Extending Time to Register a Charge at Companies House: Tips and Pitfalls
If a company creates a charge, then section 859A of the Companies Act 2006 requires that the charge be registered at Companies House within 21 days. This much is known to most good conveyancers.
If the charge isn’t registered at Companies House within 21 days then it will not bind a creditor, a liquidator, or an administrator. In other words, the lender’s interest will be to a large extent unsecured. Not good news for the lender, and not good news for the borrower and their solicitor, who will probably be facing questions as to why the charge hasn’t been registered.
But what do you do if, for whatever reason, the charge has not been registered within 21 days? Thankfully, the Companies Act provides a way to remedy the situation. Section 859F gives the court the power to extend time if the court is satisfied:
(a) that the failure to deliver [the charge and supporting] documents—
- was accidental or due to inadvertence or to some other sufficient cause, or
- is not of a nature to prejudice the position of creditors or shareholders of the company, or
(b) that on other grounds it is just and equitable to grant relief.
An application is made to the Central London County Court, it is heard as part of a bulk list at 11am on a Monday, the extension is granted, and all should be well. Yes, in theory. Unfortunately, in reality the process of applying for an extension can easily turn into a trip down the rabbit hole, if (mixing animal metaphors) the ducks are not lined up properly from the outset. The reason for this is that many solicitors are not familiar with applications under section 859F, and (to my knowledge) no one has yet published a simple and straightforward guide to what needs to be done to get an application home. As such, while it is unusual for applications to be dismissed outright, applicants can find themselves getting adjourned again and again, as district judge after district judge finds something to criticise about the application.
In writing this article, I hope to give solicitors preparing applications some pointers as to what they should, and what they should not, be doing. So, here are the seven key rules of section 859F applications:
1. Make the application in the correct form
An application should be made by Part 8 claim form. It should be accompanied by a completed copy of Appendix A, which can be obtained in template form here (but see the warning about this template below). A judge will expect to see an application in the correct form, including Appendix A. If you do not have Appendix A, you can expect your application to be adjourned for Appendix A to be produced.
2. Make sure the form contains all the right information
This is a key point. For whatever reason, the approach of the judiciary to these applications can sometimes be an exemplification of legal pedantry. If your Claim Form or Appendix A contains errors, you can expect to have your application adjourned, in order for the errors to be rectified. If you are really unlucky, you will go back after your application has been adjourned once, to find that a different judge finds different errors, and adjourns you off for those to be corrected. The obvious solution is to get all the information right in the first place.
Here are two typical problems that can lead to an application being kicked into the long grass:
(A) Reference to incorrect sections of the Companies Act
Earlier, I linked to HMCTS’s website, which has a template Appendix A. If you’re completing a document based on HMCTS’s own template, you ought to be on pretty safe ground, right? Wrong. The Appendix A on the page to which I linked will in most cases be out-of-date. This is because it seeks an order extending time ‘pursuant to section 873(2) of the [Companies] Act’. However, the power to extend time is now found in section 859F, which replaced section 873 with effect from 6 April 2013. If your charge was dated prior to 6 April 2013 then you should still apply under section 873. However, if your charge is later than that, then you are applying under section 859F, and your applications should say so, and should not mention section 873 (the section which dare not speak its name, so far as most applications are concerned). If you do say that you are applying under section 873 when you should be applying under section 859F, then the likely outcome will be an adjournment for you to amend this.
Similarly, the template Appendix A refers to ‘the time for registration in the manner required by Section [860 or 862]’. This is again out-of-date. If you are seeking an extension of time to register a charge, then it is neither section 860 nor section 862 that you should refer to here, but rather section 859A. You can still use the Appendix A in the link, but make sure to correct these errors first.
(B) Getting names wrong
Your application will certainly need to name the company which granted the charge, and the lender in whose favour the charge was granted. Get their names right! By this, I mean that if the company granting the charge is called John Smith Barrister Limited, then call it that. Don’t call it ‘John Smith Barrister’. Don’t call it ‘John Smith Barrister Ltd’ (Ltd and Limited are different words, and you need to get them the right way around in an application of this type). Don’t feel that you need to refer to the directors or add them as parties (an application in which the Claimant was referred to as ‘John Smith Barrister Limited with John Smith acting as director’ did not find favour with the judge). Similarly, you need to get the identity of the lender right. A lot of mortgage lenders have trading names which are different from their actual names. A lot of applications are adjourned for amendment because the Claim Form and Appendix A use the trading name, not the actual name. For example, if Big Mortgage Lender Limited trades as Cheap Mortgages, then don’t just put ‘Cheap Mortgages’ in the Claim Form or Appendix A. Put ‘Big Mortgage Lender Limited, trading as Cheap Mortgages’.
