The registration of a charge by a company at Companies House is something that should be straightforward. The form MR01 is prepared, the charge is attached and the fee paid, and it’s as simple as that. Isn’t it?
The answer is yes, usually. However, it is that final word ‘usually’ that matters here. Inevitably things do go wrong. The company has 21 days from the creation date of the charge to file it at Companies House but this is often left to the last minute, or there is a delay at Companies House itself. Probably the most common situation is where there is an error in the documents filed and these are rejected, quite properly, by Companies House. Even if they were filed close to the start of the filing period, it can be a challenge for the company to receive the documents in order to correct them and get them re-filed in time.
So if the charge is rejected and remains unfiled, what happens then?
The first, short answer is that the charge is void (against a liquidator or administrator, or more likely, any creditors), and the monies secured by it immediately become payable. This is not a situation any company would wish to face.
Fortunately there is a solution, which is to apply to court for an order. This is an uncontested application, so while Companies House can be informed, it won’t oppose the application. This means that the process is relatively straightforward, although it can be expensive because it requires someone with rights of audience to make the application on the company’s behalf.
When the order has been granted (the judge being satisfied with the explanations given by counsel for the company), it can be filed at Companies House along with the charge and the form MR01 – having first been checked and re-checked to ensure that the documents have been correctly completed!
What can be done to minimise the chances of a charge being rejected?
Considering the timescales for filing, probably the easiest thing is for the company to register for the Companies House web filing service. This is efficient and enables a decision to be made on the filing within a couple of hours of the documents being submitted. Clearly this should remove the most common reason for failing to file the charge of simply missing the deadline. Even if there are multiple errors on the form, the company should have plenty of time in which to rectify them.
Often, the company’s lawyer, or the bank itself may submit the charge. These parties are more likely to have been through the process before and so the chances of errors should be less.
One final of word of caution though - it is wise to ensure that everyone involved knows who is supposed to be doing it. Failure to do so may cause the problem the company is seeking to avoid.
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