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1. There should be two parties to the transaction, the creator of the charge and the charge holder.
2. The subject-matter of charge, which may be current or future assets and other properties of the borrower.
3. The intention of the borrower to offer one or more of its specific assets or properties as security for
repayment of the borrowed money together with payment of interest at the agreed rate should be
manifested by an agreement entered into by him in favour of the lender, written or otherwise.
4. Prescribed particulars of every charge falling under any of the categories of charges enlisted in Subsection
(4) of Section 125 of the Companies Act, 1956, must be registered with the concerned Registrar
of Companies.
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The following are the features of charge -
1. A charge may be created either through the act of parties or by operation of law.
2. A charge created by operation of law does not require registration. But a charge created by act of parties requires registration.
3. The charge may be in perpetuity.
4. A charge only gives a right to receive payment out of a particular property.
5. A charge is good against subsequent transferees with notice.
6. In case of a charge, no personal liability is created. But where a charge is the result of a contract, there may be a personal remedy.