3. Explain why you need an extension of time
Earlier, I set out the statutory test that the court will apply. While this is a broad test, the court will most commonly be assessing whether the failure to get the charge registered on time ‘was accidental or due to inadvertence or to some other sufficient cause’. Usually, it will be. But you need to show the court why this test is met. This requires a witness statement, usually from the conveyancing solicitor, to explain what went wrong. Such a witness statement should explain exactly what went wrong. It should not just repeat the statutory formula – doing this will lead to you being adjourned in order to file further evidence. Your witness statement should explain precisely why the documents were not registered within 21 days. This requires openness and honesty. If the conveyancer simply overlooked the requirement because they were busy, or because they did not know that this had to be done, then say so. Don’t try to cover up mistakes; the section 859F process exists because we all make mistakes, and this is a quick way to correct them.
4. Exhibit the charge
An application should be accompanied by a witness statement exhibiting a copy of the charge. Usually, this can be dealt with as part of the statement that explains why you need an extension of time. But in any case, you need a statement exhibiting a copy of the charge. If you don’t have this, a judge is likely to adjourn your application off for such a statement to be produced.
5. Have the original charge at the hearing
The first ever time I went along on an application of this kind, I did not have the original charge with me. I didn’t know that I needed it and neither did my instructing solicitors. At 11am I was called into court, along with about eleven other barristers, all of whom were making similar applications. I was someway down the list. As the barristers above me in the list made their applications, I realised that sooner or later every one of them said something like ‘here is the original charge, sir’, and handed it up to the district judge. Unsurprisingly, when my turn came and I did not have it, I was adjourned off for it to be produced.
The moral of this story is that judges want to see the original charge. They want to physically hold it, compare it to the copy that has been exhibited with the application, and ensure that all is above board. I have even watched as a judge ran his finger over the document that had been handed to him, before saying that he was not satisfied that it was genuinely the original charge, because he could not feel the indentation of the pen on the signatures! So, make sure that whoever is going to court has the original charge in their possession. If the original charge no longer exists, then the best alternative is to produce a certified copy, with a witness statement explaining why the original cannot be produced.
6. Prove that the Company is solvent
If you want your application granted without hiccup, then you need evidence that the company that granted the charge is solvent. This can be proved by obtaining a statement signed by a director, confirming that:
(a) No winding-up order has been made, nor has any resolution for winding-up of the Company been passed.
(b) No winding-up petition is pending in respect of the Company.
(c) No notice of a resolution to wind up the Company has been given.
(d) The Company is continuing to carry on business.
(e) There are no unsatisfied judgments against the Company, and no creditor is in a position to obtain a judgment against the Company.
Not too difficult, but if you don’t confirm these matters by a statement, then your application is likely to be adjourned off. Note that your evidence of solvency should be dated within the 14 days prior to the hearing, and that if you are adjourned off for any reason, then you should obtain fresh evidence of solvency, which should itself be dated no more than 14 days prior to the new hearing.
7. Give counsel express authority to amend
As I sat at the back of court one summer’s day, waiting for my case to be called on, an application came before the judge which was crying out to be allowed. The only problem was that Appendix A referred to the wrong section of the Companies Act (see above). Personally, I don’t see why this is a problem – if an application asks the court to exercise a power that it demonstrably has, why should it matter that the application alludes to the wrong section? Unfortunately, the judge did not see it that way. She wanted it amended. She asked counsel if he had express authority to amend. ‘Not express authority, no’, came the reply. ‘Oh dear,’ said the judge, ‘well, I’ll put you to the bottom of the list, and if you can get express authority before lunch then I’ll allow you to amend and grant the application. Otherwise, I’m afraid that you’ll have to go off until November’.
Whether the barrister ever got his order, or whether he had to return in November, I don’t know. But this illustrates an important point: if your application contains one minor drafting error, then it can be fixed by amendment, which can be made at court if necessary. But if you are sending counsel, then you need to make sure that they have the power to amend at court. Otherwise, you could be looking at an adjournment. So why not stick something like ‘counsel is authorised to amend the application, should it be deemed necessary’ at the end of the instructions?
Liam Varnam (2007 call) has extensive experience of company and property matters, including applications under s. 859F of the Companies Act. Together with the other members of Fenners Chambers’ property and commercial teams, he accepts instructions across the whole range of company law and property matters.