In July 2001, Muungano Ltd obtained an overdraft from a bank upon deposit of title deeds and the execution of a memorandum of charge the memorandum was executed in due form the company but left undated. The overdraft continued and subsequently the manager of the bank filled in the date as 10th January 2002. The memorandum was then registered with the registrar of company‟s on 31stJanuary 2002and the registrars certificate to that effect was duly issued.
Discuss the validity of the charge
This problem is based on the effect of registration of a charge pursuant to the provisions of the Companies Act. Under Section 99 of the Companies Act upon registration of particulars of a charge the registrar issues a certificate of registration, which is conclusive evidence that the provisions of the Act have been complied with. This section has been interpreted to mean that the certificate of registration is conclusive evidence that the provisions of the Act relating to the preparation and registration of charges have been complied with (in reMechanizations Ltd).
In this case since the memorandum of charge was duly executed the company and registered thereafter and a certificate of registration issued the registrar, the charge is valid in all respects and is therefore enforceable since its defects were cured its registration.
This position is consistent with the decision In re C.L. Nye Ltd where a bank lent money to C.L. Nye Ltd and obtained a charge on the company‟s land as security.
The charge contract was undated and the bank solicitor forgot to register it with the Registrar of Companies. Several months later the bank sought to realize its security. The solicitor inserted that day‟s date on the charge contract delivered it to the registrar for registration and obtained a certificate. The company‟s liquidator argued that he could ignore the charge because it was not registered within the requisite time. However, it was held that the certificate was conclusive evidence that the provisions of the Act relating to registration had been complied with i.e. it was registered within the requisite time hence the charge was valid.
This position was also upheld in National Provincial and Union Bank of Englandv Charnley.