Charges Section

9.9 Standard securities and the Consumer Credit Act 1974

Some creditors, normally those specialising in second mortgages, may apply for registration of a postponed credit agreement incorporating a standard security.

Such deeds will be acceptable where:

• the standard security is the primary deed, with the consumer credit agreement annexed to it; or

• the standard security is in gremio of an agreement

Such deeds will not be acceptable where the standard security is contained in a schedule annexed to the credit agreement and the agent should be informed that a credit agreement is not a registrable transaction. The standard security would have to be submitted as a deed on its own.

9.9.1 Schedule of conditions of loan

Some standard securities are accompanied by a schedule giving conditions of the loan. Such schedules will normally be referred to in the standard security, but may or may not be described as ‘annexed to’ the deed and may or may not be physically attached to the standard security. If the schedule is described as ‘annexed to’ and/or is physically attached to the standard security, it should be included in the charge certificate, but no mention of it need be made in the charges section entry or the certificate page of the charge certificate.

Schedules and annexations explains the circumstances where the schedule requires to be subscribed. Registration officers should particularly ensure that any clause which is required by statute to be included in the standard security (see paragraph Standard security) forms part of the subscribed deed.

9.10 Discount standard securities - see Discount Standard Securities under Council House Sales.

9.11 Standard securities by Limited Companies and Limited Liability Partnerships - confirmation of Date of Registration
A security by a registered company must be registered in the Register of Charges kept by the Registrar of Companies within 21 days of its date of registration in the Land Register. If the security is subsequently withdrawn from the Land Register, after its registration in the Register of Charges, the registration in the Register of Charges is ineffective and has to be cancelled. A fresh registration in the Register of Charges then has to be made after the security is re-presented in the Land Register. To prevent such problems, the Keeper has agreed to confirm the date of registration in the Land Register if a company security is involved and a confirmation is requested. In paragraph 5.48 of the Registration of Title Practice Book (second edition) agents are advised that the applicant should not request confirmation in a separate letter, but instead, at the top of the first page of the application Form 2, the applicant should write ‘confirmation is required’. The Keeper has undertaken to provide this service for the benefit of the legal profession but, as he has no duty to provide such a service, he will accept no liability for failure to do so.
To allow the agent to register the charge at Companies House within the statutory 21 days, confirmation must be issued to the applicant within a few days of receipt of the application by the Keeper. Accordingly, such applications should be treated with utmost priority. If for any reason confirmation has not been issued within 2 weeks of the date of the application, the registration officer should confirm the date of registration by telephone and fax the L19.

• Confirmation cases must be prioritised and dealt with immediately. The agent needs to know that the application will not be rejected. When the security accompanies a title, which will usually be the case, it will be necessary to check that the borrower’s title is also acceptable.

• In the case of a first registration, a plans registration officer will have to check that the subjects can be identified on the OS map. The search sheet should be checked and the closing note added.

• The confirmation officer must check that there are no other defects in the application that would lead to rejection of the application, albeit there may be a need to raise requisitions at a later stage. The officer can then issue a form L19, noting this on the title workdesk. The case can then be settled in the normal way.

• If a defect is identified in the application a requisition should be raised separate to the L19 confirmation letter.  Issuing a separate requisition removes the need to change the L19 to include the Keeper's authority for raising the requisition, the timescale for response and the consequence of non-compliance.  The L19 already includes a statement that confirmation of the date of registration is subject to compliance with any requisition; retaining that statement allows for further requisitions to be raised at a later stage of the process.

The requirements to be fulfilled by the company, and the implications for registration in the Land Register, will depend on (a) where the company granting the standard security is registered and (b) when the charge is created.

9.11.1 Companies registered in Scotland
In terms of section 878 of the Companies Act 2006, any standard security granted by a limited company registered in Scotland must be registered with the Registrar of Companies within 21 days of the date of creation of the charge. (For charges created prior to 1 October 2009, equivalent provisions in section 410 of the Companies Act 1985 apply).  The date of creation of a charge by way of a heritable security over registered property is the date of registration of the security in the Land Register.

Failure to register the charge in the Register of Charges will render the security void against a liquidator and any creditor of the company. Because of this the Keeper must be assured that a heritable security, or any charge, created by a company has been registered in the Register of Charges within the 21 days. The evidence necessary to prove this is the certificate of registration of charge issued by the Registrar of Companies, or a certified copy thereof, which certifies the date of registration in that register. If the certificate is submitted, and proves that the charge was registered within 21 days of the date of receipt by the Keeper of the application for registration of the standard security, registration may proceed with full indemnity. The certificate must be archived.

