In recent years, the regime for registering charges granted by companies at Companies House has come under mounting criticism for being overly burdensome, uncertain and out of line with current law and commercial practice.
In light of this, the Department for Business Innovation and Skills ("BIS") published a consultation paper in which it outlined proposals to revise the current regime. The Government recently published its response to this consultation outlining a number of amendments to be introduced.
It is intended that the amended regime will operate as follows:
Who the regime will apply to:
- A single UK-wide regime will apply to all companies incorporated under the Companies Acts, unregistered companies subject to the Unregistered Companies Regulations 2009 and limited liability partnerships.
- The regime will not apply to overseas companies, even where they have a registered place of business in the UK.
What will be registrable:
- Every charge granted by a company over any of its property (wherever situated) will require to be registered, unless specifically excluded by statute.
- The current requirement to register charges existing on property which is acquired subject to that charge will be abolished.
- A memorandum of satisfaction or release of a charge will be effective if submitted by either a chargor or a chargee, provided that, in the case of the former, it is accompanied by a statement explaining why this registration is not being undertaken by the chargee.
How charges may be registered:
- It will be possible to register a charge electronically.
- Particulars of a charge will still have to be provided, however, fewer details will be required.
Consequences of registration:
- A Certificate of Registration of a Charge will still be issued. This will be conclusive evidence of the identity of the chargor and of the timeous registration of the charge, but will not be conclusive evidence of the assets covered by a charge.
- Any person taking a charge over a company's assets will be deemed to have notice of any previously registered charges.
Failure to register:
- The current criminal sanction for failure to register a charge will be abolished.
- As now, if not registered within 21 days of its creation, a registrable charge will be void against a liquidator, an administrator or any creditor of the company.
- A buyer of an asset subject to an unregistered charge will take that asset free of that charge (with an exception for assets subject to the rules of a specialist registry).
The need for dual registration:
- The requirement for registrable charges to be registered at Companies House, even where that charge must also be registered with a specialist registry under other legislation, will continue.
- BIS are to explore the potential to disapply the current requirement that standard securities be registered in the Land Register of Scotland and at Companies House.
- Similarly, it is intended that dual registration not be required if the new Scottish Register of Floating Charges comes into force (as proposed under the Bankruptcy and Diligence etc. (Scotland) Act 2007).
The amended regime is set to come into force in 2012 or 2013, with draft regulations expected in early 2011. It is hoped that the proposed amendments will go a long way in tackling the shortcomings of the current regime and it is expected that they will bring businesses savings of over £15 million a year (primarily due to the introduction of electronic filing). We await the publication of the new regulations to see whether this is likely to be the case in practice.