The Companies Act, 2013 defines a charge as a security interest or lien created on the assets or assets of a company or any of its businesses and includes a mortgage U/s 2 (16). The word "Mortgage" was not listed in the previous Act of 1956. A Charge is simply a right created by a company, i.e. a 'borrower' for the benefit of a financial institution or a bank or any other lender, i.e. a 'creditor' who has agreed to extend financial assistance to the company for its assets or assets, or for any of its present and future undertakings. 

Types of Charges:

• Fixed Charge

A Charge is called fixed or specific when it is created at the time of the creation of the Charge, e.g. land, building or plant, and machinery, to cover assets that are related and definite or are capable of being determined and defined. Therefore, a fixed charge is security in relation to a certain specific property and the company gives up its right to dispose of that property until the charge is met. In the event of the company's winding up/liquidation, a particular charge holder will be placed in the highest class of creditors.

• Floating Charge

A floating charge is not attached to any definite property but covers a fluctuating type of property, such as stock-in-trade. A floating Charge is on a current and future class of assets that changes from time to time in the ordinary course of business and leaves the company free to deal with the property as it sees fit until Charge holders take steps to enforce their security. A floating charge's crux is that until it is fixed or crystallized, the security remains inactive. The assets are mortgaged in such a way that without the consent of the mortgage, the mortgage company can deal with them.

On the basis of the charging conditions, the types of charges may be as follows:

• Pari-passu Charge: The Pari-passu phrase means an equal step, treated equally, at the same rate, or at the same level. It's the Latin term for "On equal Footing" Under this, in the ratio of their outstanding amount, the charge is shared by more than one lender. The company for the creation of Paripassu shall require the prior consent of the existing charge holder.

• Exclusive Charge: The exclusive charge is only granted to a lender under the security provided. Above all other individuals, the creditor who is given credit facility security over the property on which the charge is generated has a right over the security.

• Further Charge: With the consent of the holder of the first Charge, the creation of a further Charge relating to the protection already given for the first Charge is possible. In the event of winding up or liquidation, the first charge holder has the right to recover his dues first and then the balance is recovered by the second charge holder followed by other lenders.

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. Further, despite all efforts that have been made to ensure the accuracy and correctness of the information published, White Code Legal and Tax shall not be responsible for any errors caused due to human error or otherwise.