Registerable Charges I
The Companies Act requires most types of charge made by a company to be registered in the Companies Registration Office (CRO). A charge which is not registered is void as against the liquidator and any creditor of the company. It remains valid as between the debtor and the creditor.
This defeats the principal purpose of security, as it is not available against liquidators and third-parties. It is not available on the occasion when security is most required, namely when the company is insolvent and there are insufficient funds to pay all creditors. This thereby deprives the security of most of its value.
The 2014 Act re-enacts the provision that makes most charges void against the liquidator and creditors of the company unless particulars of the charge are filed for registration with the CRO within the required period. The 2014 Act provides two alternative procedures for registration, a single stage procedure, and a two-stage procedure. If the charge is voided by failure to register, the legislation deems the money to fall due automatically.
Registerable Charges II
The requirement for registration covers
- charges for the purpose of securing any issue of debentures;
- charges on uncalled share capital;
- charges evidenced by an instrument which would be registrable as a bill of sale if executed by an individual;
- charges on land or any interest in it, but not including a charge on a rent or similar sum;
- charges on a company’s book debts;
- a floating charge on the undertaking or property of the company;
- charges on calls made on shares but unpaid;
- charges on any ship, aircraft or share therein;
- charges on goodwill, patent, license, trademark, copyright.
A charge in this context includes any security interest. It includes a mortgage or charge, whether legal or equitable by which a security interest is created.
Where a charge has elements that are within the definition of a charge, and those are which outside it, then it is a registerable charge to the extent that it is a charge within the meaning of the Act.
Particular Charges I
The 2014 Act creates a new and wider definition of a charge, for Companies Act purpose. A charge means a mortgage or charge in a written or oral agreement, created over an interest in any property, of the company. It includes a judgment mortgage.
A charge may be equitable in nature. It may be created relatively informally. It is nonetheless registerable and is prejudiced by the failure to register on time. For example, a mortgage by deposit of deeds must be registered, notwithstanding that a memorandum in writing may not accompany it.
The creation of security which does not involve a charge or the transfer of an interest by the company to another may be outside the requirement for registration. Accordingly, retention of title, hire purchase and leasing are intrinsically not security transactions, as there is no transfer of title or ownership, notwithstanding that the economic nature of the transaction may be akin to financing by way of secured lending.The asset is never owned by the company.
Particular Charges II
Bills of sale are mortgages or charges over movable goods. Any written mortgage over movable goods requires registration as a bill of sale. Accordingly, the equivalent grant of security by a company must be registered as a company charge.
Critically, the onerous and rigid requirements of the Bills of Sale Act do not apply. Registered particulars may cover a fixed or floating over all present and future goods, without particularising the secured goods.
If an arrangement in substance constitutes a security, then it may be deemed to be a security, irrespective of its form If a sale and leaseback is in substance a disguised lending and security arrangement, then it is registrable.A transfer of property which appears to be an outright transfer or sale, but includes a right to repurchase, which in substance is the repayment of credit, may be deemed a charge and accordingly be registerable.
Particular Charges III
Book debts are generally understood to refer to the proceeds of trade creditors. They equate to the current asset debtors on the company’s balance sheet.Property is widely defined to include any asset or undertaking of the company. The Minister may vary the definition of “charge” as necessary or expedient or as required by European Union law.
The Registrar of Companies has jurisdiction to accept or register an order or a notice of the making of an order, (judicial or the otherwise) which affects the shareholder or debenture holder of a company. Any jurisdiction or authority (whether judicial or otherwise) subsisting before the commencement of the 2014 Act to make an order requiring that there be registered an order of that authority affecting a shareholder or debenture holder of a company, or a notice of the making of an order, ceased to be exercisable.
An application may be made to register a charge over shareholder’s interest under Debtors Act (Ireland) Act and the Rules of the Superior Court, by way of enforcement. However, this may not be registered in the CRO. The company is in effect, a stranger to the matter.
Financial Services Exemption
Charges over the following categories of asset are not registerable where there parties are certain financial institution and other bodies. The exclusion is required by EU Directive of Financial Collateral which seeks to facilitate the creation of charges over financial instruments in the financial services sector. The exemption appies to a mortgage, charge or an agreement for a mortgage or charge over
- an interest in cash,
- money credited to an account of a financial institution or other deposit;
- shares, bonds, or debt instruments,
- units in collective undertakings or money market instruments, or
- claims in respect of any of the above.
Registration with CRO
The company itself is obliged to register the charge within 21 days. Third parties, including in particular the chargee/ mortgagee may themselves register the charge. Financial institutions, which take the charge will usually take care to ensure that registration is effected.
The Registrar of Companies is obliged to maintain a register of charges, which is available for inspection. The charges appear on the individual company’s register, which is now available online.
Upon registration, the CRO issues a certificate of registration of the charge to the registering party. This is conclusive evidence of registration. The wording of the Companies Act provision which makes registration conclusive is in strong terms. It appears that even if particulars are incorrectly registered, the registration is nonetheless valid and conclusive.
It is the duty of a company that creates a charge to register the charge. Where a company acquires assets, which are subject to a charge that would be registrable if created by the company, the company must take steps within 21 days of acquisition to register the charge.
