Under the Companies Act 2006 (the "2006 Act"), the charge registration provisions for English and Welsh companies were left largely unchanged from the 1985 Act provisions.  However, the 2006 Act gave the Secretary of State power to alter, add or repeal provisions relating to registration of charges.

The Department for Business, Innovation and Skills ("BIS") has been consulting on a new charge registration regime and has now issued the latest draft regulations for the new regime.  The main objectives of the new regime are to provide a single UK-wide registration regime that applies to all UK companies (so including Scottish companies) and limited liability partnerships ("LLPs") and to provide for electronic filing.

BIS has asked stakeholders to provide any final comments on the draft regulations by 5pm on 7 September 2012.  The new regime is expected to come into force on 6 April 2013.

Set out below is a summary of the key provisions in the latest draft:  

  • the charge registration regimes for English and Scottish companies will be merged so that there will be a single UK-wide regime ]

  • all charges must be registered unless specifically excepted eg rent deposit deeds, pledges and liens over property, charges excluded from the registration requirements by other legislation, eg the Financial Collateral Arrangements (No 2) Regulations 2003. In practice this should make the decision whether to register much simpler than at present.  Note that the term "pledge" here must be interpreted as having its English or Scottish law meaning – namely it is a creditor in possession security over goods or securities. Therefore, we believe that, for example, a security document which on its face is described (in accordance with the relevant non-UK local law) as a "pledge" over shares in a non-UK company, will be registrable

  • electronic filing will be introduced with filers needing first to obtain a unique authentication code which must be used whenever that filer is registering security; paper filing will continue to be possible

  • in order to file electronically, the filer will email a "statement of particulars" of the security together with a certified copy of the charge instrument (not the original) to Companies House.  Personal information (other than individuals' names), signatures and bank account numbers can be redacted from the certified copy

  • the statement of particulars will need to include, among other things, whether the charge is expressed to be a floating charge and whether it contains a negative pledge

  • the registrar will allocate a unique reference code to each registered charge which is intended to make searching and tracking of charges easier

  • persons who may register a charge will expressly include persons interested in the charge, so including the chargee

  • the 21 day time limit for registration will be retained

  • there are provisions to determine the date of creation of a charge (this was included largely to address differences under English and Scottish law as to when a charge is created). For example, if a charge is created by an English law deed that has been executed and has immediate effect on delivery, the date of creation of the charge is the date of delivery.  Different rules apply if a deed is held undelivered or in escrow, if the charge is not created or evidenced by a deed, and if the charge is a Scottish standard security

  • the criminal consequences of failing to register a registrable charge will be abolished; the consequence of invalidity against a liquidator, administrator and creditor of the company will be retained

  • if a charge is amended after its creation to include a negative pledge, provision is made for that negative pledge to be noted on the register

  • where a company acquires property subject to a charge, the company or person interested in the charge may deliver a statement of particulars relating to that charge to the registrar, but there is no sanction of invalidity if no such statement is delivered

  • the registrar's certificate of registration will be conclusive evidence that the relevant charge documents were delivered to the registrar within the statutory period allowed, but will no longer be conclusive evidence of the statement of particulars filed

  • chargees will be able to file release statements

  • a company which is holding property as a trustee can have this noted on the register

  • UK companies will no longer have to keep a register of charges but they will be required to keep copies of charge instruments (and any amendments to such instruments) available for inspection

  • on the application of a company or a person interested in a charge, the court will have the power to rectify omissions and mis-statements if the omission or mis-statement was accidental or inadvertent, or it will not prejudice creditors or shareholders or if it is just and equitable to grant relief.  The court will also have the power to order the removal or replacement of a filed copy charging instrument in specified limited circumstances

  • the draft contains a new section, "Notice of matters disclosed on register", which attempts to fix persons taking a charge over a company's property with constructive notice of "any matter requiring registration and disclosed on the register at the time the charge is created".  In our view, this is far too simplistic in its approach to a complex area of law (priorities).  Further, it does not address other classes of person who (arguably) should be expected to search and be fixed with constructive notice if they do not do so, eg persons acquiring the company, persons acquiring property from the company, prospective unsecured lenders/creditors etc. BIS have specifically requested comments on this new section

  • the provisions relating to registration of enforcement of security have been clarified by setting out exactly what information must be provided to the registrar following the appointment of a receiver or manager (NB these provisions do not extend to Scotland)

  • the draft regulations issued in relation to LLPs follow the same format, but with minor amendments as appropriate to LLPs

  • the explanatory note accompanying the revised draft regulations does not mention if BIS is still considering extending the registration regime to unregistered companies and mutuals (as they had indicated in the draft issued in August 2011)