Annual Returns of the Companies Act 2013

INTRODUCTION:

Section 159,160,161,162 & Schedule V deals with the Annual Return & related Provisions under Companies Act, 1956. But in Companies Act, 2013 all these Sections are combined together in one Section namely – 92.

Annual return is a yearly statement, required to be filed by every company irrespective of their nature, i.e. private, public, listed, unlisted, or status, i.e. active, dormant or under amalgamation. It is perhaps the most important document required to be filed by every company with the Registrar of Companies. Apart from the Financial Statements, this is the only document to be compulsorily filed with the Registrar every year irrespective of any events / happenings in the company.

It is not a tax return: it is simply a corporate law requirement and every company is legally obligated to file this return with Registrar of Companies (ROC).

Section 92 of the Companies Act, 2013 requires every company to prepare an annual return, a comprehensive document which contains information of a company relating to its share capital, indebtedness, directors, shareholders, changes in directorships corporate governance disclosures etc.

The Companies Act, 2013, a historic legislation which intends to improve corporate governance and empower shareholders. The Act has incorporated a framework which is based on self-regulation but with enhanced disclosures and accountability on the part of companies and their managements.

The Ministry of Corporate Affairs vide General Circular 8/2014 dated 04th April 2014 clarified that annual return in terms of section 92 of the Companies Act, 2013 will be in form MGT 7 and will be applicable for financial years commencing on or after 1st April, 2014

Annual return is the snapshot of certain company information as they stood on the close of the financial year. Section 92 of the Companies Act, 2013 deals with Annual Return of the Company.

Annual return in a layman’s term means a return which a company is required to file annually and further it is a snapshot of company information as they stood on the close of the financial year. Section 92 of the Companies Act, 2013 and the Companies (Management and Administration) Rules, 2014 deals with filling of Annual Return of a Company

The basic purpose of filing annual return with the Registrar of Companies (‘ROC’) is to provide the annual information about the Company to the ROC and its members about the Company’s general  compliances.

B. TIME PERIOD:

Earlier in the Companies act, 1956 Annual return was prepared for the period from the date of last AGM to date of current AGM. But there is a major change under Companies Act, 2013 i.e. now Companies are required to prepare Annual Return for the financial year i.e. 1st April to 31st March.

C. ANNUAL RETURN OF FOREIGN COMPANY:

As per section 384(2), the provisions of section 92 shall also apply to a foreign company, subject to such exceptions, modifications and adaptations as may be made therein by rules. Rule 7 of the Companies (Registration of Foreign Companies) Rules, 2014 provides that every foreign company shall prepare and file, within a period of sixty days from the last day of its financial year, to the Registrar annual return in Form FC.4 along with fee, containing the particulars as they stood on the close of the financial year

D. EXTRACT OF ANNUAL RETURN:

As per sub-section (3) of section 92, the companies are also required to prepare extract of Annual Return in Form No. MGT-9 which shall form part of Board’s Report.

E. PENALTY:

If a company fails to file its annual return under section 92, before the expiry of the period specified under section 403 with additional fee, the company shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to five lacs rupees and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to six months or with fine which shall not be less than fifty thousand rupees but which may extend to five lacs Rupees, or with both.(Section 92).

F. FILING OF ANNUAL RETURN WITH THE REGISTRAR (SECTION 92(4)

The return has to be filed with the Registrar of Companies within 60 days from the date of Annual General Meeting. If the Annual General Meeting is not held in any year, the return has to be filed within 60 days from the date on which Annual General Meeting should have been held together with the statement specifying the reasons for not holding the Annual General Meeting, on payment of such fee or additional fee as prescribed (Rule 12 of the Companies (Registration Offices and Fees) Rules, 2014.

