Company Annual Return

Annual Return

An annual return, filed using Form MGT-7/7A, is really important for Indian companies. It helps keep things transparent, makes companies accountable, and ensures they follow good corporate rules. In this discussion, we’ll look at why annual returns matter, the different forms needed, and the rules companies must follow.

Annual Return:

  • In simple terms, an annual return is like a detailed report card that every Indian company has to give to the Registrar of Companies (ROC).
  • It’s not all about money stuff but tells us a lot about the company’s other important aspects. This report includes important info about who owns the company, who’s in charge, and how the company works.
  • This report is super important because it helps everyone who cares about the company (like shareholders, investors, creditors, and potential partners) understand how the company is doing and if it’s stable.
  • You can look at this report for free during office hours.
  • Basically, the annual return is like the foundation of all the information it contains.

Purpose of Annual Returns:

  • The main reason for filing an annual return is to provide a yearly overview of important information about a company.
  • This includes things like where the company is located, what it does, details about other related companies, how it’s funded, who the important people are (like directors and managers), and how much they are paid.
  • It also includes information about the company’s debts, records of important meetings, and other important data.
  • This information is shared with the government and the company’s members to make sure everything is clear and everyone is accountable.

Forms MGT-7/7A:

The e-form MGT-7A, which is the Abridged Annual Return, is specifically applicable to One Person Companies (OPCs) and small companies. Any other company established under the Companies Act of 2013 is required to submit the e-form MGT-7 to the Registrar of Companies. According to Section 2(85) of the Act, small companies are defined as companies, excluding public companies, that meet the following criteria:
1. Their paid-up share capital does not exceed Rs. 4 crore or any specified higher amount, which cannot exceed Rs. 10 crore.
2. Their turnover does not exceed Rs. 40 crore or any specified higher amount, which cannot exceed Rs. 100 crore.

It’s important to note that some companies, like subsidiaries, holding companies, those registered under section 8, and those governed by special laws, are not considered small companies. They must use the longer Form MGT-7 for their annual returns.

Section 92 Filing of Annual Return
Section 93 Filing of Return in Case of Promoters’ Stakeholding Changes
Section 94 The place for Keeping Annual Returns and Inspection
Section 95 Annual Return as Evidence
Rule 11 Certification of Annual Return (MGT-8)
Rule 12 Extract of Annual Return
Rule 13 Return of Changes in Prescribed Form in Case of Promoters’ Stakeholding Changes
Rule 14 Inspection of Annual Return
Rule 15 Preservation of Annual Return
Rule 16 Furnishing Copies of Annual Return

Who Signs and Checks It?

  1. Who Signs: According to the Companies Act, 2013, both a director and the Company Secretary (or a Practising Company Secretary if there’s no Company Secretary) must sign the annual return. However, for One Person Companies or small companies, either the Company Secretary or the Director can sign it.
  2. Certification: For larger, listed companies with a paid-up share capital of Rs. 10 crore or more or a turnover exceeding Rs. 50 crore, a Practising Company Secretary (PCS) must provide certification using Form MGT-8. This certification confirms that the annual return is accurate and complete, without any changes, and that the company has followed all the relevant rules in the Companies Act.

Verification Process for Annual Return Certification:

Certifying the annual return involves carefully checking various documents and records to make sure they match the information in the return. This includes:

1. Checking the company’s rules (Memorandum and Articles of Association).
2. Review all forms and receipts sent to the Registrar of Companies (ROC).
3. Looking at lists of company members and records of shares being transferred.
4. Examining details about company directors and their shares.
5. Checking information submitted by directors.
6. Reviewing records of any financial charges on the company.
7. Going through minutes of board meetings and Annual General Meetings (AGMs).
8. Checking records of share transfers, payments, and audit committees.

Additionally, it involves:

1. Carefully review the company’s latest financial statement (balance sheet).
2. Looking at notices about AGMs and lists of shareholders.
3. Examining records of share transfers for the year.
4. Checking data controls up to the end of the financial year or AGM date.
5. Verifying ownership information recorded by Depository Participants (DPs) before the AGM.

Certification also requires:

  • Getting a statement from the Registrar and Transfer Agent (RTA) about the number of shareholders at the end of the year.
  • Getting a certificate of debt signed by the Company Secretary or Chief Financial Officer (CFO).
  • Checking approvals from stock exchanges and confirmations from depositories like NSDL and CDSL.
  • Verifying any changes in the company’s name, share value, ISIN, or symbol during the year.
  • Reviewing corporate actions taken by the company, including board decisions and forms sent to depositories.
  • Analyzing the breakdown of the company’s share ownership at the end of the year.
  • Examining any orders from the High Court or other regulators.
  • Scrutinizing records of the company’s investments.

In simpler terms, certifying the annual return means carefully checking all the company’s paperwork to ensure it’s accurate and in line with the law, and confirming details like ownership, financial status, and compliance with regulations.

Filing the Annual Return with ROC:
The procedural part of submitting an annual return has a strict deadline. Companies must send their annual returns to the ROC within 60 days after their Annual General Meeting (AGM). If there is no AGM held in a year, they still need to file the annual return with the ROC within 60 days of the planned AGM date. They also have to explain why the AGM didn’t happen.

Penalties for Non-Compliance:
If a company doesn’t file its annual return on time, it can be fined between 50,000 to 500,000 rupees. People in charge can also be fined between 50,000 to 500,000 rupees or even go to jail for up to six months, depending on how serious the violation is.

  • Foreign companies operating in India are required to fulfill annual return obligations. This means they have to follow certain rules.
  • According to Section 384(2), foreign companies must also follow Section 92. Rule 7 of the Companies (Registration of Foreign Companies) Rules, 2014, states that every foreign company has to make and submit an annual return using Form FC-4 to the Registrar of Companies (ROC) within 60 days after their financial year ends.
  • This return should show information as it was at the end of the financial year, giving important details about what the foreign company did in India.

In Conclusion:
The annual return is not just a boring task; it’s really important for how companies are run in India. It helps make things clear and keeps companies honest, so everyone knows what’s going on. Filing it on time and getting it right isn’t just paperwork, it’s a big part of making sure companies are doing the right things. Following the rules in the Companies Act, 2013, is a must for companies to meet this legal requirement, and it helps businesses in India work smoothly while protecting everyone involved.

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