Tag Archives: Companies Act 2013

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.

    Advise for contacting VidyaSunil & Associates;

    E Mail ID : vidyasunilassociates@gmail.com

    Cell No. : +91 9739834819

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PENAL PROVISIONS UNDER COMPANIES ACT, 2013 PART II

In Part I the penal provisions related to ‘Officer-in-default’ were listed.   In this article the penal provisions related to companies are listed for the information of the readers.

Penal provisions related to companies

Section 2(20) of the Companies Act, 2013 (‘Act’ for short) defines the term ‘company’ as a company incorporated under this Act or any previous company law.   As such the penal provisions are applicable to the existing companies as well as the companies to be registered in future and also applicable to various types of companies enumerated in the Act which are registered under the provisions of Companies Act, 2013 or Companies Act, 1956.

  1. Section 8 deals with the formation of companies with charitable objects etc., Section 8(11) provides that if a company makes any default in complying with any of the requirements laid down in this section, the company shall be punishable with fine which shall not be less than Rs.10,00,000/- but which may extend to Rs.1,00,00,000/-;
  2. Section 12 deals with registered office of company. Section 12(8) provides that if any default is made in complying with the requirements of this section the company shall be liable to a penalty of Rs.1,000/- for every day during which the default continues but not exceeding Rs.1,00,000/-;
  3. Section 15 deals with the alteration of memorandum or articles to be noted in every copy. Section 15(2) provides that if a company any default in complying with the provisions of sub section (1) the company shall be liable to a penalty of Rs.1,000/- for every copy of the memorandum or articles issued without such alteration;
  4. Section 16 deals with rectification of name of company. Section 16(3) provides that if a company makes default in complying with any direction given under sub-section (1) the company shall be punishable with fine of Rs.1,000/- for every day during which default continues;
  5. Section 17 deals with copies of memorandum, articles etc., to be given to members. Section 17(2) provides that if a company makes any default in complying with the provisions of this section the company shall be liable for each default, to a penalty of Rs.1,000/- for each day during which such default continues or Rs.1,00,000/- whichever is less;
  6. Section 26 deals with matters to be stated in prospectus. Section 26 (9) provides that if a prospectus is issued in contravention of the provisions of this section, the company shall be punishable with fine which shall not be less than Rs.50,000/- but which may extend to Rs.3,00,000/-;
  7. Section 33 deals with issue of application forms for securities. Section 33(3) provides that if a company makes any default in complying with the provisions of this section, it shall be liable to a penalty of Rs.50,000/- for each default;
  8. Section 39 deals with allotment of securities by company. Section 39 (5) provides that in case of any default under sub-section (3) or sub-section (4), the company shall be liable to a penalty of Rs.1,000/- for each day during which such default continues or Rs.1,00,000/- whichever is less;
  9. Section 40 deals with securities to be dealt with in stock exchanges. Section 40 (5) provides that if a default is made in complying with the provisions of this section, the company shall be punishable with a fine which shall not be less than Rs.5,00,000/- but which may extend to Rs.50,00,000/-;
  10. Section 46 deals with the certificate of shares. Section 46 (5) provides that if a company with intent to defraud issued a duplicate certificate shares the company shall be punishable with fine which shall not be less than 5 times the face value of the shares involved in the issue of the duplicate certificate but which may extend to 10 times the face value of such shares or Rs.10,00,00,000/- whichever is higher;
  11. Section 48 deals with variation of shareholders’ rights. Section 48(5) provides that where any default is made in complying with the provisions of this section, the company shall be punishable with fine which shall not be less than Rs.25,000/- but which may extend to Rs.5,00,000/-;
  12. Section 53 deals with prohibition of issue of shares at discount. Section 53 (3) provides that where a company contravenes the provisions of this section, the company shall be punishable with fine which shall not be less than Rs.1,00,000/- but which may extend to Rs.5,00,000/-;
  13. Section 56 deals with transfer and transmission of securities. Section 56 (6) provides that where any default is made in complying with the provisions of sub-sections (1) to (5) the company shall be punishable with fine which shall not be less than Rs.25,000/- but which may extend to Rs.5,00,000/-;
