Relevant to: Lenders and all UK registered companies
Summary: A new registration regime for security interests created by companies and limited liability partnerships registered in England and Wales, Scotland and Northern Ireland came into force on 6th April 2013. This regime is implemented by the Companies Act 2006 (Amendment of Part 25) Regulations 2013 (SI 2013/600) and the Limited Liability Partnerships (Application of Companies Act 2006) (Amendment) Regulations 2013 (SI 2013/618). The new security registration regime for LLPs is largely the same as that for companies.
The key changes imposed by the new regime are as follows:
• The new regime is permissive not compulsory so that charges “may” rather than “shall” be registered.
• The new regime applies to all charges and mortgages other than limited exceptions which are listed in section 859A (6).
• Criminal sanctions against the company and its officers for non-registration of a registrable charge have been removed.
• Companies House has issued new forms for registering security.
• Electronic registration is available. In order to file electronically a one-off application will need to be completed to obtain a “lender authentication code”. Lenders can use the existing on-line code for registration of future charges.
• A certified copy of the signed security document rather than the original must be submitted with the particulars of charge. This will then be available on the public register, although certain limited information may be redacted (section 859G).
• A certificate of registration will be issued once the charge has been successfully registered and a unique twelve digit reference code will be allocated to the charge.
EFFECT OF REGISTRATION (UNCHANGED FROM PREVIOUS REGIME)
A correctly registered charge is valid as against the liquidator and any creditor of the company that created the charge. Registration may also give notice of the existence of the charge to third parties and establish the priority of the charge.
EFFECT OF NON-REGISTRATION (UNCHANGED FROM PREVIOUS REGIME)
If a charge is not registered at all, or is registered outside the allowed 21 day time period under section 859H the security becomes void as against the liquidator, administrator or creditors but remains valid as between the company and the charge holder. When a charge becomes void the money secured by it becomes immediately payable.
The new regime applies to all charges created on or after 6 April 2013. Any charges created before 6 April 2013 must be registered in accordance with the previous regime even if they are registered at Companies House after 6 April 2013.
The new system of satisfaction of or release of a charge set out in new section 859L of the Companies Act 2006 must be followed regarding any satisfaction or release registered on or after 6 April 2013, irrespective of when the charge was created.
If you would like further information please contact Toby Stroh or Christopher Axford of Druces LLP’s Corporate & Commercial team.This note does not constitute legal advice but is intended as general guidance only. It is based on the law in force on 6 April 2013.