The Gazette 1986

sepTemBER

1986

GAZETTE

The Conclusiveness of Certificates of Registration of Company Charges by Philip O'Riordan, BCL., LL.B., and Robert A. Pearce, BCL., M.A.*

T he purpose of the registration provisions of the Companies Act 1 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. 2 The value of the protection thus offered is qualified because not all forms of security require registration, 3 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. 4 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" 6 . 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. 7 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 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, 8 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) 0 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 to discover the extent of the charge. Some illustrations of the problem

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