Satisfaction and Modification of Charges: Closing Out a Loan on the MCA Record

Registering a charge when a loan starts is only part of the job. When the loan is restructured, increased or given extra security, the charge has to be modified. When it's repaid, its satisfaction has to be recorded. Skipping these steps is one of the most common reasons companies find stale charges on their MCA record years later, just when they need a new loan or want to close the company. This guide explains both.

Modifying a Charge

When a modification is needed

• The amount secured is increased or reduced.
• The interest rate, repayment terms or other key terms change.
• Assets are added to or released from the security.
• The loan is taken over by a different lender, in some cases.

How it's done

Under Section 79, a modification is registered the same way as a new charge: by filing Form CHG-1 within 30 days of the modification, signed by the company and the charge holder. The same extended windows and fees apply if it's late. The Registrar issues a certificate of modification.

Recording Satisfaction

When a loan is fully repaid, or the lender releases its security, the charge is satisfied. Under Section 82, the company must tell the Registrar within 30 days of the payment or satisfaction.

The process

1. Get a no-dues or no-objection certificate from the lender confirming the loan is fully repaid and the security released.
2. Prepare Form CHG-4 with the charge details and the date of satisfaction.
3. Have it signed by a director of the company, and by the charge holder.
4. File it with the Registrar within 30 days of satisfaction.
5. The Registrar records the satisfaction and issues a memorandum of satisfaction, and the charge shows as closed on the MCA record.

If the charge holder doesn't sign

If CHG-4 isn't signed by the charge holder, the Registrar gives them notice to show cause within 14 days why satisfaction shouldn't be recorded. If there's no valid objection, satisfaction is recorded.

If the company never files

Under Section 83, the Registrar can also record satisfaction on evidence that the debt has been paid or the property released, even if the company hasn't filed CHG-4, typically on an application with the supporting documents.

Why Satisfaction Matters

• A new lender checking the MCA record sees the assets as still pledged, which can delay or block a new loan.
• A company can't be struck off while it has open charges on record.
• Investors and acquirers reviewing the index of charges will ask about every open charge.
• Failing to report satisfaction can lead to penalties on the company and its officers.

Beyond the ROC

Recording satisfaction with the ROC doesn't release everything else:

• For a registered mortgage of property, a release or reconveyance deed may need to be registered with the Sub-Registrar.
• For an equitable mortgage, the lender returns the original title deeds.
• Banks register their security interest with CERSAI, the central registry, and should release it there too.
• For vehicle loans, the hypothecation endorsement is removed from the vehicle's registration with the transport authority.

Getting Help

Think Filing handles charge modifications and satisfaction filings, chases lenders for the no-dues letters and signatures needed, and clears stale charges from the MCA record, including through the Registrar where the lender is unresponsive.