Event-Based ROC Filings and Entity Closure: Charges, PAS-3, Related Party Transactions, STK-2 and LLP Form 24

1. Statutory Overview and Legislative Intent

Charges (Chapter VI, Sections 77 to 87)

A charge is an interest or lien created on the property or assets of a company as security, including a mortgage. Section 77 makes it the company's duty to register every charge created within India or outside, on property situated in India or outside, with the Registrar. Registration publicises the secured creditor's priority so that later lenders know what is already encumbered. Under Section 77(3), a charge that is not registered is not taken into account by a liquidator or other creditor, although the debt itself remains payable. Section 82 requires the company to report satisfaction of the charge, and Section 85 requires a register of charges (CHG-7) at the registered office.

Allotment of securities (Sections 39, 42 and 62)

Section 39(4) and Rule 12 of the Companies (Prospectus and Allotment of Securities) Rules, 2014 require a return of allotment in Form PAS-3 whenever a company having share capital makes an allotment. Section 42 governs private placement and Section 62 governs rights issues, employee stock options and preferential allotment.

Related party transactions (Section 188)

Section 188 subjects specified contracts with related parties (as defined in Section 2(76)) to Board approval and, above prescribed thresholds, to members' approval. The intent is to prevent value being moved out of a company to its insiders on non-commercial terms. The safe harbour is the fifth proviso: transactions in the ordinary course of business and on an arm's length basis are outside Section 188(1).

Filing of resolutions (Section 117)

Section 117(3) lists resolutions and agreements that must be filed with the Registrar in Form MGT-14 within 30 days, including special resolutions, resolutions agreed by all members that would otherwise need a special resolution, Board resolutions under Section 179(3), and resolutions for voluntary winding up.

Closure (Sections 248 to 252; LLP Act Section 75 and Rule 37)

A company that is not carrying on business may apply to the Registrar to have its name removed from the register, instead of going through liquidation. The LLP Act gives designated partners a parallel route under Rule 37 of the LLP Rules, 2009, using Form 24.

2. Applicability and Threshold Matrix

Charges and allotments

Section 188: when members' approval is needed (Rule 15(3) of the Meetings of Board Rules)

Turnover and net worth are taken from the audited financial statements of the preceding financial year. In a public company, the related party member cannot vote on the ordinary resolution. Under the MCA exemption notification for private companies dated 5 June 2015, this voting bar does not apply to private companies, and a private company's Board may approve transactions with a related party that is a related party only because it is a holding, subsidiary or associate company.

Is MGT-14 required for a related party transaction?

Strike-off eligibility

3. Step-by-Step Compliance and Filing Workflow

A. Registering a charge (CHG-1)

1. On sanction, obtain the sanction letter, the loan agreement, the hypothecation or mortgage deed and the schedule of assets. The date of creation is the date of execution of the charge document, not the date of disbursement.
2. Pass the Board resolution for borrowing within Section 179(3)(d) limits, and a special resolution under Section 180(1)(c) where borrowings exceed paid-up capital, free reserves and securities premium (public companies; private companies are exempt from Section 180).
3. Prepare CHG-1 on the MCA V3 portal. Enter the charge holder's details, amount secured, short particulars of property, terms and conditions, and whether it is a modification. Attach the instrument creating the charge.
4. The company's director signs with DSC, the form is certified by a practising professional, and it is then sent to the charge holder (bank) for signing with the bank officer's DSC. Coordinate this early: bank DSC workflow is the most common cause of delay.
5. Pay the fee and file within 30 days of creation. The Registrar issues the certificate of registration in CHG-2 (or CHG-3 for modification). Enter the charge in the company's register CHG-7.

B. Satisfaction of a charge (CHG-4)

1. On full repayment, obtain the no-dues or charge release letter from the lender.
2. File CHG-4 within 30 days of repayment or satisfaction, signed by the company and the charge holder.
3. The Registrar issues a notice to the charge holder (unless the form is signed by the holder) and, on satisfaction, records the memorandum of satisfaction and issues CHG-5. Close the entry in CHG-7.

C. Allotment of shares (PAS-3)

1. Choose the route: rights issue under Section 62(1)(a) with offer letter and minimum 7 days for response (shorter for private companies if the Articles permit); private placement under Section 42 with special resolution, offer letter in PAS-4, record of offer in PAS-5 and allotment within 60 days of receipt of money; or preferential issue under Section 62(1)(c) with special resolution and a registered valuer's report under Rule 13.
2. Receive application money only through banking channels, into a separate bank account for private placements.
3. Pass the Board resolution for allotment. File MGT-14 for the special resolution within 30 days of passing it, before or along with PAS-3.
4. File PAS-3 within 15 days of allotment with the list of allottees (name, address, PAN, number of securities and amount), the Board resolution, the valuation report where applicable, and for non-cash consideration the contract and valuation.
5. Credit shares in demat form through the RTA (mandatory for public companies and for private companies covered by Rule 9B) or issue physical certificates within two months of allotment where still permitted.
6. For allotments to foreign investors, file Form FC-GPR with the RBI through the FIRMS portal within 30 days, and comply with FEMA pricing guidelines.

