SEARCH AND STATUS REPORT
A Charge is created when the security on the property of the Company is conferred on another person. Thus, the property of the Company is made available to the lending company as a Security.
Banks and Financial Institutions, before granting loans to Companies, generally obtains a Status Report on the position of borrowings made by the Company and the particulars of Charges already created by the Company on its assets. It is done to secure the amount proposed to be lent.
The Search and Status report acts as a tool containing critical information on status of charges. It is basically a report furnished based on information gathered by a search and inspection of a specific records.
The Search and Status report is not merely a verbatim reporting of information but also
supplemented by observations and comments of the person who furnishes the report. Normally, Practicing Company Secretaries are entrusted with the preparation of Search and Status report.
Indian Banks Association had issued a circular recommending to the Chief Executives of All member banks that the latter may utilize the services of Company Secretaries for the issuance of Search and Status report
SCOPE AND IMPORTANCE
The scope of Search and Status report depends on the requirement of the Bank or Financial institutions concerned. The following points may be noted in this regard:
v A search and status report issued by a PCS enables the Banks/Financial Institutions to evaluate the borrowing company's credibility.
v With the help of Search and Status report, the Banks can take a conscious decision regarding the quantum of loan/credit facility to be sanctioned.
v Search and Status report thus enables the bank to take and informed and speedy decision and also assures them about the credit worthiness of the borrowing company.
v Search and Status report acts as a 'Progress report' on the legal aspects and a ready reckoner of the exact position
CONTENTS OF SEARCH AND STATUS REPORT
A search and status report contains two parts; first being 'Search' (involving physical inspection of documents) and the second part is 'Status' Which comprises reporting the information and giving observations on the basis of the information as made available by Search. The search and status report generally contains the reporting and commenting on the following main information:
PARTICULARS OF CHARGES
When a charge on a property is created or modified, the Company is required to intimate about it to the ROC by filing Form CHG- 1 (in cases other than debentures) or Form no. CHG-9 (in cases of charge on debentures).
The ROC issues a certificate of registration (Format CHG-2) or Certificate of Modification (Format CHG-3), which acts as a conclusive evidence about the registration/modification of charge.
When the Charge is satisfied, the Company must file CHG-4 with the ROC, which, if satisfied, issues a Memorandum of Satisfaction in CHG-5.
If an application for condonation of delay is made to ROC /Central Government then the details about filing of CHG-10 (in case of ROC) and CHG-8(in case of Central Government) will be available in the records.
If a property already subject to charge is proposed to be kept as security by the Company then the search and status report specifically mentions this and brings it to the attention of the lending institution.
PUBLIC INSPECTION OF DOCUMENTS
MCA offers a facility for public Inspection of documents of the Companies by any person
interested on payment of A fee of 100 per company per inspection.
The documents are made available for viewing and downloading for 3 hours after the user started viewing it and can be viewed only within 7 days after the payment has been confirmed.
This facility is very useful for the PCS to create and submit the Search and Status report.
Once the documents relating to creation and other particulars of charge are analysed the Search and Status report is prepared. Most of the Banks have their specific format for the Search and Status report and that format have to be followed while submitting Search and Status report. All the important details must be incorporated in the report and each word of the report should be checked and rechecked before the Search and Status report is signed.
VERIFICATION OF DOCUMENTS RELATING TO CHARGE
The important particulars from the register of charges (CHG-7) such as date of registration, amount of the charge, particulars, date of modification (if any), if charge is satisfied then all the supporting documents must be verified. Non-essential particulars of charge need not be given in the Search report unless specifically so required by the client.
PREPARATION AND COMPILATION OF SEARCH REPORT
Before proceeding with the inspection, it would be advisable for PCS to know if the concerned bank/Financial Institution or the client requires the search report, in any specific format and if so , the content of the format. If the client requires particulars of the charges pending registration, it is advisable to give a separate report based on the verification of the registers and records maintained by or available with the company.
To summarise, the following points are important in connection with the
v The search and status report should give exact details of particulars of charges/modifications/satisfactions as effected, filed and registered from time to time.
v Check the required details regarding property on which the charge is created, name of the lender and such other details.
v A search and status report should always be supported by expert observations on the charges created by the borrower in respect of the lender.
v It is advisable to mention in the Search report by way of a footnote as to what was the last document available for inspection when the scrutiny was taken/completed.
v The search report should also specifically mention about the charge which is registered at the ROC but the concerned documents are not available for inspection.
The PCS giving the search report has to certify that his report has been submitted on the basis of the search carried by him on a particular date, with the Registrar's office/MCA portal. He is also required to certify that the company has filed all returns/forms within stipulated time with the ROC office and such other details regarding compliance.
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Disclaimer: Every effort has been made to avoid errors or omissions in this material in spite of this, errors may creep in. Any mistake, error or discrepancy noted may be brought to our notice which shall be taken care of in the next edition In no event the author shall be liable for any direct indirect, special or incidental damage resulting from or arising out of or in connection with the use of this information Many sources have been considered including newspapers, Journals, Bare Acts, Case Material. Charted Secretary etc.