CORPORATE LAW-II PROJECT

TOPIC- FILING OF ANNUAL RETURNS AND REPORTS BY A COMPANY

SUBMITTED BY: Pragalbh Bhardwaj12/BBA/034NATIONAL LAW UNIVERSITY, ODISHA

TABLE OF CONTENTS

INTRODUCTION2Research Methodology3Scope and Significance3Objective3Research questions3CHAPTERISATION4TIME OF FILING ANNUAL RETURNS5INFORMATION TO BE FILED6Other relevant forms that have to be filed6CHECKING AUTHENTICATION OF ANNUAL RETURNS FILED8ANNUAL RETURN FOR FOREIGN COMPANIES10CONSEQUENCES OF NOT FILING ANNUAL RETURNS10Consequences of False Certification by Company Secretary in Practice10COMPARISON BETWEEN RELEVANT PROVISIONS OF COMPANIES ACT, 1956 AND COMPANIES ACT, 201312Conclusion14BIBLIOGRAPHY15CASES15STATUES15BOOKS15MISCELLANEOUS15

INTRODUCTIONSection 159,160,161,162 & Schedule V of Companies Act, 1956 dealt with the Annual Return & related provisions. However, in Companies Act, 2013[footnoteRef:2] all these sections have been covered under one broad section, that is, section 92. [2: Section 92, Companies Act, 2013. ]

There was no default committed by the private or public companies even if they merely filed the annual returns, according to the provision of Companies Act, 1956. However, under the Companies Act, 2013, the rule has been made stricter. A company would be committing a default if it fails in its duty to file the annual report or annual return. Therefore, even if the company fails to file one of them, it would be in default. Moreover, any person who is disqualified as a director in a private company is not entitled to hold the post of director in a public limited company. This provision has also been introduced by the new Act and was not there in the Companies Act, 1956.Annual return is a yearly statement which is 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 and function, which highlights the information about companys various aspects including its composition, activities, and financial position and informs the investors, consumers, financial institutions, regulator and many others dealing with the firm about a 'true and fair view' of the state of its affairs in a very comprehensive and crisp manner. Therefore, it is mandatory for every company to file such an annual return.An annual return is not to be equated with a tax return. Annual Return is simply a corporate law requirement and each and every company, irrespective of the nature, has a legal obligation to file the annual return with the Registrar of Companies.For a foreign company, it is mandatory to file annual return within a period of sixty days from the very last day of the financial year along with the fees provided in the Companies (Registration Offices and Fees) Rules, 2014. This annual return has to be filed with the registrar. This annual return should contain such particulars of the company as they stood on the closing day of the financial year.

RESEARCH METHODOLOGYScope and SignificanceThe present paper focuses on filings that have to be made by a company. The scope of paper is to cover all the relevant procedures for filling of the annual return i.e. the process of filling, content of filling, time of filing and consequences of not filling it.This paper covers section 92 of the companies act 2013 and section 159, 160,161,162 of the companies act 1956. ObjectiveThis paper aims to critically examine the various facets of the provisions regarding filing of returns under the new and the old Act. The objective of this project is also to have in depth knowledge about all the relevant procedure of filling the annual returns.Research questionsQ.1) What is the information to be filled while filling annual returns and when it is to be filled?Q.2) How to check authentication of the Information filed?Q.3) What is the rule of filling annual returns for foreign companies?Q.4) What are the consequences of not filling annual return?Q.5) How are the provisions regarding returns of the new Act different from the old Act?

CHAPTERISATIONChapter I- Time of filling annual returns.This chapter includes the issues relating to the time 0f filling the returns like what is the deadline of filling return, to whom it should be filled this chapter cover section 92 of the companies act 2013 and section 159 and 160 of the companies act 2013.Chapter II Information to be filled.This chapter discussed about the content of the Information which is to be filled section 92(1) covers gives the details of information which is to be filed this chapter also includes all the other relevant forms which is to be filled apart from that which is covered under section 92 of the companies act 2013Chapter III- Checking authentication of the annual returns filled.This chapter talks about the matter relating to authentication of the information filled. It gives clarification about various aspects like who should sign the annual return, certification of the annual return and also covers the different ways of filling the FIR when the annual general meeting is held and when annual general meeting is not held.Chapter IV Annual returns for foreign companies.This chapter provides information regarding the filling of annual return by the foreign companies. This chapter also mentions about the changes in procedure due to coming of 2013 act and compared the relevant sections of both the 1956 and 2013 act.Chapter V- Consequences of not filling annual return.This chapter covers section 92(5) of the companies act 2013 it explains the different monetary and penal provisions which is given to the company if the company fails to files its annual returns.Chapter VI- Comparison between relevant provisions of the 1956 Act and the 2013 Act.In this chapter a comparison between the relevant provisions regarding annual returns of 1956 Act and 2013 Act has been done.