Default in compliance with the obligation to register is an offence on the part of the company and every officer in default. It is a category 4 offence.
Registration Procedure I
Under the 2014 Act, there are alternative procedures for the registration of charges created by companies.The one-stage procedure requires the filing of prescribed particulars of the charge with the CRO, within 21 days of its creation. This accords with the pre-existing method of registration under 1963 Act.
The two-stage procedure involves delivering a prescribed notice with the particulars to the CRO, of an intention to create a charge, followed within 21 days, by delivery of a further notice to the CRO, confirming that the charge referred to in the first notice has been created.
An initial notice in a prescribed form may be given, setting out the company’s intention to take a charge. Within 21 days after the receipt of the first notice, a notice may be filed confirming that the charge proposed to be created under the earlier notice has been created.
Registration Procedure II
Registration will lapse if the later notice is not filed within 21 days of the first notice. This gives protection against charges created but not registered within the previous 21 days the filing period. Under the two-stage procedure, the date of the first filing is deemed the date of registration, provided that the second filing is undertaken within 14 days.
Registration online is mandatory. The parties must have an ROS digital certificate. he CRO require the charge to be registered electronically, verified by a digital certificate given for by or on behalf of the charger and the chargee.
Where a charge is transferred, the transferee of the charge may give notice of the transfer of registration.
There is a new provision allowing for notice to be given to the CRO of an error or omission in the filed documents. Notice is given, and a corrective filing is made.
The general common law position is that priority in relation to security over an asset is governed by the order of creation. If the asset was subject to a separate registration system, such as in the case of land, priority is governed in accordance with that system.
Accordingly, a charge which had been unregistered until near the end of the 21 days’ registration period, could obtain priority over a later charge which had already been registered in the CRO, but which was created after it, but within that 21-day period.
The 2014 Act allows for a priority search in the CRO which reserves priority. The new rules take effect subject to provisions of other legislation, including in particular the Land Registry and Registry of Deeds, legislation. Where charges are registered on the same day, the order of filing determines the position.
Priority is still largely determined by the order of creation. The 2014 Act provides that as between competing charges, in the absence of other legislation applicable to the asset type, (e.g. Land Registry, etc.) priority is governed by the date of registration.
The advantage of the new procedure is that it guards against the risk of there being another charge which is created and registered within 21 days, but which does not show up on the CRO search on the creation of the security.
The priority of charges is subject to any agreement as to priority between charge holders. This will govern the position between the charge holders concerned only.
Certificate of Registration
The certificate of registration of a charge is conclusive evidence that the requirements of registration have been complied with. This is applicable, only to assets included in the particulars registered with the Companies Registration Office. The 2014 Act provides that the certificate is not to be conclusive as to property and assets not described in the particulars.
As under the earlier legislation, the certificate of registration on the charge gives significant protection as to the correctness of the registration. The courts have been unwilling to look behind the position as to compliance with the statutory requirements, even where there is clear evidence that the statutory procedures have not been complied with. It may be possible to challenge the conclusiveness of the certificate on the basis of fraud.
Particulars of a negative pledge, (i.e. a covenant not to grant further charges, typically in a floating charge) may not be registered. A negative pledge may be registered in respect of security granted to the Central Bank, typically by financial institutions. Negative pledges and particulars of matters that crystallise a floating charge are not to be inserted in the register and are deemed to be extraneous.
The 2014 Act provides that where the charge contains particulars of one or more assets to which the charge relates, which have not been included in the filed return, a charge is void as against liquidator and creditors in respect of the omitted assets. Under the earlier legislation, the conclusiveness of the certificate of a charge issued by the CRO was believed to protect the charge, even if the filed particulars did not specifically set out all the elements of the charge.
The 2014 Act provides that extraneous and additional material of a sort not required by the prescribed particulars is of no effect. This would include common formerly filed particulars, such as the terms of a negative pledge clause.
The requirement to register applies to charges created by a company. A judgment mortgage is a procedure by which a creditor may attach a judgment by way of mortgage on property owned by the defendant debtor. Judgment mortgages and charges which come into existence by operation of law are not covered.
A separate obligation applies to judgment mortgages. Formerly, the judgment creditor was required to deliver copies of the affidavit to the company within 21 days. The company was required to register it within three days. There was a penalty on conviction for failure to register. The failure of the company to register did appear not to affect the validity of the charge
Under the 2014 Act, the obligation to register a judgment mortgage is placed on the creditor/ judgment mortgagee, rather than the company. The judgment mortgage is to be registered within 21 days of the date on which the Property Registration Authority notifies the judgment creditor that it has been created. The failure to register the judgment mortgage will render it void against the liquidator and other creditors.
It is presumed that the judgment mortgage was received by the judgment creditor the third day after it is sent to the judgment creditor or his agent by the Property Registration Authority. Unlike the position with company charges, the order of priority is determined by the date of registration in the relevant property register.
The Companies Registration Office is to keep a register of charges in respect of each company. It is to set out the
- date of creation,
- date of registration of each charge,
- date of acquisition of the property already subject to a charge by the company,
- date of a judgment mortgage creation and date of time of registration,
- short particulars of the property charged, and
- the person entitled to the charge.