The Registrar of Companies counts the first day following registration of the deed with the Keeper as the start of the 21 days (e.g. standard security registered with Keeper on 30 May and registered with the Registrar of Companies on 20 June is acceptable). If presented outwith 21 days the Registrar of Companies will return the copy of the deed, without issuing a certificate, and advising that a court order would be required instructing the Registrar of Companies to accept a late registration. In these circumstances the Keeper would require both the certificate of registration and a certified copy of the court order.
If this certificate is not produced, the Keeper cannot register the security with full indemnity. If the company went into liquidation the creditor under the security might not be able to enforce it and on failing to do so would have a claim against the Keeper unless indemnity had been excluded (for exclusion note see Exclusion of indemnity).

9.11.2 Execution of the certificate of registration of charge
The Registrar of Companies issues a certificate of registration of charge to the agent which in turn is forwarded to the Keeper to demonstrate that the charge has not been rendered void.

Section 418(2) of the Companies Act 1985 provided that the Certificate of Registration of Charge ‘shall either be signed by the registrar, or authenticated by his official seal’. Formerly it was the practice as regards authentication for all such certificates to be signed on behalf of the Registrar of Companies. The current practice is simply to seal the certificate. No signature accompanies the seal. In terms of section 418(2) of the 1985 Act, either method of execution was valid.

From 1 October 2009 section 418 of the 1985 Act is repealed and section 885(5) of the Companies Act 2006 applies. It provides that the Certificate of Registration of Charge 'shall be signed by the registrar or authenticated by the registrar's official seal'.

9.11.3 Requisitioning the Certificate of Registration of Charge
When a Registration Officer is registering a security or other charge created by a company, if the Certificate of Registration of Charge is not submitted, it must be requisitioned, for the reasons given in Companies registered in Scotland above.

When a form L19 is issued to the agent to confirm the date of registration of the standard security, the agent is also requested to exhibit the Certificate of Registration of Charge to the Keeper. If no response whatsoever has been received by the Keeper within 60 days, the legal registration officer should proceed to complete registration of the standard security with an exclusion of indemnity (see Exclusion of indemnity).

9.11.4 Error in security deed
On the registration of a charge in the Companies Register a copy of the security creating that charge is lodged with that Register.
Problems have arisen when it has been discovered subsequent to the lodging of the copy security deed in the Companies Register that the security deed requires to be amended. It is not an option for the security deed to be amended and the original date of registration in the Land Register to be retained as the deed would be at variance with what has been presented to the Companies Register.

In such circumstances therefore, the application to register the security deed must be withdrawn and presented afresh with the amended security deed.

9.11.5 Companies registered outwith Scotland 

9.11.5.1 Position for charges created prior to 1 October 2009
The considerations in the preceding paragraphs apply to incorporated companies registered in Scotland (section 878 of the Companies Act 2006, or formerly section 410(5) of the Companies Act 1985 applies). Prior to 1 October 2009, these provisions also applied to companies registered outside Great Britain which have a place of business in Scotland (section 424 of the 1985 Act applies). ‘Great Britain’ in this context includes England, Wales and Scotland, but not the Isle of Man, the Channel Isles, Northern Ireland or the Republic of Ireland. In terms of the 1985 Act, a ‘foreign’ company which has a place of business within Great Britain was required to re-register in either England and Wales or Scotland and was allocated a company number by Companies House. The company then had to comply with the provisions of the 1985 Act and register any charges in the Register of Charges in Scotland or in England and Wales.

Where a company is registered in England and Wales but is granting a heritable security over property in Scotland, the security must be registered with the Registrar of Companies in England and Wales within 21 days of the date of creation of the charge. In terms of section 398(4) of the 1985 Act this is the date on which the deed is presented for registration. If the Keeper has confirmed the date of registration of the standard security but the certificate of registration of the charge has not been submitted within 60 days then indemnity should be excluded. For the avoidance of doubt, it is not necessary to register it also with Companies House in Scotland.

In cases where the company is a foreign company, that is incorporated outside Great Britain and not having a place of business in Scotland, a certificate of registration of charge will not be available. Companies registered in the Isle of Man, the Channel Isles, Northern Ireland and the Republic of Ireland are included in the definition of foreign companies.

The legal registration officer should:

• Check whether the agent has submitted a letter confirming that the company does not have a place of business in Scotland; if no such letter has been submitted, seek written confirmation from the agent that the company does not have a place of business in Scotland. The agent may be able to submit a written response from the Scottish Companies Registrar refusing to register the charge for this reason. This would also be acceptable to the Keeper, providing that it clearly states that the company does not have a place of business in Scotland. In either of these cases, the security can be registered without an exclusion of indemnity.
• Provide instructions that such letters are archived.