  14. Section 59 deals with rectification of register of members. Section 59 (5) provides that if any default is made in complying with the order of the Tribunal under this Section, the company shall be punishable with fine which shall not be less than Rs.1,00,000/- but which may extend to Rs.5,00,000/-;
  15. Section 60 deals with publication of authorized, subscribed and paid up capital. Section 60(2) provides that if any default is made in complying with the requirements of sub-section (1), the company shall be liable to pay a penalty of Rs.10,000/- for each default;
  16. Section 64 deals with the notice to be given to Registrar for alteration of share capital. Section 64 (2) provides that if a company  contravenes the provisions of sub-section (1) it shall be punishable with fine which may extend to Rs.1,000/- for each day during which such delay continues, or Rs.5,00,000/- whichever is less;
  17. Section 66 deals with reduction of share capital. Section 66 (11) provides that if a company fails to comply with the provisions of sub-section (4), it shall be punishable with fine which shall not be less than Rs.5,00,000/- but which may extend to Rs.25,00,000/-;
  18. Section 67 deals with restrictions on purchase by company or giving of loans by it for purchase of its shares. Section 67 (5) provides that if a company contravenes the provisions of this section, it shall be punishable with fine which shall not be less than Rs.1,00,000/- but which may extend to Rs.25,00,000/-;
  19. Section 68 deals with power of company to purchase its own securities. Section 68 (11) provides that if a company makes any default in complying with the provisions of this sub-section or any regulation made by SEBI, for the purposes of clause (f) of sub section (2), the company shall be punishable with fine which shall not be less than Rs.1,00,000/- but which may extend to Rs.3,00,000/-;
  20. Section 74 deals with repayment of deposits etc., accepted before commencement of this Act. Section 74 (3) provides that if a company fails to repay the deposit or part thereof or any interest thereon within the time specified in sub-section (1) or such further time as may be allowed by the Tribunal under sub-section (2), the company shall be punishable with fine which shall not be less than one crore rupees but which may extend to ten crore rupees;
  21. Section 86 provides that if any company contravenes any provisions Chapter VI (Charges), the company shall be punishable with fine which shall not be less than Rs.1,00,000/- but which may extend to Rs.10,00,000/-;
  22. Section 88 deals with the register of members etc., Section 88 (5) provides that if a company does not maintain a register of members or debenture holders or other security holders or fails to maintain them in accordance with the provisions of sub-section (1) or sub-section (2) the company shall be punishable with fine which shall not be less than Rs.50,000/- but which may extend to Rs.3,00,000/-;
  23. Section 89 deals with declaration in respect of beneficial interest in any share. Section 89 (7) provides that if a company, required to file a return under sub-section (6), fails to do so before the expiry of the time specified under the first proviso to sub-section(1) of Section 403, the company shall be punishable with fine which shall not be less than Rs.500/- but which may extend to Rs.1,000/-;
  24. Section 91 deals with power to close register of members or debenture holders or other security holders. Section 91 (2) provides that if the register of members or debenture holders or of other security holders is closed without giving the notice as provided in sub section (1) or after giving shorter notice than that so provided, or for a continuous or an aggregate period in excess of the limits specified in that sub-section, the company shall be liable to a penalty of Rs.5,000/- for every day subject to a maximum of Rs.1,00,000/- during which the register is kept closed;
  25. Section 92 deals with Annual Return. Section 92 (5) provides that if a company fails to file its annual return under sub-section (4) before the expiry of the period specified under Section 403 the company shall be punishable with fine which shall not be less than Rs.50,000/- but which may extend to Rs.5,00,000/-;
  26. Section 94 deals with the place of keeping  and inspection of registers, return etc., Section 94(4) provides that if any inspection or the making of any extract or copy required under this section is refused, the company shall be liable for each such default, to a penalty of Rs.1,000/- for every day subject to a maximum of Rs.1,00,000/- during which the refusal or default continues;
  27. Section 99 provides that if any default is made in holding a meeting of the company in accordance with Section 96 or Section 97 or section 98 or in complying with any directions of the Tribunal, the company shall be punishable with fine which may extend to Rs.1,00,000/- and in the case of a continuing default, with a further fine which may extend to Rs.5,000/- for every day during which such default continues; taxmanagementindia.com
