Pledge of Shares, whether required to be registered with ROC ?

[CS Alpesh Dhandhlya]

Dear Experts,

The Company has pledged its shares in the name of the Bank.

Whether the charge created is required to be registered with ROC or not ? 

[Krishna Ds]

NO

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Thanks & Regards...?

D S Krishna

Mobile: 94480 18302

[Ankush Lawate]

No....Only principle documents i.e. Mortgage / Hypothecation deed is required to be registered with ROC.

Thanking you,

Regards,

Ankush Lawate

[KAMESH]

It is required.  See sec 77.

Sent from Samsung Mobile

[Ankush Lawate]

Not required...share pledge is between the shareholder and bank.

Section 77 provides for charge registration.

Suppose company hold shares of other company and pledges them for securing of its borrowings, then it shall be registered with ROC.

Thanking you,

Regards,

Ankush Lawate

[CS Raman]

Dear Members,

Our understanding is correct for not filing any form with RoC for pledge of shares. For reference, enclosed please find some extract from Ramaiya's book that states 'such registration is not statutorily compulsory but would be registered by RoC, if the lender insists on registering the charge'.

You may also see CII's recommendation in this matter (on Page no.34, point no.59)

In few cases, it is my experience that few lenders understood this and did not insist on filing of form with RoC w.r.t. pledged shares. However, there are cases where companies are filing form CHG-1. Hope there will be some clarification from MCA in this matter.

Regards,

Arvind

[CS Alpesh Dhandhlya]

Thanking you so much Dear Experts,

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[CS Ravi Popli]

Company has to file pledging of Share under section 77 of the Companies Act,2013.

[csyogan .]

the commentary, case laws, etc., etc., are given taking into consideration the spirit of the old Act... i dont think this guard can be taken under the new Act

regards,

yogan.

On Tue, Apr 21, 2015 at 3:11 PM, CS Raman <csra...@gmail.com> wrote:

[CS Raman]

That is true Yogan. However, non-filing of CHG-1 or CHG-9 for pledge of shares is not non-compliance but an abundant compliance. Had this been necessary under the Act, then forms would have contained specific option to file it, like the form is revised for filing Motor Vehicle (Hypothecation).

Further, if we file then ambiguity still remains on the following:

i. Amount of charge secured (should it be entire value of loan taken by borrowing company OR face value of share OR value of share arrived by a Registered Valuer?

ii. Type of charge: We have no option but to tick 'others' and specify details.

iii. Will principal terms and conditions of loan of the borrowing company indirectly apply on the Pledgor also?

iv. Shares whether in demat or physical, is already given in custody of the Lenders. Only ownership remains with the Pledgor with  . Now, when the asset, i.e. shares are not in custody of the Pledgor, then what shall we write in Point No.14 (short particulars of property or assets including complete address and location)?

New CA, 2013 has been silent on this while the prescribed form has been like the earlier Form 8. Reading both together it is fine with few lenders to accept that charge filing for pledge of shares is not compulsory, but optional.

Regards,

Arvind Gupta

[csyogan .]

mr. arvind,

my opinion on each of the points :

(i) you can see the pledge agreement for the value of the charge. the value of share that is rs.10 may go to any number in future. take infosys as the example. infact, in my practice, i have seen private real estate companies' shares multiply 400 times also due to the realty boom. so the total amount of charge has to be taken irrespective of the face value of the shares charged / current value of the shares charged

(ii) others option is there. so you can write 'shares' there

(iii) you may say NA and write the story in others col pls.

(iv) you can simply say demat in case it is demat and anyways u r mentioning pledge, so the location of the property need not to be written or you can say not applicable there.

(v) filing of the form is obligation of the pledgor and not the pledgee. if u ignore by saying that the lender didn't insist it is the company which would be at default and not the chargeholder. further i dont see any reason why people are saying that no form needs to be filed. the exception which was there under the erstwhile s.125 is now not there, so simply file the form. further s.180(1)(a) compliance is to be ensured after taking into consideration the total amount of charge.

regards,

yogan.

[CS Raman]

Thanks Yogan for bringing more insight.

My experience coming from infrastructure sector, debt financing and re-financing is frequent. I have not been rigid with lenders but inquisitive on why to file the said form and what additional security/comfort it offers to them. I would not comment on reasons based on which peer professionals are filing the form. Shall keep the forum posted, if my understanding differs in near future.

Thanks,

Arvind

[csyogan .]

filing is a requirement under the statute.. comfort matters are secondary..