The register is open for inspection by any person on payment of such fee as may be prescribed.
The Registrar issues a certificate of registration on completion of registration. This is conclusive evidence that the obligations in the Act have been complied with in respect of the registration of the charge. This does not extend to property which is not set out in the registration of the charge.
Where a company has an established place of business in Ireland, a charge on any of its Irish situate assets must be registered. It should be registered on the relevant branch register. Formerly, the CRO maintained a so-called “Slavenberg” file for registration of charges by a foreign company, without a registered branch or other Irish registration. It was named after an English case.
The 2014 Act abolished the Slavenberg Register. If a company has a branch or establishment, it must establish a Branch Register and particulars must be registered in it of charges.
In the case of charge over assets outside the country, the 21-day period is extended by the time taken to dispatch and send the charge through the post to Ireland. Where the charge is also required to be registered in a foreign jurisdiction, a certificate of registration in that jurisdiction must be furnished. This may in practice be difficult to do within the requisite time limits.
The Court has the power to extend the time to register the charge if the particulars are not delivered to the CRO within 21 days. However, the order will not be granted to the detriment of persons who advance money to the company, before registration.
Where a charge has not been registered in time, an application may be made to the court to register late. The court must be satisfied that the omission was due to accidental circumstances, inadvertence or some other sufficient cause. It must not be of a nature such as to prejudice the position of creditors or shareholders of the company or other grounds must exist so that it is just and equitable to grant relief.
The court will invariably require that the late registration does not prejudice the interests of third parties. The rights of secured creditors accrued in the meantime are preserved. The order will usually be made, without prejudice to their rights.
The court is likely to refuse an extension of time to register if the company is insolvent and winding up is imminent or inevitable. Registration may take place in theory, even when the company is in winding up. In practice, it is very unlikely to be granted, as it would prejudice creditors.
Where a charge has been released, a statement may be filed by two directors confirming the release. It is an offence to make a false return. The Court, on application by a member, receiver, creditor, liquidator, may declare the persons who have made the false certificate to be personally liable without limitation, for all or part of the debt specified.
The Registrar may enter satisfactions and releases of charges onto the register. It may accept as evidence of satisfaction, a statement in a prescribed form, signed by a company and director. A person who signs a statement knowing it to be false is guilty of a category 2 offence.
Where the person did not honestly believe on reasonable grounds that the statement was true and the court considers the making of the statement contributed to the company being unable to pay its debts, prevented or impeded the ordinary winding up of the company or facilitated the defrauding of creditors, the court on application of the liquidator, examiner or receiver, may if it thinks fit, make a declaration that the persons who signed the declaration shall be liable for all or part of the debts of the company, as the court may specify.
Companies are obliged to keep a copy of every charge which they enter at their registered office.
This includes a copy of every instrument creating a charge which is required to be registered. In the case of a judgment mortgage, a copy of the judgment mortgage must be kept.
The documents may be inspected by any creditor or member during business hours, free of charge. The right of inspection must be exercisable for at least two hours a day. A register of debenture holders is required if debentures have issued.
Failure to keep the registers, where required is an offence. Default in compliance is an offence on the part of the company and every officer in default.
References and Sources
Companies Act 2014 (Irish Statute Book)
Companies Act 2014: An Annotation (2015) Conroy
Law of Companies 4th Ed. (2016) Ch.20 Courtney
Keane on Company Law 5th Ed. (2016) Ch. 21 Hutchinson
Other Irish Sources
Tables of Origins & Destinations Companies Act 2014 (2016) Bloomsbury
Introduction to Irish Company Law 4th Ed. (2015) Callanan
Bloomsbury’s Guide to the Companies Act 2015 Courtney & Ors
Company Law in Ireland 2nd Ed. (2015) Thuillier
Pre-2014 Legislation Editions
Modern Irish Company Law 2nd Ed. (2001) Ellis
Cases & Materials Company Law 2nd Ed. (1998) Forde
Company Law 4th Ed. (2008) Forde & Kennedy
Corporations & Partnerships in Ireland (2010) Lynch-Fannon & Cuddihy
Companies Acts 1963-2012 (2012) MacCann & Courtney
Constitutional Rights of Companies (2007) O’Neill
Court Applications Under the Companies Act (2013) Samad
Company Law – Nutshell 3rd Ed. (2013) McConville
Questions & Answers on Company Law (2008) McGrath, N & Murphy
Make That Grade Irish Company Law 5th Ed. (2015) Murphy
Company Law BELR Series (2015) O’Mahony
Companies Act 2006 (UK) (Legilsation.gov.uk)
Statute books Blackstone’s statutes on company law (OUP)
Gower Principles of Modern Company Law 10th Ed. (2016) P. and S. Worthington
Company Law in Context 2nd Ed. (2012) D Kershaw
Company Law (9th Ed.) OUP (2016) J Lowry and A Dignam
Cases and Materials in Company law 11th Ed (2016) Sealy and Worthington
UK Practitioners Services
Tolley’s Company Law Handbook
Gore Browne on Companies
Palmer’s Company Law