The Companies Act 2014 has introduced:

• New rules governing what security needs to be registered,
• A new regime governing priority of charges, and
• A new filing process for submission and registration of charges with effect from 1 June 2015 (the ‘effective date’). 

The provisions relating to charges and debentures are contained in part 7 of the act.

Historically, particulars of only certain charges listed in legislation (section 99 of the Companies Act 1963) were required to be delivered to the Companies Registration Office (CRO) in order to ensure the charge was valid. One of the changes in the act is a broadening of what needs to be registered in the CRO. The registration rules are contained in sections 408 and 409 of the act and provide that charges over all categories of assets are now registerable save for certain specific exclusions (including, for example, a charge created over an interest in cash or in shares in an Irish company). Thus, particulars of every charge created by a company over any property need to be delivered to the CRO, save for charges over non-registerable assets. The new rules relating to what needs to be registered apply to all company types from the effective date, including companies that have yet to convert to a designated activity company or LTD under the act. Failure to register a charge has the effect of making the charge void against a liquidator or any creditor of the company.

Priority of charges is now determined by the date and time of receipt by the registrar of a filed charge submission and is no longer governed by the date of creation of the charge itself. The new priority provisions are contained in section 412 (3) of the act. The priority rules remain subject to any specific priority rules applicable to certain assets, for example, land under PRA/Registry of Deeds rules and/or any agreement governing priority between lenders. 

In addition to retaining the one-stage procedure of filing a Form C1 within 21 days of creation of the charge, section 409 of the act introduces a new optional two-stage filing procedure, whereby a notice of intention to create a charge (Form C1A), followed within 21 days by a confirmation of creation of that charge (Form C1B), can be filed. The act does not contain any equivalent to section 99(3) of the Companies Act 1963, under which it used to be possible to file a Form C1 outside of the 21-day period where the charge was created over property situated outside of the State.

Priority under the two-stage procedure is determined by the time and date of the filing of Form C1A. Priority under the one-stage procedure is determined by the date and time of filing of the Form C1. Thus, the two-stage procedure is accorded priority.

Both parties must sign the Form C1 if using the one-stage procedure. Under the two-stage procedure, if either party has not signed the Form C1A, then that party must sign the Form C1B so that both parties sign one or other of the forms. It is no longer possible to register a charge by having just one party sign the form and filing a certified copy of the relevant security document.

The committee is aware that certain lenders have indicated a preference for adopting the one-stage procedure for reasons of confidentiality and non-disclosure of impending charges against a company. A further concern raised by lenders is the requirement for charge forms (C1/C1A C1B) to be executed by both parties. A solution that has been adopted in practice is that the firm of solicitors acting for the lender may sign the form on behalf of both chargor (if so authorised) and lender. The CRO have stipulated that two different solicitors in a firm must sign if this approach is followed. In these circumstances, a lender’s solicitor will require the appropriate authorisation from the chargor in favour of the lender’s solicitor authorising the lender’s solicitor to: (a) sign or complete all security related registration forms, and (b) file same in the CRO. The lender’s solicitor may also require an indemnity (often contained in the body of the relevant security document) for acting on foot of such authorisation, combined with an acknowledgment that the chargor has not been advised by the lender’s solicitor, nor does the lender’s solicitor have any liability or responsibility to the chargor for failure to comply with the requirements.

Some lenders are being prescriptive about those procedures that should be followed when acting on their behalf in taking security. Accordingly, practitioners should consult with the guidance and instructions issued from their client in all instances.

All filings under sections 408 and 409 of the act are now required to be made online using the www.core.ie e-filing system. This is to facilitate the CRO in determining priority of filings. All practitioners should register for this system. The charge forms are signed by solicitors using a ROS certificate or sub-certificate, which must be applied for in advance with the Revenue Commissioners and issued to individual users within a firm.

Furthermore, as mentioned in a recent article from the Law Society eZine (October 2015), from 5 December 2015, the only login method available from ROS will be JavaScript. It is recommended that solicitors change their login to JavaScript well in advance of the deadline to ensure that the time limits for filing, among other things, Forms C1 and C1A/C1B are not missed. 

The committee is aware that certain practitioners have encountered some technical difficulties in implementing the new e-filing procedure and application for ROS signatures. The CRO have been helpful to date in assisting the profession and created a new contact specifically for e-filing issues – telephone 01 804 5374, 01 804 5307, 01 804 5355, or email electronic.filing@djei.ie – and have uploaded an explanatory video outlining the steps to be followed (see www.cro.ie/Annual-Return/Filing).