A Guide to Registering a Charge at Companies House
At some point or the other in the course of running your business, you might need some financial assistance. There are banks, creditors and other financial institutions out there that are willing to offer loans to small and large businesses. Once you’re able to meet some criteria with these lenders, then you are good to go.
Beyond reaching the loan terms and agreement, you have to create and register charges at the Companies House. Registering charges following a loan agreement is important as it helps you stay in compliance with laws and provides security to your lenders.
This guide will help you understand all you need to know about registering charges in the UK. You will learn about the types of charges that we have, how to register a charge, the importance and the mistakes to avoid and so on.
What is a Charge?
A charge is a form of security given to a lender, like a bank, individual or other financial institution by a company upon an agreement to receive a loan. It is a kind of guarantee given to a creditor that a company will pay back a loan within the specified time frame.
Usually, a charge is given to a creditor over an asset that a company (borrower) owns. The asset could be land, machinery, properties etc. The inability to return a loan by the company means the lender has the right to take over or sell the asset so they could recover the fund. Charges are important to the lender because they boost the confidence that their money is safe and can be gotten back as agreed.
To avoid so many complications with charges and to prevent a company from using the same assets as collateral with different financial institutions, charges must be registered. And they must be registered within 21 days of which the charge was created.
Types of Charges
There are basically two types of charges and both can be registered at the Companies House:
1. Fixed Charges
Fixed charges are used to cover a specific company’s assets like machinery or property. They are used to provide security over a particular company asset. Fixed charges are more preferable to floating charges because lenders can easily sell off a company asset in situations where the company enters insolvency or is unable to pay up. So in most cases, the company has no right to sell off the particular asset without the proper authorization from the lender. As compared to floating charges, fixed charges provide more security to lenders.
2. Floating Charges
While fixed charges apply to a particular company’s assets, floating charges cover sets of fluctuating assets. Floating charges allow the company to use the assets during the normal course of the business but still provide security to the creditor.
However, in situations where the company or borrower enters insolvency and is unable to pay up the loan, the floating charge will become a fixed one. With that, the company cannot sell off the assets unless it is granted an approval by the lender.
Who should register a charge at Companies House?
Anyone who is interested in registering a charge can do it as there are no rules specifying who should. Ideally, a company itself should register a charge once it enters an agreement to get a loan from the creditor. However, the lender or the lender's agent can do the registration also.
According to the Companies House, anyone who is interested can register a charge with them.
How to Register a Charge at Companies House
Registering a charge with the Companies House is quite straightforward. Below are the steps to follow:
1. Understand the type of charge
The first step to note when registering a charge at Companies House is to ascertain the type of charge you are registering. This is essential as it helps you provide the correct documents needed for the registration and to follow the accurate registration process and details. You would therefore need to be sure if the charge is floating or fixed before filing the form MR01.
2. Prepare the Important documents
Once you’ve identified the type of charge, you begin by preparing the needed documents. You would want to prepare a certified copy of the charge instrument along with the MR01 form that’ll be submitted at the Companies House.
It is also pertinent to note that both the lenders and borrowers should go through the documents properly and be sure before forwarding to the Companies House.
3. Fill out the form MR01
This is where the actual registration process starts. You would need to fill out the form MR01 when making your registration. The form MR01 is an important document that is used to register a charge with the Companies House. While you can fill out the form online, you can also fill out a paper copy, document and submit it through post. Usually, registering the charge online would take less time than the paper form. Here are some of the information you would need when filling out the form MR01.
- Company name and number
- Company authentication code
- Charge creation date
- Full name of the lenders
- Full description of the charge
- Charge type ( floating or fixed)
- Company jurisdiction
Once all of this information is filled out, you should check through properly to be sure every detail provided is accurate and correct.
4. Submit your application and pay the required fee
When you’re done filling out the form, you can submit the application together with the required fee. If you make your application online, you would need to pay 15 pounds, however, with the paper form you’ll need to pay 23 pounds.
You should expect a confirmation of the receipt of your application within 2 days of submission to the Companies House.
5. Receive registration Confirmation and a Certificate
Once you have received a confirmation of your application, you will receive a certificate of your registration of a Charge within five days. The certificate will state your company number, charge code ( a unique code assigned to all charges registered at the Companies House), company name and the date the charge was created.
