legal procedures.
2. Whether the charge is created in India or outside
The portion of authorized capital that the company has offered for subscription to investors.
This amount can be equal to or less than the authorized capital but never more.
3. Type of charge (e.g., mortgage, hypothecation, lien, etc.)
The part of issued capital that investors have agreed to purchase.
Not all issued shares may get subscribed, but at least 90% of them should be.
4. The charge holder's specific information includes their name, physical address, PAN number, and email address.
The portion of subscribed capital that the company has requested payment for from shareholders.
It is equal to or less than the subscribed capital.
5. The charge secures a specific financial amount.
The actual amount paid by shareholders for their subscribed shares.
If any shareholder fails to pay, it becomes a “call in arrears.”
When all dues are cleared, paid-up capital equals subscribed capital.
6. The fundamental elements and stipulations governing the charge
A portion of capital reserved for emergencies (e.g., company liquidation).
It cannot be used for regular business activities.
7. Rate of interest
The actual amount paid by shareholders for their subscribed shares.
If any shareholder fails to pay, it becomes a “call in arrears.”
When all dues are cleared, paid-up capital equals subscribed capital.
8. Detailed specifications of repayment conditions including monthly duration and installment particulars.
A portion of capital reserved for emergencies (e.g., company liquidation).
It cannot be used for regular business activities.
9. The loan facility nature encompasses categories like working capital loans, term loans, and overdraft options.
The actual amount paid by shareholders for their subscribed shares.
If any shareholder fails to pay, it becomes a “call in arrears.”
When all dues are cleared, paid-up capital equals subscribed capital.
10. Date of loan disbursement
A portion of capital reserved for emergencies (e.g., company liquidation).
It cannot be used for regular business activities.
11. Margin requirements
The actual amount paid by shareholders for their subscribed shares.
If any shareholder fails to pay, it becomes a “call in arrears.”
When all dues are cleared, paid-up capital equals subscribed capital.
12. The specific elements of real estate holdings currently under mortgage agreements
A portion of capital reserved for emergencies (e.g., company liquidation).
It cannot be used for regular business activities.
13. The document titled Mortgage Deed or Loan Agreement functions as a supplementary attachment.
The actual amount paid by shareholders for their subscribed shares.
If any shareholder fails to pay, it becomes a “call in arrears.”
When all dues are cleared, paid-up capital equals subscribed capital.
Why Change Share Capital?
When Should CHG-1 Be Filed?
A person cannot be a director if they:
-
The charge holder (bank or lender) must file CHG-1 within 30 days of charge creation.
-
If filing is delayed, an extension can be requested, but it cannot exceed 300 days from the charge creation date.
-
Any modification of an existing charge must be filed using Form CHG-8.
-
If there is a delay in filing, the company must obtain approval for condonation of delay by submitting Form INC-28.
What Happens When You Don't File the Forms on Time?
If you don’t submit the required forms by the deadline, you’ll face penalties:
Late Fee:
You’ll have to pay INR 100 for each day you delay filing.
On the Company:
INR 1,000 per day, subject to a maximum of INR 10 Lakhs.
On Every Officer in Default:
INR 1 Lakh, plus INR 100 per day of delay, subject to a maximum of INR 5 Lakhs.
How to Increase Authorized Share Capital?
If the director has already completed DIR-3 KYC, they can simply complete WEB-Based Director’s KYC by:
Step 1: Check Company’s Articles of Association (AoA)
Ensure the AoA allows for an increase in capital. If not, the company must amend the AoA before proceeding.
Step 2: Call a Board Meeting
The Board of Directors must convene a meeting to approve the proposal and call an Extraordinary General Meeting (EGM) (if not done at an Annual General Meeting).
Step 3: Conduct the Extraordinary General Meeting (EGM)
Shareholders must receive a notice detailing the agenda, explanations, and proposed resolutions for increasing share capital. Pass a Special Resolution to amend the Memorandum of Association (MoA) and Articles of Association (AoA).
Step 4: File Form SH-7 with the Registrar of Companies (ROC)
Submit Form SH-7 within 30 days of passing the resolution. Pay the necessary fee to the ROC. If capital changes occur due to debenture conversions or government orders, filing SH-7 is mandatory.
Step 5: Pay Stamp Duty & Submit Documents
Stamp duty is payable electronically via the MCA portal. Required documents include: EGM Notice Certified Copy of the Resolution Altered MoA & AoA
Step 6: File Form MGT-14
Every Special Resolution must be filed with Form MGT-14 within 30 days. The filing should include an explanatory statement under Section 102 of the Companies Act.
Timely filing of DPT-3 ensures compliance, prevents legal risks, and maintains your company’s credibility with financial institutions and stakeholders.
Government Fees for Filing CHG-1
The government fee for CHG-1 filing depends on the company’s authorized share capital. The fee structure is outlined under the Companies (Registration of Offices and Fees) Rules, 2014.
For the latest fee details, visit the Ministry of Corporate Affairs (MCA) website: http://MCA.GOV.IN