On 24 July 2006, the DTI published for consultation proposed restatement clauses for the registration of company charges section in the Bill. The new wording will be contained in Part 26 of the Bill and, while the existing Companies Act 1985 wording has been moved around and simplified in places, the proposed amendments do not significantly change the existing law.
In essence, the types of charges requiring registration and the 21-day registration period following creation of the charge have not been changed. The most practical difference is that, once the Bill becomes law, lawyers will no longer file a Form 395 to register their client's security, but rather a Form 864 (unless the clause numbers in the Bill change). In Scotland, a Form 410 will become a Form 882.
This lack of substantive change may be surprising because, in August 2004, the Law Commission published a report on the practice of registration of charges, which recommended various changes. The key proposals included:
- Charges over land would only require to be registered once as the Land Registry and Companies House would share information;
- The introduction of a new online system which would mean charges could be registered instantaneously and for a lower cost;
- Removal of the 21-day time limit for registration and the introduction of the possibility of registering in advance of the transaction.
The DTI published a consultation paper in July 2005 to gauge opinion on the Law Commission's proposals and the response it got was mixed. The Government has therefore decided to restate the existing law in the Bill.
Nevertheless, there are two points to note in the draft clauses, which suggest that some reforms may follow:
- Charges which currently require registration in second registers may become registrable only once. Charges over certain assets – in particular, land, but also other assets such as ships and aircraft – currently require registration at Companies House as well as registration in other registers. The new draft section 897 empowers the Secretary of State to make provision for facilitating information sharing between different registries and therefore a charge properly registered in one register will not require a second registration at Companies House.
- The Secretary of State is also given a general power to amend Part 26 (relating to Registration of Charges) by regulation. Such regulations will be subject to what is called "affirmative resolution procedure", which means that they must be subject to debate in parliament, however, the mere insertion of the clause suggests that reform may be considered in the future.
In summary, although the changes would not appear to be substantive, those concerned with the registration of charges would be well advised to familiarise themselves with the new provisions as the existing clauses of 395-410 of the Companies Act are not simply restated.