D. Approving a related party transaction

1. Maintain an up-to-date list of related parties from MBP-1 disclosures, shareholding records and group structure.
2. Test each proposed contract: is it in the ordinary course and at arm's length? Document the test with comparable quotes, transfer pricing studies or valuation reports. If yes, Section 188(1) does not apply, though disclosure in AOC-2 and in the financial statements still does.
3. If not exempt, place the proposal before the Board with the disclosures required by Rule 15(1): name of the related party and nature of relationship, nature, duration and particulars of the contract, material terms including value, any advance paid, the manner of determining pricing, and whether all factors relevant to the contract have been considered. Interested directors must not be present during discussion (Section 184(2)).
4. If the Rule 15(3) threshold is crossed, obtain the members' ordinary resolution before entering into the transaction, with the explanatory statement under Section 102.
5. Record the contract in the register MBP-4 under Section 189 and disclose it in Form AOC-2 annexed to the Board's report under Section 134(3)(h).

E. Voluntary strike-off of a company (STK-2)

1. Stop operations and clean up: recover receivables, pay creditors, settle statutory dues, surrender GST registration (Form REG-16), close the PF and ESI codes where possible, and close bank accounts after the last transactions.
2. Bring filings current: file all pending AOC-4 and MGT-7 or MGT-7A up to the end of the financial year in which the company ceased operations.
3. Pass the special resolution (or obtain the consent of 75% of members by paid-up value) at a general meeting, and file MGT-14 if required.
4. Prepare attachments:
   • Indemnity bond in STK-3 by every director, notarised (or by the company and every director, as specified), on non-judicial stamp paper;
   • Affidavit in STK-4 by every director;
   • Statement of accounts in STK-8 containing assets and liabilities, made up to a date not more than 30 days before the application, certified by a practising Chartered Accountant;
   • Copy of the special resolution or consent of members;
   • NOC from the sectoral regulator where the company is regulated;
   • A statement regarding pending litigation, if any.
5. File STK-2 with a fee of Rs. 10,000, signed by a director with DSC and certified by a practising professional. Applications are processed centrally by the Centre for Processing Accelerated Corporate Exit (C-PACE), established by the MCA in 2023.
6. Public notice: the Registrar issues a notice in STK-6, places it on the MCA website, publishes it in the Official Gazette and in newspapers, and invites objections within 30 days.
7. Strike-off order: if no objection survives, the Registrar strikes off the name and publishes a notice in STK-7 in the Official Gazette. The company stands dissolved from the date of publication.

F. Closure of an LLP (Form 24)

1. Cease business, realise assets, pay liabilities and close the bank account.
2. File all pending Form 8 and Form 11 up to the end of the financial year in which business ceased.
3. Prepare: statement of account showing nil assets and nil liabilities, certified by a practising CA and made up to a date not more than 30 days before filing; affidavit by designated partners; indemnity bond; consent of all partners; acknowledgement of the latest income tax return; and a statement that no litigation is pending.
4. File Form 24 signed by designated partners with DSC and certified by a practising professional, with the prescribed fee.
5. The Registrar issues a public notice inviting objections, and on completion strikes off the LLP's name and publishes the notice in the Official Gazette.

4. Statutory Due Dates and Frequency Table

5. Interest, Late Fees and Penal Consequences

In addition, each delayed MCA form attracts the normal additional fee under the Companies (Registration Offices and Fees) Rules, 2014, which for most event-based forms escalates with the period of delay. Ad valorem fees apply to charge filings beyond the first extended window.

6. Practical Audit Pitfalls and Best Practices

• Run a charge reconciliation every quarter. Compare the MCA "Index of Charges" for the company with the loan register and the balance sheet. Closed loans with open charges damage the company's credit profile and appear in due diligence reports.
• Vehicle loans and equipment finance are charges. They are routinely missed. Hypothecation in favour of a finance company requires CHG-1.
• Diarise the creation date, not the disbursement date. The 30-day clock starts when the instrument is executed.
• Keep allotment money clean. Never use private placement funds before allotment and filing of PAS-3. Money from a person other than the allottee's own account is a red flag for both the ROC and income tax (Section 68 and Section 56(2)(viib) history).
• Do the arm's length homework in advance. For RPTs, keep the benchmarking file with the Board papers. Internal transfer pricing documentation under the Income-tax Act, where applicable, can support the ordinary course and arm's length test, but the two tests are not identical.
• Check that AOC-2, notes to accounts and MBP-4 agree. Inconsistent RPT disclosures are a frequent subject of ROC inspection observations.
• Before applying for strike-off, obtain tax clearances informally. Ensure no pending income tax or GST proceedings exist. The Registrar can reject or the department can object to the STK-6 notice.
• Keep the strike-off file permanently. Directors may need STK-3 and STK-4 copies years later to respond to notices addressed to the dissolved company.
• For LLPs, file pending Form 3 and Form 4 changes before Form 24. The partner list in the closure application must match the master data.

7. Statutory References and Official Sources