Despite the serious consequences of failure to register a Charge at Companies House, Section 895(f) of the Companies Act 2006 provides for a means to rectify the position by setting out its strict legislative provisions. Whilst previously regarded as a criminal offence by the company under the former provisions of the Companies Act, an amendment to the Companies Act stipulates that an order to have the statutory time period extended can be applied for by way of making an application to the Companies Court (within the Business and Property Courts of the High Court of Justice). A fee will be payable on filing an application. However, it is crucial to note that Section 859F of the Companies Act requires that special circumstances be met in order to file a court order.
The criteria to successfully apply for an order is stringent. The company or an interested person (the beneficiary of the charge or their representative) must submit a Claim Form in accordance with the Civil Procedure Rules Part 8, detailing the circumstances under which the charge was not correctly registered, within the specified time limit. You must also complete a Claim for an Order Extending Time for Registering a Charge comprising of a witness statement to evidence that the failure was ‘accidental or due to inadvertence or to some other sufficient cause’ or ‘is not of a nature to prejudice the position of creditors or shareholders of the company’. It is essential that special care is taken when preparing the evidence for the court, as the claimant is exposed to a further risk of the application being adjourned or dismissed if the evidence supplied is insufficient. There are further provisions by way of section 859M of the Companies Act should any notices or statements intended to be relied upon in the County Court at Central London require reparation. Thus, the stringent impediment to applying for rectification of failure to register a charge within the time constraints is somewhat reduced to a certain degree. However, a common pitfall is evident in that applicants often construe the procedure to be followed to have the time limit extended a mere formality. Whilst this may be the only recourse in certain circumstances, it ought not to be deemed as a favourable option. The court will assess each matter on its own merits and on a case by case basis. It is also likely that the court will decide on the basis of whether it would be ‘just and equitable’ to grant an order.
It is mandatory to ensure that all parties upon which the application will have an impact are notified and more particularly, that the application and all corroborating evidence is provided to such parties for their sight. The parties will encompass other Chargors who have taken security over the company’s assets and the company if the application is submitted on its behalf. Prior to the hearing and in any case at least two clear working days prior, a statement confirming that the company is solvent must be provided to the court. The original charge instrument will need to be provided to the Registrar. If false or inaccurate information is provided, then this would amount to an offence under s1112 of the Companies Act 2006.
Once the hearing has taken place and if successful, two copies of the order will be provided. This will enable you to register the charge by attaching a copy of the order to the completed MR01. It is important to note that the form MR01 when accompanied by a court order cannot be submitted electronically.
In Anfield (UK) Ltd v Bank of Scotland plc 2010, the defendant bank had failed to register its own legal charge however the defendant bank was entitled to be subrogated and registered as the owner of a pre-existing legal land charge, which ranked in priority to charges in favour of other intermediate lenders. This controversial case has certainly given reassurance to lenders if they miss the deadline to register a charge. Nevertheless, the strict criteria in applying to the court to extend the deadline to register a charge must be adhered to.
Commenti