A letter from Companies House, or anyone else, advising that a security has been noted in the ‘Slavenburg Register’ does not constitute a Certificate of Registration of Charge. The ‘Slavenburg Register’ is a non-statutory register kept by Companies House where a note is made of foreign companies who attempt to register charges, but which are rejected on the basis that the companies are not registered in Scotland nor do they have a place of business in Scotland.

If the agent can neither confirm that the company has no place of business in Scotland nor provide a certificate of registration of charge, an exclusion of indemnity should be entered in the charges section and in the charge certificate in respect of the charge. A suggested style is:

Note: Indemnity is excluded in terms of section 12 (2) of the Land Registration (Scotland) Act 1979 in respect that evidence has not been produced to the Keeper that the granter of the above Standard Security has no place of business in Scotland for the purposes of section 424 of the Companies Act 1985 and in respect of any loss which may result from failure to register the said Standard Security in terms of sections 410 and 424 of the said Act.

9.11.5.2 Position for charges created on and after 1 October 2009

9.11.5.2.1 Companies registered in England and Wales or Northern Ireland

The previous Companies Act of 1985 applied to Great Britain, but the Companies Act 2006 applies to the United Kingdom, that is it now extends to include Northern Ireland (but not the Isle of Man, Channel Isles or Republic of Ireland).

Where a company is registered in England and Wales or Northern Ireland but is granting a heritable security over property in Scotland, the security must be registered with the Registrar of Companies in the part of the United Kingdom where the company is registered, within 21 days of the date of creation of the charge. (The date of creation of a charge by way of a heritable security over registered property is the date of registration of the security in the Land Register.)  A certificate of registration of charge should be submitted by the agents.  In the absence of a certificate of registration of the charge, then indemnity should be excluded. For the avoidance of doubt, it is not necessary to register the security with Companies House in Scotland.

If there is an error in the standard security deed, the considerations in previous paragraph on errors applies.

9.11.5.2.2 Overseas Companies

The Overseas Companies (Execution of Documents and Registration of Charges) Regulations 2009, which came into force on 1 October 2009, provides that overseas companies which have re-registered in the UK are required to register charges with the Registrar at Companies House.   

In terms of the Overseas Companies Regulations 2009 an overseas company that opens a UK establishment is required to register particulars with the Registrar. The term “UK establishment” means either

• a branch within the meaning of the EEC 11th company law directive [the directive refers to branches, but does not define the term ‘branch’]; or
• ‘a place of business that is not such a branch’

Unlike the position for UK companies, which register either in England and Wales or Scotland or Northern Ireland, from 1 October 2009 where an overseas company re-registers in the UK it will be a 'UK registration’, no matter at which office of Companies House they register. The overseas company will be allocated a company number by Companies House. The overseas company then has to comply with the provisions of the 2006 Act and register any charges in the Register of Charges.

An overseas company is, in terms Regulations 8 and 9 of the Overseas Companies (Execution of Documents and Registration of Charges) Regulations 2009 only required to register a charge with the Registrar at Companies House if the company is registered in the UK.  If it is clear from the format of the application that the company has re-registered (e.g. the deed or application form quotes a UK company number) then any charge requires to be registered at Companies House.

The particulars of an overseas company are not registered 'unless and until they are on the register and accordingly available for public inspection'.

If the company has fulfilled the requirements of Regulation 8 on the day that the charge is created, then the charge must be registered at Companies House within 21 days of its creation and a certificate of registration of the charge should be submitted by the agents.  In the absence of a certificate of registration, indemnity should be excluded.

There are two circumstances when a certificate of registration of charge cannot be produced:

• The company has not yet re-registered (e.g. title to their UK establishment is being registered on the same date as the charge).
• They do not own property that falls within the definition of an establishment.

In such instances, the legal registration officer should:

• Seek written confirmation from the agent that the company was not registered in the UK on the date of registration of the standard security, nor that it should have been registered in the UK as at that date. The agent may be able to submit a written response from the Companies Registrar refusing to register the charge for this reason. This would also be acceptable to the Keeper, providing that it clearly states that the company was not registered in the UK on the date of the application for registration in the Land Register. In either of these cases, the security can be registered without an exclusion of indemnity. 

Provide instructions that such letters are archived.

If the agent can neither confirm that the company is not registered in the UK nor provide a certificate of registration of charge, an exclusion of indemnity should be entered in the charges section and in the charge certificate in respect of the charge. A suggested style is:

Note:  Indemnity is excluded in terms of section 12(2) of the Land Registration (Scotland) Act 1979 in respect of any loss which may result from failure to register the above standard security in terms of Regulation 10 of the Overseas Companies (Execution of Documents and Registration of Charges) Regulations 2009.   

If there is an error in the standard security deed, the considerations in previous paragraph on errors [link to 9.11.4] applies.

This topic continues …

Updated June 2006