Is CHG 1 required to be filed for Corporate Gurantee

[komal jain]

Is CHG 1 is  required to be filed by company named B relating to Corporate Gurantee for the OD Facility availed by Company named A on mortgage of immovable property. 

please provide section reference and case law pertaining to same. 

Thanks and regards 

CS KOMAL JAIN 

7383119361

[saket kumar]

no

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_______________________________________________

Saket Kumar, ACS, B.COM.

Practicing Company Secretary,

9/12, Lal Bazar Street

Mercantile Building, 2nd Floor, Block-E,

Kolkata- 700 001, West Bengal

Mob: 8961660621

[saket kumar]

[PREETI AGRAWAL]

  Corporate Guarantee does not create any Charge per-se, unless mortgage or hypothecation etc is created on assets/undertaking. It may be noted that corporate guarantee provided by companies in the course of its business does not amount to a charge, since the guarantee given in case of a loan or a borrowing is contingent in nature and does not amount to a charge.  

 Corporate Guarantee is a tri-partite agreement, hence it would include a right to step into the shoes of the creditor after repaying the amount guaranteed, this additional right is not available in case of charge. In S.T. Patil And Ors. vs Registrar Of Companies on 13 May, 1997 Equivalent citations: 1998 91 Comp Cas 578 CLB, the Hon’ble Company Law Board was of view that “Guarantees do not require registration under Section 125 of the Act. It is in this connection, reference may be made to the decision in Paul and Frank Ltd. v. Discount Bank (Overseas) Ltd. and the Board of Trade [1967] 37 Comp Cas 76 {Ch D), wherein it has been held that contracts of insurance, guarantee, indemnity, etc., do not require registration”). Further, this case law is relevant under the Companies Act, 2013 Therefore Corporate Guarantee is not required to be registered by filing of Form CHG-1.

 However, as a Good Corporate Governance practice it is advisable to register the Corporate Guarantee, such registration will enable banks to easily in event of default by principal borrower, execute guarantee on guaranteeing company. This registration would also operate as a constructive notice to the other lenders and any other person dealing with the company.  

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Regards,

Preeti Agrawal

Company Secretary

Cell No-9850084716