February-12-2020 in Banking & Financial Services

This article appeared in The Law Society Gazettte, January/February 2020 edition. 

Section 416 of the Companies Act 2014 requires that evidence of satisfaction of a registered charge in the Companies Registration Office (“CRO”) must be submitted in order for the Registrar to mark a charge as satisfied on the register.

A registered charge in the CRO is evidenced as satisfied either fully or partially by the lodging of a:

  • Form C6 – full satisfaction; or
  • Form C7 – partial satisfaction,

signed either by an authorised signatory of the company or the registered charge holder.

In the event that the Form C6 or Form C7 is signed by an authorised signatory of the company (and not signed by the registered charge holder) and lodged in the CRO, the Registrar will issue a 21 day notice to the registered charge holder. The purpose of this notice is to inform the registered charge holder that a Form C6 or Form C7 has been lodged by the company and that, unless an objection to its registration is received within 21 days, the charge will be marked by the Registrar as fully or partly satisfied. 

This process works well for the most part however where a charge registered in the CRO has been transferred to a third party and the CRO has not been notified of the change of ownership, there is a risk of the charge being marked as satisfied by the Registrar when it has not been released by the current owner of the charge (as they will not have been notified).

The Registrar is only obliged to issue the 21 day notice to the registered charge holder and not the acquirer of the charge.  The registered charge holder may not respond to the notice and, if an objection is not received, the charge will be marked as satisfied after the expiry of the 21 day notice period.

CRO Approach

Guidance note 3 on the Form C6 and guidance note 5 on the Form C7 provide that where the charge holder has changed since the registration of a charge then a Form C17 evidencing the transfer of the charge should be lodged before the Form C6 or Form C7 is lodged.

The Form C17 must be signed by both the registered charge holder and the current owner of the charge whether that is the party that the registered charge holder transferred to or not. 

Our attention was alerted to scenarios arising on portfolio loan sales whereby ownership of debt and supporting charges were changing hands but Form C17s were not being lodged in the CRO.  As highlighted herein, there is no statutory basis for or obligation on the CRO to notify the current charge holder if it is not the registered charge holder. It should also be noted that no responsibility attaches to the CRO in circumstances where no Form C17 has been filed and the current charge holder is not notified.

Guidance

Practitioners should consider doing the following:

  1. If acting for a party acquiring a loan or other asset benefitting from a registered charge:
    1. clarifying if the vendor is the registered charge holder, and if not, insisting on a Form C17 being signed by an authorised signatory on behalf of the registered charge holder and the vendor, as a condition precedent to completion of the acquisition.
    2. Ensuring that an authorised signatory of the vendor and of their own client (the acquirer) sign an additional Form C17 for registration following the acquisition.
  2. If acting for a company that intends repaying its debt to a current charge holder that is not the charge holder registered in the CRO:
    1. seeking a Form C17 (in addition to calling for a deed of release/discharge) that has been signed by both an authorised signatory of the registered charge holder and the current owner of the charge - being the party receiving funds and releasing the charge; or
    2. if the current charge holder refuses to provide a Form C17, practitioners should not make a commitment to their client to arrange for the satisfaction of the charge to be completed in the CRO as this may be outside their control.

If you have any queries in relation to the issues raised in this article, please contact Michael Hanley mhanley@hayes-solicitors.ie

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