Working in Partnership with Our Clients 

Company Series

Company Charges

What are company charges?

It is not unusual to discover from a search on a company that there are company charges registered with the Companies Commission Malaysia. What do they mean?

A company may borrow money and in return allows its assets to be charged to its lender as collateral. When a company charges its assets, it implies that the lender will have the right to sell those assets charged and utilitse the proceed to settle debt owed to it by the Company. The right of this lender is secured and hence is superior over other unsecured creditors of the company.

Registration of company charges serve to notify parties subsequently dealing with the company of the existence of creditor(s) who have better priority ranking if the company is liquidated.

Must all secured creditors register charges in their favour?

Not all the charges created in favour of a company’s creditor need to be registered.

Charges listed in section 108(3) of the Companies Act, 1965 require registration. They are summarily described as follow:

1. Charges to secure debentures;

2. Charges to uncalled share capital of the company;

3. Charges or assignment if executed by an individual within West Malaysia and affecting property within West Malaysia is registrable under the Bill of Sales Act 1950;

4. Charge over land or interest related to land;

5. Charges on book debt of the company;

6. Floating charges;

7. Charges on calls for capital made but not paid;

8. Charges on the company’s ship or aircraft;

9. Charges on the company’s goodwill or intellectual property right ;

10. Charges on money deposited with a bank.

What do you need to know about registered charges of a company?

A search with the Companies Commission Malaysia will normally provide four vital information. If you are dealing with the company such information in assessing the financial strength of the company.

1.      the identity of the secured creditors.

2.      how many secured creditors.

3.      the amount each of the creditor is secured for

4.      the priority ranking among the secured creditors

What if a secured creditor did not register the charges created by the company in his favour?

There are two implications for non-registration of charges:

• That creditor will lose its ranking over other secured creditors on the asset charged.

• That creditor will also lose its right to the asset against other creditors when the company is in liquidation.

Is there a time limit to register a charge?

Particulars of a charge must be lodged with the Registrar of Companies within 30 days of its creation. In the event this is not done, an application may be made to the High Court to extend the time for lodgment. The court must be satisfied that there is good reason for the delay, that no person, since the creation of the charge, has obtained any interest in the property to be charged that would be prejudiced by an extension of time and that no shareholder or creditor would be so prejudiced.