Understanding Charges Under the Singapore Companies Act

Introduction:

Companies can raise funds in multiple ways, including debt financing. To protect the interests of lenders, Singapore law mandates certain procedures for registering charges created by companies over their assets. These procedures are designed to ensure transparency and legal enforceability in the event of default or liquidation. This blog explores what a charge is, the statutory requirements surrounding it, the registration process, and other related obligations under the Singapore Companies Act 1967.

What is a charge?

A charge is a form of security interest created over a company’s assets to secure a debt or obligation. It does not transfer ownership of the asset but grants the lender rights over it if the borrower defaults. Charges can be fixed (attached to specific assets) or floating (covering classes of assets that may change over time).

Under the Companies Act, a company can create a charge for various types of borrowings or obligations, including:

• A charge to secure any issue of debentures

• A charge on uncalled share capital

• A charge on shares of a subsidiary owned by the company

• A charge that would require registration as a bill of sale if made by an individual

• A charge on land or any interest therein (excluding rent or periodic payments)

• A charge on book debts

• A floating charge on the undertaking or property of the company

• A charge on calls made but not paid

• A charge on ships, aircraft, or any share therein

• A charge on goodwill, patents, trademarks, copyrights, and associated licenses or registered designs

Process of registration of charge?

When a company creates a registrable charge, it must comply with the procedures set out in Section 131–138 of the Companies Act. The process involves:

Step 1: Safekeeping of Instrument 

The instrument creating the charge (e.g., loan agreement or debenture) must be retained for inspection by the Registrar, if requested.

Step 2: Timely Filing.

The charge must be registered with ACRA (Accounting and Corporate Regulatory Authority) within 30 days from the date of its creation.

Step 3: Filing Requirements.

Details such as the amount secured, description of the charged property, and details of the chargee (the party entitled to the charge) must be submitted and These details are entered into ACRA’s Register of Charges.

Step 4: Notice and Certificate.

Upon successful registration, ACRA sends a notice to both parties and issues a Certificate of Registration, which serves as conclusive evidence of the charge.

Satisfaction of Charge?

When the debt secured by a registered charge is paid or otherwise satisfied, the company must notify ACRA by filing a Satisfaction of Charge.

• This must be accompanied by supporting evidence proving the discharge.

• ACRA will update the public register accordingly, and a memorandum of satisfaction will be issued.

• The company must also update its internal register of charges.

Other Statutory Obligations:

Beyond the registration of charges, the Companies Act of Singapore imposes several other statutory obligations on companies to ensure transparency and proper governance. Under Section 133, a company is required to register a charge even if it acquires property that is already subject to a registrable charge. This also applies to foreign companies that become registered in Singapore and had previously created or acquired property with a registrable charge before registration. The objective of this provision is to ensure that all significant encumbrances, even those predating the company’s registration in Singapore, are disclosed and properly recorded with the registrar.

According to Section 135, when a company issues debentures that are secured by a registered charge, it has a duty to inform the debenture holders about the existence of such a charge. This is a crucial disclosure obligation that ensures prospective investors are fully aware of any security interests that may affect the value or enforceability of their investment.

Furthermore, Section 138 mandates that the company must keep original charge instruments or certified copies at its registered office. These documents must be preserved for a period of at least five years after the charge has been satisfied. They should contain all relevant details, including a description of the property charged and particulars of the charge itself. This requirement facilitates transparency and ensures that such documents are readily available for inspection by stakeholders or regulators when needed.

Penalty:

Lastly, companies and their officers must be aware of the penalties associated with non-compliance. Failure to register a charge within the stipulated time frame can result in a fine of SGD 1,000 for both the company and the responsible officers. In addition, failure to maintain charge records as required under Section 138 can lead to penalties of up to SGD 2,000. These provisions collectively underscore the importance of maintaining proper records and ensuring timely compliance with charge-related obligations.

Conclusion:

Creating and registering charges is a critical statutory responsibility for companies in Singapore. Proper compliance ensures that the company’s financial obligations are legally protected and transparent to stakeholders. From timely registration to post-satisfaction duties, each step must be diligently followed to avoid penalties and uphold creditor confidence.

If you're unsure about your obligations or require assistance with charge registration or statutory compliance, our team at Prolead can help. We ensure that your business meets all legal requirements seamlessly, allowing you to focus on what matters most—growing your business.