Registering a Charge at the Companies House

Section 859A of the Companies Act 2006 requires a charge created by a company to be registered at Companies House within twenty one days of its creation (charges created before 6 April 2013 fall under the earlier regime, including section 873). The purpose is simple: registration secures the lender's interests and makes the security binding on the world.

The limit is statutory, but it is not quite the end of all things. Section 859F of the Act allows the court, on application, to extend the period where it is satisfied that the failure to register in time was accidental, or due to inadvertence or some other sufficient cause, or is not of a nature to prejudice the position of creditors or shareholders of the company, or that it is otherwise just and equitable to grant relief. We explain that application, and its demanding evidential requirements, in a separate article on this blog.

Between the expiry of the twenty one days and the grant of any extension, however, the consequences are severe for everyone concerned. For the lender, the exposure is immediate and real: the unregistered charge is void against any liquidator, administrator or creditor of the company. For the borrowing company, section 859H provides that once the security becomes void, the money secured by it becomes immediately payable. Funds advanced against the charge are rarely sitting idle, and a sudden obligation to repay can strain cashflow to the point of threatening the company's survival. Should the company then become insolvent, the lender's exposure crystallises into loss, with the whole loan to reclaim and only a void charge to reclaim it under.

Nor does the solicitor escape. A solicitor acting for a lender who fails to register the charge has failed to secure the client's assets and to represent the client's best interests, with the prospect of a claim and of regulatory consequences under the SRA's principles. There is nothing commonplace about this failure, and nothing minor about its results.

About the author: Dr Aamir Nawaz, LLB (Hons), LLM, PhD, Solicitor, Barrister (np) and Notary Public.