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What are the consequences of a failure to register a legal charge at Companies House within the 21-day time limit?

View profile for Jade Fairhurst
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Under Section 859A of the Companies Act 2006, a company that has created a registrable charge (or, any person interested in that charge), may deliver to the Registrar of Companies a section 859D statement of particulars for registration of that charge.

The section 859D statement of particulars has a 21-day time limit commencing the day after the date of creation of the charge. And so; when the statement of particulars is not delivered within the 21-day period, there are time consuming and costly consequences.

Most significantly, under section 859H, the security itself will become void against:

  • A liquidator of the company.
  • An administrator of the company.
  • Any creditor of the company.

For the charge holder, non-registration means that when a charge is voided against an administrator or liquidator, the charge is voided insofar as any security on the company’s property or undertakings related to it. So, should the company that created the charge enter administration or liquidation, the charge holder will rank as an unsecured creditor.

Despite the above, the voidance of the charge does not result in a voided contract and/or obligation for repayment of the monies that were to be secured by that charge. This therefore follows that under section 859H, the money becomes immediately payable. For the chargor, this means that they will remain liable for repayment of the debt and may be required to immediately repay its full indebtedness to the charge holder.

Where a personal guarantee has been provided under the terms of the loan, this can also put the guarantor at serious and immediate risk if the chargor is called upon to repay the monies and is unable to do so.

To remedy the failure to register the charge, the company or interested person can apply to the court for an order that the time period allowed for delivery of the statement of particulars is extended. In considering the application, the court will take account of:

  • Whether the failure to deliver before the end of the 21-day period was due to inadvertence, accidental, or due to some other sufficient reason, or it is not likely to prejudice the position of the creditors or the shareholders of the company.
  • That it is just and equitable to grant relief.

It is important to note that there is no guarantee that the court will agree to extend the period for delivery of the statement of particulars, and each application will be judged on its own merit. Where the court grants relief, the priority of that charge will usually rank behind any security registered before that date.

Remedying the failure to register a legal charge can be complex, time consuming and costly, however the consequences as detailed above in failing to take remedial steps can have more onerous consequences for all of the parties concerned. Call our specialist commercial law team for advice on 0161 696 6170.