Creating and Registering Charges in Singapore: Guide for Companies

As a business owner in Singapore, you might find yourself needing a loan from the bank to grow your business. When considering whether and how much of a loan to extend to you however, a creditor’s primary concern is always that the loan is repaid.

The creation and registration of charges is one way by which a creditor can be assured that the debt owed will be repaid.

What is a Charge?

A charge is a form of security interest usually taken by a creditor to secure repayment of a loan.

The creditor usually creates a charge over an asset (which will be considered a “charged asset”) that the debtor owns, and if the debtor defaults on the loan, the creditor may take control of the charged assets, sell them, and apply the proceeds of the sale of those assets to repay the outstanding debts owed.

Categories of charges: fixed and floating

There are two categories of charges:

1. Fixed charges; and
2. Floating charges.

The main difference between both categories of charges lies in whether the debtor is able to freely, and without the creditor’s consent, control and manage the charged assets.

A fixed charge is a charge secured on fixed assets, or assets which are more permanent (e.g. land, piece of machinery, shares, etc.). Once a fixed charge is created, the debtor cannot deal with the charged asset freely without the creditor’s consent.

For example, if a fixed charge has been created over office equipment, the debtor needs the creditor’s consent to sell the equipment, since the creditor also has an “interest” in the asset.

On the other hand, a floating charge is a charge secured on what is usually a pool of non-specific assets or generic categories (e.g. inventory, book debts, undertakings).

A floating charge becomes (or “crystallises” into) a fixed charge upon the happening of certain defaulting events, such as the debtor ceasing to carry on his business, or going into liquidation. The events that will cause a floating charge to become a fixed charge will be provided for in the agreement between the parties when creating the floating charge.

The key characteristic of a floating charge is that the debtor is free to manage and even dispose of the charged assets in the ordinary course of business unless the defaulting event occurs.

Creation and Registration of a Charge in Singapore

How to create a charge

A debtor and creditor will typically enter into a loan agreement, which will detail the loan terms such as the:

• Loan amount
• Interest rates
• Repayment period

If both parties have agreed to create a charge, the loan agreement will also spell out the extent of rights that the creditor will have over the charged assets, including whether it will be a fixed or floating charge and the type of charge (see below).

Once the loan agreement is signed, and the debtor receives the amount stated in the loan agreement, the charge is created on the assets of the debtor.

What types of charges must be registered?

When certain types of charges are created, they must be registered with the Accounting and Corporate Regulatory Authority (ACRA) within 30 days of their creation (for charges created in Singapore), or within 37 days of their creation (for charges created outside of Singapore).

A charge is created outside Singapore if the loan agreement was entered into outside Singapore.

This requirement of registration applies to all Singapore-registered local and foreign companies that want to create charges.

The following charges must be registered:

1.      A charge to secure any issue of debentures;
2.      A charge on uncalled share capital of a company;
3.      A charge on shares of a subsidiary that the company owns;
4.      A charge created or evidenced by a bill of sale;
5.      A charge on land;
6.      A charge on book debts of the company;
7.      A floating charge on the undertaking or property of a company;
8.      A charge on calls made but not paid;
9.      A charge on a ship or aircraft; and
10.      A charge on intellectual property.

Two specific types of charges do not have to be registered:

1.   A shipowner’s lien created by a company on or after 1 October 2018; and
2.   A charge created at any time on or after 1 May 2009 that has to be registered under the International Interests in Aircraft Equipment Act 2009.

How to register a charge

To register a charge, the company director or any authorised company officer may submit an application to ACRA with your CorpPass through BizFile+ for a fee of $60.

Alternatively, you may engage the services of a registered filing agent (e.g. a corporate secretarial firm, law firm or accounting firm) to submit an online application on the company’s behalf.

After the application has been submitted, it will be processed. When the application has been approved, ACRA will send an email notification to confirm the registration of the charge. On its end, ACRA will maintain a register of charges to keep track of the details of the registered charge.

However, apart from keeping a record of the transaction with ACRA, you should also keep a copy of the signed loan agreement and maintain a register of charges within your own company, containing the following details:

• Name of the creditor;
• Amount and currency of the loan obtained;
• Terms of repayment;
• Type of assets secured;
• Details of the charge created; and
• Date of satisfaction of charge (explained below)

You can also purchase a “Certificate Confirming Registration of Charge” which certifies that a charge has been registered with ACRA. The certificate can be purchased via BizFile+ for $50.

Outcome of late or non-registration of charge

Failure to register the charge on time, or failure to register the charge at all, are both offences.

If convicted, officers of the company shall be liable to a fine up to $1,000 and also to a default penalty. Additionally, the charge will be void, meaning that it will be treated as not having been created in the first place.

For charges created in Singapore, if you know that you are unable to register the charge within 30 days of its creation, the company may obtain a court order for an extension of time to register the charge. The court will decide how much extension of time to grant.

However, the court must be satisfied that the late registration or omission/mis-statement of any particular with respect to the charge was:

• Accidental;
• Due to inadvertence;
• Due to some other sufficient cause;
• Not of a nature to prejudice the position of creditors or shareholders; or
• On other grounds that makes it just and equitable to grant the extension of time.

On the other hand, for charges created outside of Singapore, if you cannot register the charge within 37 days of its creation as mentioned above, you will also have to obtain a court order for an extension of time. In this case, once an extension of time is granted, the company is given up to 3 months to register the charge.

Variation of a Charge

Even after a charge has been registered, you can still enter into an agreement to vary the terms of the original registration (e.g. the amount secured, or a change in the creditor). You can vary the charge through BizFile+ using your SingPass or CorpPass, and no fees are payable for filing this transaction.

Satisfaction of a Charge

A charge may be satisfied either when the debt has been paid up in whole or in part, depending on the terms of satisfaction agreed on in the loan agreement. The effect of this is that any assets previously subjected to the charge will now be released from it.

When a charge has been satisfied, you will have to inform ACRA to release the charge via BizFile+ using your SingPass or CorpPass. There is no fee for this transaction. Upon successful filing, the charge will be removed from ACRA’s register of charges.

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While it is possible to complete all the stages listed above by yourself, because of the time urgency in registering a charge post-creation and possibly tedious requirements of each step from creating, registering to releasing a charge, you should get in touch with a professional corporate secretarial firm who can assist you with the process.

A corporate secretarial firm can help you keep track of the relevant deadlines and handle the company’s compliance with the regulations pertaining to the creation of charges.

For more information, you may wish to refer to our other article on how a corporate secretarial firm can assist in the administrative functions of your company.