In India, all registered companies are required to file their Annual Returns and Income Tax Returns annually.
Compliance is not just a legal obligation but crucial for the company’s reputation and growth. Non-compliance can lead to operational limitations and result in monetary fines or imprisonment for defaulters. This article emphasizes the significance of annual returns and compliance under Section 92 of the Companies Act, 2013.
- Section 92 mandates that companies registered in India must abide by the Companies Act, of 2013, covering various corporate governance aspects.
- The Act addresses director appointments, qualifications, remuneration, and retirement, as well as the conduct of Board and Shareholder Meetings.
- Companies must prepare an annual return containing particulars about their registered office, principal business activities, and details of holding subsidiary, and associate companies.
- The annual return should also include information about shares, debentures, securities, and shareholding patterns.
- Details of members and debenture-holders, along with changes since the previous financial year, must be included.
- Complying with these regulations ensures transparency, accountability, and ethical corporate practices, enhancing the company’s credibility and trust among stakeholders.
- Diligent adherence to the Companies Act, 2013 fosters sustained growth in India’s dynamic business landscape.
- Information pertaining to its promoters, directors, and key managerial personnel, including any changes that have occurred since the conclusion of the previous financial year.
- Comprehensive details about meetings held with members or a specific class thereof, as well as the Board and its various committees, along with attendance records for each.
- Elaborate disclosure regarding the remuneration provided to directors and key managerial personnel.
- A thorough account of any penalties or punishments imposed on the company, its directors, or officers, including specifics on the compounding of offenses and any appeals filed against such penalties or punishments.
- Matters relating to the certification of compliances and disclosures, as prescribed by relevant regulations.
- Detailed information, as prescribed, concerning shares held by or on behalf of Foreign Institutional Investors.
- All other relevant matters as prescribed by applicable regulations. This comprehensive annual return must be duly signed by a director and the company secretary.
In the absence of a company secretary, the return can be signed by a company secretary in practice. It should be noted that in the case of a One Person Company or a small company, the annual return shall be signed by the company secretary. In the event that there is no company secretary, the return can be signed by the director of the company.
- The Companies Act grants the Central Government the authority to prescribe an abridged form of the annual return (MGT-7A) for specific categories of companies.
- The prescribed categories include “One Person Company,” “small company,” and any other class of companies as determined by the government.
- This provision has been effective from the financial year 2020-21 onwards.
- Listed companies and companies with a paid-up capital of ten crore rupees or more or a turnover of fifty crore rupees or more must obtain certification of their annual return from a practicing Company Secretary.
- The certification must be in Form No. MGT.8 and must confirm that the annual return accurately and adequately discloses all relevant facts and that the company has complied with the Act.
- All companies are required to make their annual return available on their website.
- The web link to access the annual return should be provided in the board report.
- Every company must file a copy of its annual return with the Registrar of Companies within sixty days from the date of the annual general meeting.
- If no annual general meeting is held in a particular year, the annual return must be filed within sixty days from the date on which the meeting should have been held.
- In such cases, the company must include a statement explaining the reasons for not holding the annual general meeting and must pay the prescribed fees or additional fees as applicable.
Implications of Non-Compliance under the Companies Act, 2013
Ensuring adherence to the Companies Act, 2013 is paramount for maintaining the integrity of corporate operations in India. Of particular importance is Section 92, which holds significant implications for companies and their officers in the event of non-compliance. Failure to file the annual return within the stipulated timeframe can lead to severe penalties, adversely affecting both the company and its officers.
- In case of non-compliance, both the company and every defaulting officer may be subjected to a monetary penalty of ten thousand rupees.
- However, the repercussions do not end there. Should the company persist in failing to file the annual return, it could face an additional penalty of one hundred rupees per day.
- This daily penalty accrues up to a maximum of two lakh rupees for the company and fifty thousand rupees for an individual officer.
- Furthermore, the implications extend to the company secretary in practice as well.
- If the annual return is certified by the company secretary in a manner that does not align with the requirements laid out in this section or the accompanying rules, they may face a substantial penalty of two lakh rupees.
- It is evident that compliance with Section 92 is not merely a legal obligation but a crucial aspect of demonstrating a company’s commitment to upholding good corporate governance practices.
- By mandating the preparation and timely filing of the annual return, this provision ensures transparency and accountability in the functioning of companies.
- Stakeholders rely on this vital information to make informed decisions, emphasizing the significance of adhering to these regulations.
In conclusion, adherence to Section 92 of the Companies Act, 2013 is essential for safeguarding the interests of stakeholders and promoting ethical corporate conduct. It serves as a pivotal tool in fostering transparency and maintaining the integrity of companies in India. Embracing compliance is not only a legal necessity but also an affirmation of a company’s dedication to sound governance principles.