Companies Act 2014
Charges created by a company: changes to filing procedure and priority rules.
The Companies Act 2014 was signed into law by the President on 23rd December 2014 although it will not commence until a Ministerial order issues. The Act is expected to be brought into force by Ministerial order on 1st June. It is the first major remodelling of our company law since the 1963 Act which itself substantially followed the UK’s 1948 Act.
One change that will be of particular interest to lenders and companies that borrow or give security will be the new regime introduced for the registration of charges.
Under Section 99 of the Companies Act 1963, a charge created by a company is void against a liquidator and any creditor of the company unless particulars of the charge are filed with the Registrar of Companies within 21 days of creation of the charge. Once registered, priority between charges created by a company is governed by the date of creation. Section 409 of the Companies Act 2014 outlines the new regime for registration of charges and new rules for priorities.
Charges will no longer have priority from their date of creation but from the date of registration of particulars. However, to address the problem that lending institutions might have with this, there are now 2 ways to file particulars of a charge:
- File a C1 as we do now (within 21 days of creation but priority will only be acquired from date of filing); or
- New 2 stage procedure:
a. File particulars in a Form C1A (notice of intention to create a charge); and
b. Within 21 days of filing the C1A, file a Form C1B (confirming the creation of the charge).
If the 2 stage procedure is used, priority will be acquired from the filing of the C1A (provided the C1B is filed within 21 days). For lenders the 2 stage procedure is likely to be the preferred option in most cases where funds are to be advanced immediately.
Forms can be filed electronically using a ROS signature but note that where manually filed signature pages are used the priority date will be the date the manually filed signature page is received so if a C1A is to be filed on the morning of or even a couple of days before a closing, a ROS signature should be used.
Drafts of the new forms are available on the CRO website. A Form C1A may be signed by the company secretary, a director or a solicitor acting on behalf of the company and/or a person duly authorised on behalf of the charge holder. Where the Form C1A has been signed by either the company or the charge holder only, then the Form C1B must be signed by the other party to the charge. When acting for a lender or charge holder advancing funds, the most practical approach is likely to be to have the borrower’s solicitor file an agreed C1A before closing, allowing the lender’s/charge holder’s solicitor file the C1B as a sole signatory.
The current practice of one party only (usually the holder of the charge) signing a Form C1 and submitting this with a certified copy of the charge instrument can no longer be used. The new C1, if used, is to be signed by the company secretary, a director or a solicitor acting on behalf of the company and by a person duly authorised on behalf of the charge holder/lender.
Other articles related to the Companies Act 2014:
Directors’ loans to companies from 1st June 2015 – Companies Act 2014
The conversion option affects all companies – Companies Act 2014