New Companies Act charge registration regime
After three years of consultation, new Companies House registration requirements have now come into force and apply to charges (which term includes both legal charges and mortgages) created on or after 6 April 2013 by companies and limited liability partnerships (LLPs) registered in England and Wales.
The new registration regime seeks to modernise and streamline the charge registration process and a new, optional, online registration system has been introduced.
Key features of the new regime
All charges are registrable unless specifically excluded
All charges created by a UK company or LLP (whether by written instrument or by operation of law) are registrable unless the charge is:
- created in favour of a landlord on a cash deposit in connection with a lease (such as a rent deposit deed);
- created by a member of Lloyd's to secure its obligations in connection with its underwriting business at Lloyd's; or
- excluded from registration under any other Act such as the Banking Act 2009 or the Financial Collateral Arrangements (No 2) Regulations 2003.
Abolition of criminal sanctions for failure to register
There are no longer criminal sanctions against the company or LLP and its officers as a result of failure to deliver particulars of the charge to Companies House within the time limit.
21 day time limit for delivery of particulars
The period allowed for delivery of particulars is 21 days beginning with the day after the date of creation of the charge. The relevant charge will, as was the case under the previous regime, be void against a liquidator, administrator or creditor of the company or LLP (and the money secured by it will become immediately payable) if it is not registered within the time limit.
New Companies House forms
New Companies House registration forms apply for registration of the creation of charges including, amongst others, separate forms for charges created by written instrument (Form MR01 for companies and LLMR01 for LLPs) and charges created by operation of law where there is no written instrument (Form MR08 and LLMR08 respectively). Please refer to http://www.companieshouse.gov.uk/pressDesk/news/april2013DraftForms.shtml for more information. The new forms are shorter than the previous forms and require less information to be provided in them. They do not require details of the secured liability or the assets secured, other than where such assets include land, ships, aircraft or intellectual property that is registered or is required to be registered in the UK.
Certified copy of the charge instrument to be filed
A certified copy (not the original as was the case previously) of the written instrument creating or evidencing the charge must be delivered to Companies House together with the relevant registration form. Companies House have stated that any original documents submitted to them will not be returned. Unlike under the previous regime, this copy document will then be available on the public register for downloading although certain limited sensitive information may be redacted from the certified copy including the signature and address of any individuals and the numbers of any bank or securities accounts. Chargees and chargors (or their representatives) must therefore bear this in mind when drafting charges, particularly where they make reference to, or incorporate, other documents certified copies of which may consequently also need to be delivered to Companies House for filing.
Electronic or paper filing
Forms MR01 and LLMR01 in respect of registrable charges may be filed in paper form (£13 fee) or electronically through the Companies House online WebFiling service or its software-based filing platform (£10 fee). To file electronically lenders (or anyone other than the company or LLP who created the charge) will need to first make a one-off application to Companies House to obtain a lender authentication code. Similarly, a company or LLP may file a charge electronically in respect of itself if it has a company authentication code which, again, can be obtained by making a one-off application to Companies House.
Evidence of registration – certificate and unique reference code
Once registered, the Registrar of Companies will allocate a 12 digit unique reference code to the charge and will place a note on the register recording that reference code. It will also provide to the person who delivered the particulars of the charge for filing a certificate of registration of the charge.
Amendments to registered charges
In respect of charges which are amended by adding or amending a term which (a) varies the order of the ranking of the charge or (b) creates a negative pledge, particulars, together with a certified copy of the amending document, can be delivered to Companies House for registration. This notification does however appear to be voluntary and there does do not appear to be any consequences for not delivering the relevant particulars to Companies House for registration.
Records of charges to be kept by companies and LLPs
Every company and LLP must keep available for inspection at its registered office (or other alternative location which they have specified under the relevant Act), amongst other things, a certified copy of (a) every written instrument creating, and varying, a charge capable of registration under the regime, and (b) any other documents containing the particulars of the assets charged that must be set out in the relevant charge registration form if those particulars are not contained in the instrument creating the charge but are contained in other documents referred to in that instrument.
A company or LLP must continue to keep a register of charges created on or before 5 April 2013 but there is no requirement to do so in respect of charges created on or after 6 April 2013.
Release of security
There is no statutory requirement for the company or LLP to notify Companies House that:
- the debt secured by a registered charge has been satisfied in whole or in part;
- a registered charge has been released in whole or in part; or
- the charged property no longer belongs to the company/LLP although it is in the interest of the company/LLP to do so.
The company/LLP or the charge holder may therefore deliver the relevant forms to Companies House in order to notify them of this but there is no time limit for doing so.
Where company or LLP acquires property already subject to a charge
In the event that a company or LLP acquires property or an undertaking already subject to a charge, it may deliver to Companies House particulars of the existing charge over that property or undertaking if that charge would have been capable of being registered under the regime if it had been created by the company or LLP after the property or undertaking was acquired. If such particulars are not delivered to the Registrar, the charge will not be void against a liquidator, administrator or creditor of the company or LLP.
Whilst the changes implemented by the new regime will be welcomed by many, it is still not clear at this stage how some aspects of the registration regime, such as what information should be included in the charge document and what information should be included in any other document (for example, a loan agreement) to which the charge document relates, will evolve in practice.