  28. Section 111 deals with circulation of members’ resolution. Section 111 (5) provides that if any default is made in complying with the provisions of this section, the company shall be liable to a penalty of Rs.25,000/-;
  29. Section 117 deals with resolutions and agreements to be filed. Section 117 (2) provides that if a company fails to file the resolution or the agreement under sub-section (1) before the expiry of the period specified under Section 403 the company shall be punishable with fine which shall not be less than Rs.5,00,000/- but which may extend to Rs.25,00,000/-;
  30. Section 118 deals with the minutes of proceedings of general meeting, meeting of Board of Directors and other meeting and resolutions passed by postal ballot. Section 118 (11) provides that if any default is made in complying with the provisions of this section in respect of any meeting, the company shall be liable to a penalty of Rs.25,000/-;
  31. Section 119 deals with inspection of minute books of general meeting. Section 119 (3) provides that if any inspection under sub-section (1) is refused, or if any copy specified under sub-section (2) is not furnished within the time specified therein, the company shall be liable to a penalty of Rs.25,000/-;
  32. Section 121 deals with the report on annual general meeting. Section 121 (3) provides  that if the company fails to file the report under sub-section (2) before the expiry of the period specified under Section 403 the company shall be punishable with  fine which shall not be less than Rs.1,00,000/- but which may extend to Rs.5,00,000/-;
  33. Section 124 deals with unpaid dividend account.  Section 124(7) provides that if a company fails to comply with any of the requirements of this section, the company shall be punishable with fine which shall not be less than Rs.5,00,000/- but which may extend to Rs.25,00,000/-;
  34. Section 134 deals with financial statement, Board’s report etc., Section 134 (8) provides that if a company contravenes the provisions of this section, the company shall be punishable with fine which shall not be less than Rs.50,000/- but which may extend to Rs.25,00,000/-;
  35. Section 136 deals with the right of member to copies of audited financial statement. Section 136 (3) provides that if any default is made in complying with the provisions of this section, the company shall be liable to a penalty of Rs.25,000/-;
  36. Section 137 deals with copy of financial statement to be filed with Registrar. Section 137 (3) provides that if a company fails to file the copy of the financial statements under sub-section (1) or sub-section (2) as the case may be, before the expiry of the period specified in Section 403, the company shall be punishable with fine of Rs.1,000/- for every day during which the failure continues but which shall not be more than Rs.10,00,000/-;
  37. Section 147(1) provides that if any of the provisions of Sections 139 to 146 (both inclusive) is contravened, the company shall be punishable with fine which shall not be less than Rs.25,000/- but which may extend to Rs.5,00,000/-;
  38. Section 148 deals with the Central Government to specify audit of items of cost in respect of certain compliance. Section 148 (8) provides that if any default is made in complying with the provisions of this section the company shall be punishable in the manner as provided in Section 147 (1) (as per point No. 37);
  39. Section 157 deals with the company to inform DIN to registrar.  Section 157 (2) provides that if a company fails to furnish DIN under sub-section (1) before the expiry of the period specified under Section 403 the company shall be punishable with fine which shall not be less than Rs.25,000/- but which may extend to Rs.1,00,000/-;
  40. Section 172 provides that if a company contravenes any of the provisions of Chapter XI and for which no specific punishment is provided therein, the company shall be punishable with fine which shall not be  less than Rs.50,000/- but which may extend to Rs.5,00,000/-;
  41. Section 178  deals with the nomination and remuneration committee and stakeholders relationship committee.  Section178 (8) provides that in case of any contravention of provisions of Section 177 and this section the company shall be punished with fine which shall not be less than Rs.1,00,000/- but which may extend to Rs.5,00,000/-;
  42. Section 182 deals with the prohibitions and restrictions regarding political contributions. Section 182 (4) provides that if a company makes any contribution in contravention of the provisions of this section, the company shall be punishable with fine which may extend to 5 times the amount so contributed;
  43. Section 185 deals with loan to directors. Section 185 (2) provides that any loan is advanced or  a guarantee is given or provided in contravention of the provisions of sub-section (1), the company shall be punishable with fine which shall not be less than Rs.5,00,000/- but which may extend to Rs.25,00,000/-;
  44. Section 186 deals with loan and investment by company. Section 186 (13) provides that if a company contravene the provisions of this section, the company shall be punishable which shall not be less than Rs.25,000/- but which may extend to Rs.5,00,000/-;
