Sub-section 16 of Section 2 of the Companies Act 2013 defines charge as an interest or lien, that is created on the assets or property of a company and any of its undertakings or both as security and include a mortgage. So basically it is the interest of the creditor in the assets that are provided by the data as security. There is a right of lien that is given by charge over the property to the creditor. In simple terms, it means that the creditor can have possession of the property tell the debtor fully repays him the debt.

Some details are required to be filled with the registrar comma those details are The date and description of the instrument creating a charge, general description of the property charged, date of the resolution authorizing the creation of charge, list of the terms and conditions of the loan, the total amount secured by the charge, any document that provides for evidence of the creation of charge or any copy of the instrument that showcases that the charge has been certified, and the name and address of the charge Holder.

There are 2 types of charges, that is a fixed charge and a floating charge.

A fixed charge is a charge which is identifiable with specific and clear property or a set during the time of the creation of charge and unless the charge Holder or creditor is paid off his dues a company is not capable of transferring search identified and defined property. fixed assets like property which includes anything static, for example, land and building and that is specific will have a charge created that is fixed. Fixed charges can also extend to assets like patents, copyrights, trademarks, etc. The control of the property will be with the creditor even if the position is with the debtor. So, The debtor will have to obtain the permission of the creditor if he wants to Exact the property on which there is a charge.

Floating charge covers for the circulating nature of the properties for example stock in trade. The properties on which floating charge has been created may have its nature changed from time to time. there can be a crystallization of floating charge and it can convert into fixed charge and it is called crystallization of floating charge. A floating charge is created on those assets which are not fixed in nature and the company is capable to dispose of search Asad without any prior permission from the creditor. The assets on which floating charges created have a dynamic nature. And since their dynamic in nature creditor cannot lay restrictions on the business activities which make money if the debtor wants to pay off his debt.

Crystallization of floating charge can take place if the debtor is unable to pay off his debt, or when the company is winding up, Or when the company goes into liquidation. Crystallization can take place if the company ceases to carry the business, or the debenture holder takes any action against the debtor for not paying the debts, other events when crystallization takes places is when it is specified in a deed of agreement.

Creating the charges necessary or else the financial institution or bank will not lend their monies as they will not be able to ensure that their funds are safe and will be repaid.

This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect, Or Religion Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws Being Force In India, For The Time Being.