Other Event Based Filings

Besides Annual Filings, there are various other compliances which need to be done as and when any event takes place in the Company. Instances of such events are:

  • Change in Authorised or Paid up Capital of the Company.
  • Allotment of new shares or transfer of shares
  • Giving Loans to other Companies.
  • Giving Loans to Directors
  • Appointment of Managing or whole time Director and payment of remuneration.
  • Loans to Directors
  • Opening or closing of bank accounts or change in signatories of Bank account.
  • Appointment or change of the Statutory Auditors of the Company.

Different forms are required to be filed with the Registrar for all such events within specified time periods. In case, the same is not done, additional fees or penalty might be levied. Hence, it is necessary that such compliances are met on time.

Other Key Points

The private limited company can be formed by minimum 2 persons whereas, there are 50 maximum shareholders. And those persons must be friends or relatives.

  • The minimum paid up capital should be at Rs. 1 lakh.
  • However, if the paid up capital is above Rs 10 lakhs, no third party loan from private lenders could be collected except the shareholders, directors and their relatives.
  • If the paid up capital is above 5 cr, the internal audit, cost audit, and report of company secretary are mandatory. However, those services should be obtained from engaging outside professional agencies.
  • The board of directors of the company is formed with minimum 2 directors and the maximum limit should be governed by the Articles of Association of the company.
  • The directors remuneration can be paid within the limit prescribed by the companies Act however, the rules & regulations thereof should be incorporated in the Articles of Association.
  • The meeting of the Board of Directors must be held once in each quarter. However, it may exceed than that number as per the rules framed in Articles of Association.
  • The company should hold an Annual General Meeting. However, any extraordinary general meeting could be held as per the regulations framed by companies act and incorporated in the Articles of Association.
  • The company could not pay interest or any consideration of any type except dividend on the paid up capital of the shares holders.
  • Normally, the company could raise loans from shareholders and directors, their relatives and the firms and companies in which such shareholders and directors have vested interest. The reasonable interest as per the provisions of Articles of Association could be paid.
  • The company can distribute dividend after paying dividend tax twice a year i.e., interim and final. However, there should be accumulated profit in the form of reserves in the books of the company. Accordingly there should be provision in the Article of Association.
  • The company cannot pay any amount to directors except remuneration. It is a very severe thing to have a debit balance of the directors in the books of accounts of the company who is holding shares 10% or more. In income tax this will be treated as income of the director. Even any firm or company in whom a director is holding more than 20% interest also could not take any loan or advance from the company except any other transaction with specific nature.
  • The company has to file annual return and balance sheet to the registrar of companies before 30th September of every  year. There are no other documents required to be submitted to ROC except in specific circumstances such as, change in RO, change in directors, change in authorized capital, creation of charge of bank or financial institution and the assets of the company etc.
  • In the case of dispute the director can refer the matter to the arbitrator as per the provision of Articles of Association regarding the appointment of arbitrators.
  • However, the aggrieved shareholders can also approach to the company law board from the wind up of the company in severe circumstances. Even the creditors have also right to do so.
  • The rights & duties of the directors are framed & governed by the Articles of association of the company. Therefore, the Articles of Association must be complied very carefully.
  • The company can raise loans from bank or institutions as prescribed by companies Act 1956 and framed accordingly in the Articles of Association.
  • Under old Companies Act (Prevailing Act) and the new company bill which is yet to be come into operation the electronic filing of all the requisite documents and payments to be made electronically thereof had been made compulsory.
  • The share of the private limited company cannot be transferred to anybody else other than the present shareholders and with the sanction of the company in the board meeting. The rules for this are incorporated in the articles of Association.
  • It is not easy to expel or debar any director from the board of directors it can only be happen as per the charges framed on the said director as mentioned in the Companies Act and rules thereof framed in the Articles of Association. Even the shareholders can remove any director in general meeting or extraordinary general meeting.
  • Since the company is an artificial judicial person different from the directors and shareholders therefore, the shareholders and directors have no excess over the assets of the company. Whereas, for the liabilities of the company the director of the company can be held liable jointly or severally.
  • VidyaSunil & Associates is into practice of Tax Complaince, Audit, Accounts , Corporate / Business Finance & Outsourced CFO Services.

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