Companies Act Section 85

Comprehensive Explanation of Section 85 of the Companies Act: Company’s Register of Charges

Section 85 of the Companies Act establishes the legal requirement for companies to maintain a register of charges at their registered office. 

This register serves as an official record of all charges, including floating charges, that impact the company’s property, assets, or undertakings. 

The provision also outlines the requirement for preserving associated charge instruments and details the accessibility of these records for inspection by stakeholders. 

The section ensures transparency, accountability, and proper recordkeeping within a company’s financial and governance framework. The section is structured as follows:

Subsection (1): Obligation to Maintain a Register of Charges

1. Requirement to Maintain a Register

Every company is legally required to maintain a register of charges at its registered office.

The register must be maintained in a form and manner as prescribed by the relevant regulatory framework.

2. Contents of the Register

The register must contain complete details of:

All charges created by the company, including floating charges, that encumber any property, assets, or undertakings of the company.

Specific particulars of each charge, as mandated by law, ensuring a comprehensive record of financial encumbrances.

3. Retention of Charge Instruments

In addition to maintaining the register of charges, the company is required to retain a copy of the instrument that created each charge.

These charge instruments must be kept at the company’s registered office along with the register of charges.

The retention of these documents ensures that stakeholders can reference and verify the exact terms and conditions under which the charges were established.

Subsection (2): Accessibility of the Register and Instruments

1. Right to Inspect the Register and Instruments

The register of charges and the corresponding charge instruments must be made available for inspection during the company’s business hours.

The right to inspect these documents is granted to various categories of individuals, as detailed below:

(a) Members or Creditors

Any member (shareholder) or creditor of the company has the right to inspect the register of charges and the related charge instruments free of charge.

(b) Other Persons

Individuals who are not members or creditors of the company may also inspect the register and instruments.

However, such individuals must pay a fee prescribed by the relevant regulations to conduct an inspection.

This provision ensures that while transparency is maintained, access by external parties is regulated.

2. Reasonable Restrictions on Inspection

Companies are permitted to impose reasonable restrictions on the timing and manner of inspection.

However, these restrictions must be reasonable and cannot completely prevent access to the register or charge instruments.

Any restrictions imposed must be outlined in the company’s articles of association and should comply with applicable legal standards.

Objectives of Section 85

1. Transparency and Accountability

By requiring companies to maintain a detailed and accessible register of charges, this provision promotes transparency in corporate financial matters.

It ensures that all encumbrances affecting a company’s property, assets, or undertakings are properly documented and disclosed.

2. Accessibility for Stakeholders

The law grants members, creditors, and other interested parties the ability to inspect the register and related instruments.

This ensures that stakeholders can make informed decisions regarding their dealings with the company and protects their financial interests.

3. Documentation and Recordkeeping

The requirement to retain charge instruments alongside the register of charges ensures a comprehensive and verifiable record of all charges affecting the company.

Proper documentation enhances legal clarity, simplifies compliance, and mitigates disputes related to company charges.