Definition

As and when large and small companies require funds for financing their projects and running their business; they approach the banks/financial institution for borrowing loans. The financial institutions/banks do not lend their monies unless they are sure that their funds are safe and they would be repaid as per agreed repayment schedule along with payment of interest. In order to, secure their loans, they resort to creating right in the assets and properties of the borrowing companies, which is known as a charge on assets. This is done by executing loan agreements, hypothecation agreements, mortgage deeds and other similar documents, which the borrowing company is required to execute in favour of the lending institutions/ banks etc.
It is compulsory for all companies who borrow funds, to register the creation of charge with the ROC.