  45. Section 187 deals with investments of company to be held in its own name.  Section 187 (4) provides that if a company contravenes the provisions of this section, the company shall be punishable with fine which shall not be less than Rs.25,000/- but which may extend to Rs.25,00,000/-;
  46. Section 190 deals with the contract of employment with Managing or whole time directors. Section 190 (3) provides that if any default is made in complying with the provisions of sub-section (1) or sub-section (2) the company shall be liable to a penalty of Rs.25,000/-;
  47. Section 203 deals with appointment of key managerial personnel. Section 203 (5) provides that if a company contravenes the provisions of this section, the company shall be punishable with fine which shall not be less than Rs.1,00,000/- but which may extend to Rs.5,00,000/-;
  48. Section 204 deals with Secretarial audit for bigger companies. Section 204 (4) provides that if a company contravenes the provisions of this section, the company shall be punishable with fine which shall not be less than Rs.1,00,000/- but which may extend to Rs.5,00,000/-;
  49. Section 206 deals with the power to call for information, inspect books and conduct inquiries. Section 206 (7) provides that if a company fails to furnish any information or explanation or produce any document required under this section, the company shall be punishable with a fine which may extend to Rs.1,00,000/-;
  50. Section 221 deals with freezing of assets of company on inquiry and investigation. Section 221 (2) provides that in case of any removal, transfer or disposal of funds, assets or properties of the company in contravention of the order of the Tribunal under subsection (1) the company shall be punishable with fine which shall not be less than Rs.1,00,000/- but which may be extend to Rs.25,00,000/-;
  51. Section 222 deals with imposition of restrictions upon securities. Section 222 (2) provides that where securities in any company are issued or transferred or acted upon  in contravention of an order of the Tribunal under sub-section (1), the company shall be punishable with fine which shall not be less than Rs.1,00,000/- but which may extend to Rs.25,00,000/-;
  52. Section 242 deals with the powers of the Tribunal.  Section 242 (8) provides that if a company contravenes the provisions of sub-section (5), the company shall be punishable with fine which shall not be less than Rs.1,00,000/- but which may extend to Rs.25,00,000/-;
  53. Section 245 deals with class action. Section 245 (7) provides  that any company which fails to comply with an order passed by the Tribunal under this section shall be punishable with fine which shall not be less than Rs.5,00,000/- but which may extend to Rs.25,00,000/-;
  54. Section 312 deals with the appointment of Company Liquidator to be given to Registrar. Section 312 (2) provides that if a company contravenes the provisions of sub-section (1), the company shall be punishable with fine which may extend to Rs.500/- for every day during which such default continues;
  55. Section 344 deals with the Statement that company is in liquidation. Section 344 (2) provides that if a company contravenes the provisions of sub-section (1), the company shall be punishable with fine which shall not be less than Rs.50,000/- but which may extend to Rs.3,00,000/-;
  56. Section 392 provides that if a foreign company contravenes the provisions of Chapter XXII the foreign company shall be punishable with fine which shall not less than Rs.1,00,000/- but which may extend to Rs.3,00,000/-;
  57. Section 403 deals with fee for filing, etc., Section 403 (2) provides  that where a company fails or commits any default to submit, file, register or record any document, fact or information under sub-section (1) before the expiry of the period specified in the first proviso to that sub-section the company shall be liable for penalty under this Act for such failure or default;
  58. Section 405 deals with the companies to furnish information or statistics. Section 405 (4) provides that if any company fails to comply with an order made under sub-section (1) or sub-section (3) or knowingly furnishes any information or statistics which is incorrect or incomplete in any material respect, the company shall be punishable with fine which may extend to Rs.25,000/-;
  59. Section 450 provides that if a company contravenes any of the provisions of this Act or rules made there under, for which no penalty is provided elsewhere in the Act the company shall be punishable with fine which may extend to Rs.10,000/- and where the contravention is continuing one, with a further fine which may extend to Rs.1,000/- for every day after the first during which the contravention continues.
  60. VidyaSunil & Associates is into practice of Tax Complaince, Audit, Accounts , Corporate / Business Finance & Outsourced CFO Services.
  61. Advise for contacting VidyaSunil & Associates;
  62. E Mail ID : vidyasunilassociates@gmail.com
  63. Cell No. : +91 9739834819