What Is Charge Creation?
Charge creation is a formal process by which specific assets are legally pledged as security for borrowed funds. For lenders, it provides a clear legal remedy if a borrower cannot repay—reducing credit risk and increasing transaction transparency.
In simple terms: charge creation ties a loan to an identified asset. This creates confidence for investors and lenders and supports responsible financing by ensuring assets back the capital raised.
Charge Creation for Debenture Financing
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How Charge Creation Operates in a Debenture Structure
Debenture Financing — Step by Step
A corporate sponsor establishes a Special Purpose Vehicle (SPV) to raise funds via debentures. Investors subscribe to debentures and the proceeds are collected in the SPV’s bank account to fund the project.
The SPV acquires assets (for example, land or infrastructure) and a Debenture Trustee is appointed to manage the security on behalf of investors. The asset is mortgaged in favour of the trustee so it acts as a recovery source if obligations are not met.
Finally, the security is registered with the MCA (or relevant registry) using the appropriate charge creation form to provide full legal transparency and enforceability.
Charge Creation for LLPs and Special Vehicles
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LLP Fund Mobilization & Hypothecation — Key Stages
1. Capital Collection
Funds are raised and routed into the designated SPV/LLP bank account to ensure transaction traceability and clear accounting of project cashflows.
2. Hypothecation of Movable Assets
A hypothecation agreement creates a floating charge over inventory, receivables or other movable assets—giving lenders a prioritized claim while allowing operational flexibility.
3. Statutory Registration
The security instrument is filed with the statutory authority (e.g., MCA) using the required charge registration form (such as Form CHG-8/CHG-9 as applicable) to perfect the lender’s rights.
How Quantcorp Safeguards Investor Interests
Once recorded, a charge restricts the disposal or transfer of the underlying asset without lender/trustee consent. Quantcorp ensures that any replacement or sale of secured property follows strict procedures to protect investor capital and preserve value.
Our policies mandate repayment priority, transparent reporting, and legally enforceable safeguards—so investors receive consistent protection throughout the lifecycle of the financing.
