Registration of Charges and Priority (New Elements)

Part 7 – Charges and Debentures

The law in relation to registration of charges is now as follows:

1. Unless either the one-stage or the two-stage procedure is carried out, every charge created under the new Act will be void against the liquidator (and any creditor of the company).

2. If a charge is incompletely registered, it will only be partially void. Whatever is omitted will have no force.

3. The one-stage procedure consists in sending the Registrar the prescribed particulars in the prescribed form, within 21 days of the creation of the charge.

4. The two-stage procedure consists in (1) sending notice to the Registrar of an intention to create a charge and (2) within 21 days of the Registrar receiving that notice, sending the Registrar the prescribed particulars in the prescribed form, stating that the charge previously referred to has in fact been created. If this second step isn’t taken, the Registrar removes the notice of the intention to create the charge. If the second step is taken, the day the Registrar received notice of the intention to create the charge will be – retrospectively – the day of its actual creation.

5. If a charge was not registered, that doesn’t mean that any money secured by it is not repayable. In fact, that money becomes immediately repayable. (This was the case under the old rules).

6. It doesn’t matter that the creation of a charge on foreign property might require parties to bring further proceedings to make the charge valid in that foreign country: the charge over the property can still be created here by sending the proper particulars to the CRO.

7. If there has been a change among the person(s) entitled to a registered charge, notice of this fact can now be delivered to the Registrar. This is new (Section 409(8)).

8. The Registrar has no power or duty to examine any deed or any document that is supplemental to a deed. This is a new provision, for clarity.

9. The transitional provisions can be found here (Section 420).

There are a number of registration rules that have not been carried over:

1. In the old Section 99 of 1963 Act, practitioners will recall that there was a list of categories of charges which had to be registered, for example: a charge for the purpose of securing any issue of debentures; a charge on book debts of the company; a floating charge on the undertaking or property of the company; and so on. This list does not appear in the new Act.

2. The Company Law Review Group recommended that every charge should be made a registrable charge. The idea is that it gives creditors the clearest possible view of the charges on a company’s assets. There are no hidden charges.

3. The only exception is any charge which falls under S.I. No. 1 of 2004 or S.I. No. 89 of 2004. These Statutory Instruments are enactments of EU regulations which deal with Financial Collateral Arrangements.

4. The old rule which allowed for an extension to the 21 day period, where a property outside the State was being registered, has been done away with because there is no need for such an extension in the context of effective courier services.

5. Under the old law there was a rule which said that if a charge over a foreign property required a certificate from the jurisdiction where it was situated in order to be valid, then that certificate had to be delivered to the CRO as well. That rule has been done away with. The logic is: it is a matter for the chargee, not a concern of the Registrar.

6. The old provision in relation to negotiable instruments has not been carried over.

7. The old rule that required companies to keep a register of debentures has not been carried over.

Under the old rules, the primary obligation to register the charge lay on the company that created the charge. This obligation is carried over (Section 410).

The practice, however, is that most charges are registered by the chargee or its solicitor.

Therefore, it is also the case, as before, that any person “interested in the charge” may register it and this has “the same effect as if the company” had done so. That person may recover the fees incurred in registering the charge from the company.

What happens if a company buys a property which is subject to a charge? The law only requires a company to register charges which it has created – but in this case, an individual may have created a charge and a company is assuming liability for repayment. In such a case, Section 411 applies. The duty is to take steps so that the Registrar receives the particulars of the charge within 21 days of the company purchasing the property.

Section 412 is new and could be called a clarity provision. It expressly states matters which, up until now, practitioners have assumed to be the case.

The day the charge is created is not the day which matters most anymore. The relevant date for priority purposes is the day the Registrar receives the particulars (if a party is using the two-stage procedure then it is the date of the receipt of the intention to create a charge that is relevant).

If a number of charges are registered on the same day, the earliest in time has priority.

If the creditors have come to an agreement themselves in relation to the priority of charges – such as via an inter-lender agreement – then the rules above will be displaced. This is new.

The Registrar cannot enter particulars of a negative pledge on the register (Section 412(5)). This is new, but reflects the feeling that most parties understand a charge to contain a negative pledge clause and when registering charges, the current practice of the CRO is to ignore them when transcribing particulars onto the register.

The only time the above rule does not apply is where a floating charge has been granted by a company to the Central Bank either to provide or secure collateral.

Whenever a charge is registered, a certificate of registration is issued (Section 415).

A judgment converted into a judgment mortgage is void against the liquidator and any creditor of the company unless particulars of the judgment mortgage are registered within 21 days of its creation (Section 413).

The procedure for registering a judgment mortgage are set out in subsections (2) and (4) of Section 413.

Priority of judgment mortgages is determined by the date of receipt of the particulars by the Registrar.

The Registrar must keep a register, in relation to each company, of all charges which must be registered (Section 414). This duty has been retained.

The following two obligations have not been carried over: the obligation to enter in the register particulars of debentures and the obligation to record the amount secured by the charge particulars. The logic behind the latter is that most charges secure all sums due to the chargee.

The register is open to all for inspection, though a small fee might be set for consultation.

Section 417 deals with late registration and is a slightly amended version of the old Section 106 of 1963.

Under the old system of registering satisfactions, the company had to send a Form C6 in to the CRO, with a statutory declaration from the directors.

The new system does away with the need for a statutory declaration, but creates an offence for a person to knowingly sign a false release statement, and provides for imposition of personal liability on the signor in those circumstances.

Where the satisfaction has not been signed by the chargee, the Registrar will give notice to that chargee-creditor.