Before Using Company Assets as Collateral, Keep the Registration Evidence Close

This article is prepared for business compliance awareness. It is general legal information and should not be used as a substitute for transaction specific advice.

Collateral can make credit possible, but it also creates a record keeping burden that many companies underestimate. Once a company signs a charge, variation, further charge or related security document, the transaction should not disappear into a folder marked legal. The business itself should know what was signed, when it was signed, who is responsible for registration and what evidence proves that the required registry steps were completed.

The recent Kenyan lesson

A 2026 High Court ruling published by Kenya Law, in Milimani HCCOMMMISC App. No. E027 of 2026, offers a useful warning. The matter involved Koka Properties Limited and Standard Chartered Bank Kenya Limited and concerned an application for more time to register a Deed of Variation of Charge, Further Charge and Second Further Charge with the Registrar of Companies. The court discussed the thirty day registration period under section 885 of the Companies Act and the possibility of an extension under section 888 where the omission can be explained and corrected.

The ruling may suggest that late registration is not always fatal, but that is not the point businesses should take from it. The more sensible lesson is that a company should not need a court application to manage a deadline that could have been tracked from the start. Court extension applications require time, cost and a careful explanation. They may also require the company to show that creditors or members are not prejudiced. That is a heavy way to solve what often begins as a filing management problem.

Why ordinary businesses should care

A company charge can affect lenders, other creditors, shareholders and future buyers of the business. It also affects transparency in the market, because registry records help outside parties understand what assets may already be encumbered. For that reason, registration is not merely a private formality between borrower and bank. It is part of the company’s public and internal accountability.

The risk of missing the deadline is real. A director may assume that registration at one registry means everything is complete. A finance officer may wait for stamp duty issues to settle. A lawyer may be following up, but the company may have no receipt or certificate. BRS access may depend on one person who is away. None of these explanations necessarily shows bad faith. They may, however, leave the company exposed if the security record is challenged or if urgent proof is required.

Building a useful evidence file

Every company that gives security over its assets should maintain a charge registration evidence file. This file should identify each security document and connect it to the relevant asset, lender, date of creation, board approval and filing evidence. It should not be a complicated legal archive. It should be a practical file that a director or finance manager can open and understand without reading the entire loan agreement.

The first part of the file should be the security document register. It should capture charges, debentures, further charges, variations, movable property security rights and land charges. The second part should be the deadline record, calculated from the date of creation. The third part should contain evidence of stamp duty assessment, payment, franking and submission. The fourth part should contain Companies Registry or BRS acknowledgments, certificates, rejection notices and follow up correspondence. The fifth part should contain board resolutions, authority documents, execution evidence and any power of attorney used in the transaction.

Where land or movable property registration is also required, those records should sit beside the Companies Registry evidence rather than replacing it. This distinction is important. A company may be able to show that a land registry process took place, while still struggling to prove that the company charge was properly registered with the Registrar of Companies within the statutory period.

Internal responsibility and proof

The file should have an owner. In a larger company, that may be the company secretary, legal officer or finance manager. In a smaller company, it may be one director assisted by an external lawyer. Whoever holds the role should send reminders before the deadline, request proof from lawyers and update management if a filing is rejected or delayed. Without a named owner, responsibility can become everybody’s business and nobody’s task.

It is also sensible to avoid a single point of failure for BRS access and internal approvals. Companies should maintain controlled access arrangements so that filing can continue when one director, accountant or administrator is unavailable. This should be done carefully and securely. The aim is not to weaken control over company credentials, but to ensure that access problems do not cause missed statutory deadlines.

If things have gone wrong

Where a deadline has already passed, the company should not ignore the problem or assume that silence will solve it. It should immediately document the reason for the delay, collect the evidence showing what steps were taken, assess possible prejudice to creditors and members and seek advice on the correct remedial route. In some cases, an application for extension may be available. In others, the transaction structure or supporting documents may require closer review.

The most useful question for management is simple. Can the company prove the status of every charge from its own file, without relying on memory or scattered email threads? If the answer is no, the business should treat that as a compliance weakness, even if no dispute has yet arisen.

Practical conclusion

For Kenyan businesses, registration of company charges should be managed as part of governance, not as a silent legal afterthought. A practical evidence file can prevent missed deadlines, reduce uncertainty for lenders and support directors who need to show that company assets were used responsibly as collateral. It may not remove every financing risk, but it gives the company a much better record if questions arise later.

Source note. This article is based on Milimani HCCOMMMISC App. No. E027 of 2026, In the Matter of Sections 878 and 885 of the Companies Act, involving Koka Properties Limited and Standard Chartered Bank Kenya Limited, the Companies Act, 2015, and the Companies (General) Regulations, Legal Notice 239 of 2015.