Company Charges and Mortgages

23 OCTOBER 2024
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Company Charges and Mortgages an Overview

In the UK, the filing of company mortgages and charges is a critical part of the regulatory process for businesses. These filings ensure transparency, allowing creditors, shareholders, and the public to see what assets have been pledged as security for loans or other financial obligations. Under the Companies Act 2006 and the Companies (Registration of Charges) Regulations 2013, companies are required to register their charges and mortgages with Companies House. Failure to comply can result in the invalidation of the charge against other creditors.

What Are Company Charges

A company charge is a form of security that a company grants over its assets to secure a loan or other financial obligation. There are two main types of charges:

  1. Fixed Charge: This is attached to a specific asset, such as property, machinery, or equipment. The company cannot sell or dispose of the asset without the lender’s consent.
  2. Floating Charge: This covers a range of assets that fluctuate in value and composition, such as stock or cash. The company can trade or sell these assets in the ordinary course of business until the charge “crystallises,” typically when the company defaults on its loan.
What Are Company Mortgages?

A company mortgage is a specific form of charge where a company grants a lender a legal interest in property or other tangible assets to secure a loan. If the company defaults on the loan, the lender has the right to sell the mortgaged asset to recover the debt.

Why Filing Company Charges and Mortgages is Important

Filing company charges and company mortgages with Companies House is essential for several reasons:

  • Legal Priority: Registered charges are publicly accessible, and their registration establishes their legal priority over other charges. For example, a registered fixed charge takes priority over unregistered or subsequent floating charges.
  • Transparency: Filing ensures that creditors, investors, and the public have access to information about the company’s financial obligations, promoting transparency.
  • Enforcement: Registered charges are enforceable against liquidators and administrators. If a company goes into administration or liquidation, registered charges give creditors legal rights over the company’s assets.
Filing Requirements and Deadlines

Under the Companies Act 2006 and subsequent regulations, companies must file details of any charge or mortgage created over their assets within 21 days of its creation. This includes the following steps:

  1. Complete Form MR01: For most charges, companies must submit Form MR01 to Companies House. The form requires details about the charge, including the name of the lender, the amount secured, and the assets involved.
  2. Provide a Copy of the Charge: A certified copy of the actual charge agreement must be submitted alongside Form MR01.
  3. Pay the Fee: There is a small filing fee associated with registering the charge.

Once submitted, Companies House will record the charge and make it publicly available.

Consequences of Failing to File

Failure to file a charge or mortgage within the 21-day period has serious consequences:

  • Unenforceable Charge: The charge may be invalid against a liquidator, administrator, or other creditors.
  • Penalties: The company or directors may face penalties for non-compliance.

It is essential for companies and lenders to comply with these regulations to protect their interests and ensure that charges are enforceable.

How to Register a Satisfaction of Charge

Once a loan has been repaid, the company should file a satisfaction of charge to indicate that the debt has been cleared. This is done using Form MR04 and ensures that the public record reflects that the charge has been discharged.

Conclusion

Filing company charges and company mortgages with Companies House is a critical part of the UK’s insolvency procedure and company regulation framework. It ensures that all creditors, shareholders, and the public are aware of the company’s financial obligations, maintaining transparency and legal compliance. Businesses must ensure that they register all charges within the 21-day window to avoid penalties and ensure that the charge is legally enforceable.

Frequently Asked Questions

What are company charges and mortgages?

Company charges and mortgages are legal tools by which a company uses its assets as security for a debt or other financial obligation. A “charge” is a broad legal interest granted over a company’s assets (present or future) to secure repayment, while a mortgage is a specific type of charge, typically concerning real property.

What rules apply when a company creates a charge or mortgage?

When a company grants a charge or a mortgage, it must register the charge with Companies House using form MR01 in England & Wales. Registration must happen within 21 days of creating the charge. If not registered in time, recovering the debt if the company becomes insolvent can be much harder.

What kind of information is recorded about company charges and mortgages, and where is it kept?

The public record kept by Companies House includes details such as the nature of the charge or mortgage, the party in whose favour it is made (the lender), and when it was created or registered. Companies often also keep an internal register that tracks particulars like the amount secured, status (whether satisfied, released, or outstanding), and changes over time.

Here are detailed reasons why the provided links are useful for understanding the filing of company charges and mortgages with Companies House:

  1. Companies House: Register a Charge (Official Guidance) The official page from Companies House provides a step-by-step guide to registering a charge or mortgage.
  2. GOV.UK – Companies Act 2006 This takes you to the full text of the Companies Act 2006, the key legislation governing company charges and mortgages.
  3. Companies House – Company Charges This explains company charges and how they should be filed. It also explains the concept of fixed and floating charges.
  4. Companies (Registration of Charges) Regulations 2013 This links to the 2013 Regulations that govern the registration of company charges, providing the most up-to-date legal framework. It outlines the specific requirements for registering charges, including the 21-day deadline, and highlights changes in procedures that came into effect after 2013.
Get Company Charges and Mortgages Data

Our Business Data solution provides a comprehensive dataset of all UK company charges and mortgages, including their current status and lender details. This dataset is updated daily and is linked to the company number for easy reference.

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