The Department for Business, Innovation and Skills has published draft regulations amending the regime currently in place under the Companies Act 2006 (the “2006 Act”) in respect of registering security, such as rent deposits, at Companies House. If the regulations come into force, they will remove the need to register a rent deposit deed with Companies House.
Current regime
Section 860 (in Part 25) of the 2006 Act provides that when a company creates a registerable charge it must deliver the particulars of the charge with the instrument to Companies House within 21 days beginning with the day after the day the charge is created.
Do I really need to register the rent deposit deed with Companies House?
There is some debate as to whether section 860 of the 2006 Act does apply to rent deposit deeds creating a charge.
Are rent deposits “book debts”?
- Many practitioners take the view that charges created by rent deposits qualify as “book debts” therefore requiring registration.
- However, the High Court in Obaray v Gateway (London) Limited (2000) has said obiter that a charge over a credit bank balance (such as a rent deposit) is not a book debt. In Obaray, the court considered an implied charge but, by implication, some believe this principle also applies to an express charge (as contained in the vast majority of rent deposit deeds).
The Financial Collateral Regulations 2003
- These regulations apply to a security financial collateral arrangement which could include a rent deposit. The regulations remove the requirement to register the arrangement at Companies House.
- However, a consultation paper published by the government in 2003 expressly said that these regulations did not cover arrangements relating to book debts (which, as stated above, could include rent deposits).
Despite the above, well-advised clients will continue to register rent deposit with Companies House until there is something which is clearly and expressly contrary to the obligation in section 860.
Implications of not registering the rent deposit deed
- The charge will be void: If section 860 is not followed the charge will be void for non-registration.
- Express obligation on the tenant company: A rent deposit deed will often contain obligations requiring a tenant company to register the charge with Companies House; therefore non-registration will mean that often a tenant company will find itself in breach of an express obligation to a landlord.
- It is a criminal offence: section 860 provides that it is a criminal offence not to comply with that section and a fine can be levied on the tenant company.
Conclusion
The draft regulations are expected to come into force on 6 April 2013. Until this date, a tenant company should carefully check its obligations in a rent deposit deed and err on the side of caution when considering its obligation in section 860 to avoid committing a criminal offence. Until this date, a landlord should also ensure that the rent deposit deed contains express and clear obligations on a tenant company to register the rent deposit deed with Companies House within 21 days of the date of the deed and provide the landlord with clear evidence of this to ensure the charge is not void for non-registration.
