When a company borrows money from a bank or other lender, the company will normally have to provide the creditor with some form security (i.e. collateral) for that loan. One of the most common types of security is a ‘charge’ (such as a mortgage) over assets like land or buildings. With limited exceptions, a company is required to register a charge at Companies House within 21 days.
Different types of charges
There are two different types of charges used as security on a loan: fixed charges and floating charges. It depends on the type of loan and lender. Both fixed and floating charges are classed as secured loans, providing protection to lenders. If a company is unable to pay back the loan or it becomes insolvent, the lender can repossess and sell the secured assets in order to recoup the loan.
Fixed charges tend to be favoured by lenders because they are attached (‘fixed’) to specific assets and are prioritised above floating charges in the event of a company’s insolvency, even if a fixed charge and floating charge exist over the same asset. Floating charge holders also rank behind other preferential creditors like company employees and insolvency practitioners.
Fixed charges are attached to specific, identifiable assets, including land, buildings, vehicles, fixed plant and machinery, and trade fixtures. With a fixed charge, the company cannot dispose of the specific secured asset without express permission from the charge holder (i.e. the lender). The types of financial arrangements that are often subject to fixed charges include mortgages, leases, bank loans, and invoice factoring arrangements.
Floating charges are held over all of a company’s assets, or specific classes of assets, that a company can use, transfer, and sell in the normal course of business, as long as the company is solvent. The value and quantity of these types of movable assets can, therefore, change periodically throughout the duration of the financial agreement.
Floating charges may be held over real estate and movable assets, both current and future, including stock, raw materials, vehicles, property fixtures and fittings, cash, book debts (money owed to the company), and work in progress.
Whilst floating charges are fluid in nature when a company is solvent, they ‘crystallise’ if the borrower defaults on the loan agreement, is wound up, or enters insolvency. When this happens, the floating charge becomes a fixed charge and attaches to the secured asset(s), which means that the company is no longer free to use or dispose of the asset(s) without permission from the lender.
Register a charge at Companies House
To register a charge that is created or evidenced by an instrument on or after 6th April 2013, form MR01 (form LLMR01 for LLPs) must be completed and delivered to Companies House online or by post within 21 days, beginning with the day after the charge is created. For example: a charge created on 01/02/2020 must be delivered by 22/02/2020.
To complete form MR01, you will need to provide the following details:
- Company name
- Company registration number (CRN)
- Date on which the charge is created
- Name(s) of person(s) entitled to the charge (i.e. the lender)
- Description of the charge
- Answers to questions about the nature of the charge, including whether it is a fixed charge or floating charge
A certified copy of the written instrument (a legally binding document, like a mortgage deed, that sets out terms and conditions of the security charge) must be included with the form. You will also need to pay a fee of £15 (online filing) or £23 (paper filing) to Companies House for each mortgage or charge you wish to register.
Companies House will acknowledge receipt of your form within approximately two days of filing. When form MR01 has been accepted, the charge will be registered and you will be issued with a certificate of Registration of a Charge within approximately five days. The charge and related instrument will be shown on the company’s public record.
If a charge is not registered within 21 days, it may be difficult for the creditor to recover the debt should the company become insolvent. If you don’t send this information to Companies House within the given timeframe, you will need to get a court order providing an extension of time to register the charge.
It may also be necessary to register the charge with the Land Registry or at the Land Charges Department, depending on the type of asset secured.
Charges created before 6th April 2013
Particulars of a charge of mortgage created before 6th April 2013 must be registered at Companies House on form MG01 (England & Wales and N. Ireland) or form MG01s (Scotland). These forms can be found on the National Archives website and must be printed at full size on white A4 paper. You will have to pay a fee of £23 to register this type of charge, regardless of when it was originally created.
Removing personal information from the charge instrument
Any information that is filed at Companies House is open to public inspection and can be viewed online. If you wish to protect your privacy, you can remove or ‘redact’ certain sensitive details from the certified copy of the charge instrument before sending it to Companies House. You may remove:
- personal information relating to an individual, other than the name of the individual
- the number or identifier of a bank or securities account
- a signature
Who can register a charge at Companies House?
Any interested party can register a charge at Companies House, including the company itself, the lender, or the lender’s agent. You can register a charge against your company online via WebFiling using your company authentication code. Lenders and agents can register charges against a company by applying to Companies House for a lender authentication code (LAC).
Access information on charges registered at Companies House
Information on charges registered by UK limited companies and LLPs is available to the public free of charge online via Companies House Service. To find charges related to a particular company, simply:
- Enter the company name, company registration number, or officer name into the search box
- Select the relevant company from the list displayed on screen
- Go to ‘Filing History’
- Check the ‘Charges’ box
- Select ‘View PDF’ next to the charge document that you wish to view
Charges exempt from registration at Companies House
Pursuant to the Companies Act 2006 (Amendment of Part 25) Regulations 2013, all charges must be registered, with the exception of:
- a charge in favour of a landlord on a cash deposit given as a security in connection with the lease of land;
- a charge created by a member of Lloyd’s (within the meaning of the Lloyd’s Act 1982(1)) to secure its obligations in connection with its underwriting business at Lloyd’s;
- a charge excluded from the application of this section by or under any other Act.
It is no longer a criminal offence should a company fail to register a charge. Nevertheless, it can result in serious consequences for the creditor. Failing to register a charge that should be registered may ‘void’ any security that was otherwise granted over the company’s assets or property when the charge was created.
Dealing with company charges can be incredibly complex. If your limited company or limited liability partnership is at the stage of creating charges, we highly recommend consulting a chartered accountant or commercial solicitor for expert help and advice before entering into a financial agreement.