Explain the provisions of the Companies Act (Cap 486, Laws of Kenya) relating to registration of charges.

Registration of Charges:
Under Section 96 (1) of the Act, a copy of every charge created the company must be delivered to the registrar for registration within 42 days of its creation. However, under sections 10Z, the High court is empowered to extend the duration on application if its satisfied that the non-presentation was accidental or due to in advertence or some other sufficient cause or does not prejudice the position of the creditors or shareholders of the company. Hence the charge must be delivered to the registrar within 42 days of its creation or such extended time as the court may grant on application failing which;

i) The charge is void as against the liquidator and money becomes payable immediately.
ii) The company and every offices in default are liable to a fine not exceeding sh.1,000.

Particulars to be registered;

Under section 97 (1) of the Act, it‟s the duty of the company to deliver to the registrar for registration particulars of every charge created the company. However, where registration is affected on the application of another person, the person is entitled to recover from the company the amount of any fees properly paid to the registrar.

The registerable particulars include:
1) Date of transaction
2) A description of the instrument creating the charge.
3) The amount secured.
4) A short description of the property charged or mortgaged.
5) Names, postal addresses and descriptions of the parties etc.

Effect of Registration of Charge;

Under section 99 of the Act, upon registration of the charge, the registrar issues a certificate of registration which is conclusive evidence that the requirements of the Act relating to registration of charges have been complied with. The certificate cures all defects. In the words of Buckley J in re Mechanizations Ltd 1966, “It shall be conclusive evidence that the particulars delivered to the registrar are accurate particulars
…. The effect of sec 99 appears to me to be that when the registrar gives his certificate, it is to be conclusive in fact not only that the registrar has entered the particulars in the register of charges but also that the steps preliminary thereto have been carried out”.

In National Provincial and Union Bank of England V. Charnley the instrument creating the debenture, omitted the security which was a motor vehicle. A third party purported to attach the motor vehicle in the event of default. Question was whether the motor vehicles in the event of default. Question was whether the motor vehicle could be attached. It was held that since the charge had been registered and a certificate issued, all the defects of the documents were used and the motor vehicle could be attached.

A similar holding was made in re Nye Ltd. A bank lent money to a company and obtained a charge over the company‟s land as security. The charge instrument was undated and the banks solicitor forgot to register it with the registrar of companies. Several months later the bank sought to enforce the security. The banks solicitor inserted a date on the charge, delivered it to the registrar where upon it was registered and a certificate issued.

The company‟s liquidator disclaimed liability on the ground that the charge was not registered within the required time. However, it was held that the charge was enforceable as it had been registered and a certificate issued curing all its defects.

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