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CS Professional · Compliance Management, Audit and Due Diligence · Documentation and Maintenance of Records

Sagar Foods Ltd acquires a factory that is already subject to a registered charge, and later agrees with the lender to modify the terms of a charge it had registered earlier. The CS asks whether charge registration provisions apply. What is the correct position under the Companies Act, 2013?

The charge registration provisions of section 77 apply, so far as may be, to both events. Section 79 covers a company acquiring property subject to a charge and any modification in the terms, conditions, extent or operation of a charge already registered.

  1. AThey apply to neither situation, as registration is only for charges the company itself creates
  2. BThey apply to the acquisition of property subject to a charge, but not to modifications of a registered charge
  3. CThey apply to modifications of a registered charge, but not to acquisition of property subject to a charge
  4. DThey apply, as far as may be, to both the acquisition of property subject to a charge and any modification of the terms, conditions, extent or operation of a registered chargeCorrect

Explanation

Section 79 extends the section 77 registration provisions, so far as may be, to a company acquiring property subject to a charge and to any modification in the terms or conditions or the extent or operation of a registered charge. So both events need documentation and registration.

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