Enforceability of fixed charges made by overseas companies

Whether charges created by overseas companies are enforceable in England and Wales.

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It is not unknown for overseas companies to use their own procedure for creating a charge, either in accordance with their national law or otherwise. This article considers whether such a charge is enforceable over property in England and Wales. The first question is whether the Charge is validly executed as a deed, in accordance with the provisions of the Companies Act 2006 (“CA 2006”).  If it is then it will operate to create a legal mortgage.

Section 1045 of CA 2006 makes provision for the Secretary of State to make regulations as to the execution of contracts and documents by overseas companies. The Overseas Companies (Execution of Documents and Registration of Charges) Regulations 2009 (the “Regulations”) makes modifications to sections 44, 46 CA 2006, which proscribe the requirements of a valid deed.

For a charge to satisfy section 46 of the CA 2006 (as amended by the Regulations) and therefore be a valid deed, it must be properly executed.  Section 44(1)(b) (as amended by the Regulations) simply requires that the document is executed in any manner permitted by the laws of the territory in which the company is incorporated. 

However, even if the necessary formalities have not been met the charge may still be saved if it has been registered against the title of the Property at the Land Registry.  Section 51 of the Land Registration Act 2002 (“LRA”) provides that “on completion of the relevant registration requirements, a charge created by means of a registerable disposition of a registered estate has effect, if it would not otherwise do so, as a charge by deed by way of legal mortgage.”  The effect of this section is, upon registration of a charge, to give legal effect to it, even if the underlying instrument is defective in some way.

The effect of the registration of the Charge and section 51 of the LRA is to give it the character of a charge by deed by way of legal mortgage.  This therefore brings with it all the powers under the LPA, in addition to those expressly granted in the Charge, subject to any future amendment to the register.