The Gazette 1986

GAZETTE

sepTemBER

1986

The Conclusiveness of Certificates of

Registration of Company Charges

Philip O'Riordan, BCL., LL.B.,

and

Robert A. Pearce, BCL., M.A.*

he purpose of the registration provisions of the

Companies Act

is generally acknowledged to be

to give notice to prospective creditors of a company

of the existence of certain classes of securities which

may have been entered into by the company.

The value

of the protection thus offered is qualified because not

all forms of security require registration,

and even in

regard to registrable charges a 21 day period following

the creation of the security is allowed for particulars of

the charge to be delivered to the Registrar of

Companies.

Provided that the correct particulars are

timeously delivered, the charge ranks from the date of

its creation. A clear search does not therefore guarantee

the absence of registrable charges' and a creditor may

find that his charge ranks after a charge made before his

own, although only registered afterwards, but on the

basis of particulars delivered within the 21 day period.

The problem is aggravated by the great delays in

actually effecting registration. There is a gap of many

weeks between the lodgement of particulars of a charge

for registration and the appearance of the charge on the

company's file and the issue of the Registrar's

Certificate of Registration. Because it is not safe to rely

upon a clear search as indicating the absence of pending

charges, it is necessary to take other steps, such as

obtaining a certificate from the company's secretary

that there are no such charges. The necessity to do this

seriously reduces the value o f ' the registration

provisions.

An equally serious problem for the prospective

creditor is that the accuracy of the registered particulars

in the Register of Company Charges is not assured.

Lodgment of the prescribed particulars with the

Registrar is merely a prerequisite to the enforcement of

the charge concerned. Even if the registered particulars

are inaccurate or misleading, then in the absence of

some special consideration such as fraud, the chargee is

entitled to rely upon the instrument creating the charge

provided that the instrument, in itself, is effective to

create a charge. A subsequent chargee who is prejudiced

by this can normally neither challenge the validity of the

registration nor claim that the prior chargee is estopped

from relying upon the instrument of charge where this is

at variance with the recorded particulars. This arises

because under section 104 of the Companies Act, 1963

the certificate of the Registrar of Companies of the

registration of a charge is conclusive evidence that the

registration requirements of the Companies Act have

been complied with. It is the purpose of this article to

consider the consequences of this provision.

The Effect of a Certificate of Registration of a charge

The certificate issued by the Registrar under section

104 is not conclusive evidence of the accuracy of the

particulars contained in the Register of Company

Charges. If it were, the registered particulars would

prevail over the contents of the original instrument of

charge if there were any variance between the two. The

position would then be analogous to that in regard to

registered land where "the register shall be conclusive

evidence of the title of the owner to the land as

appearing on the register and of any right, privilege,

appurtenance or ,burden as appearing thereon"

Instead of this, the certificate of the Registrar of

Companies is merely conclusive evidence that a charge

has been properly registered. Pursuing the analogy with

charges over land, registration of company charges is

not in this respect unlike the system of registration of

deeds as it applies to mortgages and charges.

The

registration of a charge, like the registration of a

memorial of a deed, simply puts an enquirer on notice

that there is a mortgage or charge affecting the

property, and the enquirer must make further enquiries

to discover the extent of the charge.

Some illustrations of the problem

Two kinds of problem can arise from the conclusive-

ness provision in section 104. First, while an instrument

creating a charge over a company might sometimes

legitimately be left undated until it is intended that the

charge shall come into effect (rather like an assurance of

property may be drawn up and signed, but not

delivered) an abuse which is probably not uncommon,

enabling a charge to be registered outside the 21 day

statutory period without the necessity of making

application to court for an extension of time,

is for the

true date of creation of the charge to be concealed by

leaving the instrument of charge undated until a more

advantageous and more recent date is placed upon it.

This device succeeded in

Lombard and Ulster Banking

(Ireland) Ltd.

-v-

Amurec Ltd.*

Hamilton J. held that

the certificate of the Registrar was conclusive as to the

delivery of particulars within the 21 day period after the

creation of the charge, notwithstanding the fact that an

incorrect date had been inserted in the charge and in the

particulars delivered to the Registrar, the true date being

some 18 months earlier.

Secondly, injustice to a subsequent creditor may arise

from inaccuracies concerning the extent or nature of a

charge. For instance in

Re Mechanisations

(Eaglescliffe)

Ltd)

the amount charged was inaccurately stated. The

particulars supplied by the applicant mentioned the

principal sum only and not the interest. It was held that

even though the mortgagees were responsible for the

omission, nevertheless the charges were a valid security

for the full amount due under them. Similarly in

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