Once you've received this certificate, then your registration of the charge has been completed successfully.
Deadline to Register a Charge at Companies House
According to the Companies Act 2006, a charge must be registered with the Companies House within 21 days in which the charge was created. Companies thus should make their application with the Companies House immediately after they create the charge.
Once this 21-day deadline has been missed, you would need a court order to increase your registration time frame before you can register.
Who Can Access a Company’s Charges?
A charge that has been registered with the Companies House can be accessed by the general public through the Companies House Website. Information about all charges registered in the UK can be viewed freely online. To access charges about a particular company, simply follow the below steps.
- Visit the Companies House website
- Input the company name and registration number in the search space.
- Select the company you wish to view the charges from the list of companies
- Once you find the company, look out for the Filing history
- Tick the charges box
- The list of the charges should pop out if there are any.
- Click on the view PDF next to the charge you would like to view.
What is a Charge Instrument?
A charge instrument is an official document detailing the agreement between the lender and the company (borrower). It shows the type of loan arrangement and the type of charge to which both parties agreed. It explains the terms and conditions of payment of the loan and so on. Charge instruments are vital for registering a charge and must be presented with the other documents during registration.
Is it Possible to Withhold Some Information from the Public while registering a Charge?
Yes, it is possible to withhold some private information while registering a charge at Companies House. Just like every piece of information detailed at Companies House is made public, every piece of information about your charge that is provided during registration will be made public and can be viewed through the Companies register.
However, you can remove some very sensitive information from the charge instrument before reporting it to the Companies. You can withhold details like:
- Details of individual personal information apart from the name
- Identifier of a bank or securities account.
- A signature
Importance of Registering a Charge with the Companies House
Firstly, registering a charge with the Companies House helps you ensure that you are complying with the set rules and regulations. Although it is no longer a criminal offence if you don’t make registration of a charge, however, there are other several consequences to be faced.
Apart from that, charges serve as a legal binding between the lender and the borrower. As such, lenders do not have to face any risk in the event of the company's insolvency because a charge serves as a legal agreement between both parties. If a charge is not registered, then the lender is at risk if the company is unable to pay up debts.
Registering charges serve as protection for a company’s assets. A charge provides a legal obligation on a company's assets ensuring that the assets are secured all the time. Registering a charge also gives the lender some form of confidence as they believe that the right authorities (Companies House) are involved.
Moreover, when a company and the lender agree to register a charge, it gives both parties the feeling of being safe with one another and this in turn increases the reputation of the company as more creditors could be willing to deal with them.
Form your company with Incorpuk today
At Incorpuk, we will help you file accurate information when you register your company through us. We will help you with incorporation articles, a registered office address, and all you may need to register your company in the UK. Contact our team if you seek any information; we will gladly assist.
Mistakes to Avoid When Registering a Charge
Registering a charge is important to securing finances for your business and must be done properly. Here are the common mistakes you should avoid when making your registration with the Companies House.
1. Avoid Incorrect or incomplete information
Giving incorrect and incomplete information during your charge registration could slow down the entire process. It could even lead to complications if the Companies House notices an inconsistency in the information provided in the future. To avoid situations like that, be sure that all required information is provided and accurate.
2. Be aware of the deadline
Ideally, the 21-day deadline should not be missed. As soon as the charge is created, it should be registered. Once the deadline has passed, you would need a court order to register with Companies House. Failure to register a charge means that the charge is not legally binding and so could pose difficulty in claiming the payment of the loan. Moreover, registration of a charge is a requirement that must be done according to the Companies Act 2006.
3. Be sure to provide the certified documents that are required.
Another common mistake you should avoid is neglecting to submit certified copies of vital documents. Failure to submit a certified copy of a document like a charge instrument could lead to the rejection of your application. To avoid this, be sure to submit all the necessary documents together with the MR01 when filing your application.
Conclusion
Securing finances for your company is crucial to the growth and development of your business. While there are many financial institutions and lenders that give loans to aid a company’s funding, it is important to create and register charges as soon as you reach a loan agreement with them.