Lily Private Limited on 5 th February 2024 obtained rupees 30 lakh working capital loan by offering its Stock and Accounts Receivables as security…

As per the provisions of section 2 (16) of the Companies Act, 2013, “charge” means an interest or lien created on the property or assets of a company or any of its undertakings or both as security and includes mortgage. Whenever a company obtains working capital loans from financial institutions by offering stock and Accounts Receivables as security, it is required to create a charge on such property or assets in favour of the lender. Hence, for 30Lakh working capital loan, Lily Private Limited is required to create a charge on it. Lily Private Limited is not required to create a charge for 5Lakh adhoc overdraft on the personal guarantee of a director. Since charge is always created on the property or assets of a company and personal guarantee of director is not a property or asset of company.