Keeping the Register of Charges Up to Date

A company that borrows often gives the lender a claim over its assets. In Mauritius that claim is called a charge, and the register of charges in Mauritius is the record that shows which assets are encumbered, in favour of whom, and for how much. It is one of the documents a bank, an incoming investor or an auditor asks to see first.

This guide covers three things: which securities belong in the register, how a charge is put on the public record through the Registrar of Companies, and how to run the company's own internal register so that it matches what has been filed. For the other books every company keeps, see statutory registers. Nothing here replaces the analysis of an adviser who has read the actual security documents.

What a charge is and why the register matters

A charge is a form of security. The company (the chargor) gives a creditor (the chargee) rights over an asset, so that if the debt is not repaid the creditor can look to that asset first. The company stays the owner of the asset unless and until the security is enforced.

Two records exist, and they serve different readers:

• The public record at the Registrar. Registration of a charge through the Corporate and Business Registration Department (CBRD) tells third parties that the asset is encumbered. It protects the lender's ranking and warns anyone dealing with the company.
• The company's internal register of charges. This is the company's own list, kept at its registered office or another place permitted by the Companies Act 2001. It lets the board see its commitments at a glance and lets shareholders and creditors inspect them.

The two should tell the same story. When they do not, the gap usually appears at the worst moment: a refinancing, a sale of the business or an audit.

Which securities belong in the register

The test is substance, not the label on the document. A security that gives a creditor rights over company property, to be satisfied from that property if the company defaults, is a candidate for the register. Typical examples:

Some arrangements sit close to the line: retention of title clauses, assignments of receivables, and security held in a foreign jurisdiction over a foreign asset. Whether they must be registered depends on their terms and on the law that governs them, so they are best reviewed with an adviser before signature rather than after.

Charges you inherit

A charge can also arrive with an asset. If the company buys property that is already encumbered, that existing charge should be recorded and tracked as well. The same applies after a merger or a restructuring that moves assets from one company to another.

How a charge is registered with the Registrar

Registration is a filing exercise with a statutory deadline. The deadline runs from the creation of the charge, and missing it can affect the security and expose the company and its officers to consequences. Check the exact period in the current Companies Act 2001 for the type of charge involved, and diarise it the day the facility is agreed.

Filings with the CBRD are made through CBRIS, the secure web application used for statutory forms and payments. Auditors, corporate service providers, law firms, registered agents and companies at or above the turnover threshold set in the Companies Regulations must use the online service for filings and payments.

The board step is easy to skip and costly to omit. Directors who authorise a charge are exercising their powers, and the reasons for doing so belong in the minutes. See board resolutions and directors' duties for how that decision is recorded and the standard against which it will be judged.

Running the internal register

The internal register is a simple document, but it must be complete and dated. For each charge, record at least the following:

• the date of creation of the charge and the date it was registered;
• the name and address of the chargee, or of the trustee for debenture holders where there is one;
• a short description of the secured asset or class of assets;
• the amount or the maximum amount secured, and the currency;
• the nature of the charge (mortgage, fixed, floating, pledge) and any ranking or priority arrangement;
• the registration reference given at filing;
• the date and details of any variation, partial release or full discharge.

The register is a living document. A charge that has been repaid should not simply disappear from the list: mark it as discharged, record the date, and keep the lender's release alongside it. That history is what shows an auditor that nothing was forgotten.

Who keeps it

The board is responsible for the company's records, even when the work is delegated. In many companies the company secretary or the FSC-licensed corporate service provider (Management Licence) maintains the register on the board's behalf. Delegating the task does not delegate the responsibility, so the board should receive an updated extract at least once a year and whenever new borrowing is approved. If you are weighing outside support, how to choose a corporate services provider sets out what to ask.

How long to keep the paper

Keep the register itself, the security documents and the filing evidence for as long as the charge is live, and for a sensible period after discharge. As a reference point from related regimes, the share register must be kept for at least 7 years after the transaction concerned, and customer due diligence records under the FIAMLA for at least 7 years after the end of the business relationship. Those figures do not set the retention period for charges, but they show the order of magnitude regulators expect. Company records: what to keep and for how long gives a practical retention approach.

Updating the register when something changes

Events that should trigger an update include:

1. A new loan or facility that comes with security.
2. A variation such as an increased limit, a change of secured asset, or a change of lender after an assignment.
3. A partial or full repayment and the release of the security.
4. A change in the company's own details, such as a change of name. A change of name takes effect on the date of the certificate issued by the Registrar, after a special resolution of the shareholders unless the constitution provides otherwise, and existing security documents should be updated to match.
5. A change of registered office. The registered office is the address for service of legal documents. A change is notified to the Registrar and takes effect on a date not earlier than 7 days after the notice is registered; the internal register should show the right address for inspection.
6. A change of director or secretary, which must be notified to the Registrar within 28 days. The new officer should be briefed on the charges that bind the company.

A useful habit: add the register to the yearly compliance calendar and to the annual compliance checklist so that it is reconciled every year with the lenders' statements and the accounts.

Reconciling charges with the accounts

Charges affect the financial statements. Secured borrowing, pledged assets and contingent liabilities under guarantees normally need to be disclosed in the notes, and the auditor will compare the register with the confirmations received from banks. An undisclosed charge is a common cause of audit queries. Plan a yearly reconciliation as part of preparing annual financial statements, and tell the auditor about every new security as it is granted rather than at year end. The scope of the audit itself is explained in audit requirements.

Charges also bear on distributions. Before paying a dividend, directors assess whether the company can meet its debts as they fall due, and secured debt is a central part of that picture. See the solvency test for how the assessment works.

Consequences of getting it wrong

The practical risks are of three kinds:

• For the lender, an unregistered or late-registered charge may rank behind other creditors or be open to challenge, which in turn makes lenders cautious about refinancing the company.
• For the company and its officers, failure to comply with filing and record-keeping duties can lead to penalties, and a company that cannot show clean records finds that banks and buyers slow down. The overview in penalties for non-compliance gives the wider picture. As an indication of scale, failing to notify a change of director or secretary exposes each director and the secretary to a fine of up to Rs 200 000.
• For the sale of the business, a buyer's due diligence will test the register against the Registrar's file. Differences have to be explained and fixed before completion.

Practical checklist

• List every loan, overdraft, guarantee and lease that comes with security
• Confirm that the board approved each charge and that the minutes say why
• Check that each charge was filed with the Registrar within the statutory deadline
• Enter each charge in the internal register with dates, chargee, asset and amount
• Mark discharged charges and keep the lender's release
• Compare the register with bank confirmations and the draft accounts
• Update the register after any change of name, address, director or secretary
• Give the board an extract once a year and after each new facility
• File the signed documents and the filing receipts with the company records