1. TIME OF FILING ANNUAL RETURNS The Companies Act, 2013 that the information which was there at the end of the financial year needs to be present. This is one of the major changes which was brought about by the new Act.Under the old act of 1956, section 159[footnoteRef:3]& section 160[footnoteRef:4] provided that the information, as it stood on the date of the Annual General Meeting, must be present. [3: Section 159, Companies Act, 1956.] [4: Section 160, Companies Act, 1956.]

Every company shall file with the Registrar a copy of the annual return, within sixty days from the date on which the annual general meeting is held or where no annual general meeting is held in any year within sixty days from the date on which the annual general meeting should have been held together with the statement specifying the reasons for not holding the annual general meeting, with such fees or additional fees as may be prescribed, within the time as specified, under section 403.[footnoteRef:5] [5: KM Ghosh, Company law, 1927 (14th ed. Vol.2 2012).]

However, as per third proviso to sub-section (1) to section 96 of the 2013 Act[footnoteRef:6], the Registrar of Companies has the power to extend the time period within which the Annual General Meeting must be held by a period which is not more than three months. However, sufficient reasons have to be provided to extend this time limit. In such a situation, there is an additional three months cooling period added to the sixty days which is ordinarily given for the filing of annual return. [6: Section 96 (1), Companies Act, 2013.]

2. INFORMATION TO BE FILED Under the provisions of sub-section (1) to section 92 of Companies Act, 2013, the following information must be incorporated in the prescribed form such as[footnoteRef:7]: [7: Section 92(1), Companies Act, 2013.]

its registered office, principal business activities, particulars of its holding, subsidiary and associate companies; its shares, debentures and other securities and shareholding pattern; its indebtedness; its members and debenture-holders along with changes therein since the close of the previous financial year; its promoters, directors, key managerial personnel along with changes therein since the close of the previous financial year; meetings of members or a class thereof, Board and its various committees along with attendance details; remuneration of directors and key managerial personnel; penalty or punishment imposed on the company, its directors or officers and details of compounding of offences and appeals made against such penalty or punishment; matters relating to certification of compliances, disclosures as may be prescribed; details, as may be prescribed, in respect of shares held by or on behalf of the Foreign Institutional Investors indicating their names, addresses, countries of incorporation, registration and percentage of shareholding held by them; and such other matters as may be prescribed.

Other relevant forms that have to be filedRule 11(1) of the Companies (Management and Administration) Rules, 2014 provides that every company shall prepare its annual return in Form No. MGT.7.[footnoteRef:8]Sub-section (3) to section 92[footnoteRef:9] read with Rule 12(1) of the Companies (Management and Administration) Rules, 2014[footnoteRef:10], says that an extract of the annual return shall form part of the Boards report and such extract shall be in Form No. MGT 9. [8: Rule 11 (1), Companies (Management and Administration) Rules, 2014.] [9: Section 92(3), Companies Act, 2013.] [10: Rule 12(1), Companies (Management and Administration) Rules, 2014.]

Pursuant to General Circular No. 22/2014 vide dated 25th June, 2014; MCA has specifically made it clear that Form No. MGT.7 shall not be made applicable to annual returns with regard to those companies whose financial year ended on or before 1st April, 2014 and for annual returns pertaining to earlier years.[footnoteRef:11] [11: General Circular No. 22/2014 vide dated 25th June, 2014.]

This clearly implies that the companies need to file the annual return according to the form prescribed under the Companies Act, 1956.The annual return which is filed needs to be signed by a Director of the company or company secretary. However, if no company secretary is present, it may be signed by a company secretary in practice. The format of annual return is in form MGT 7.[footnoteRef:12] [12: Rule 11 (1), Companies (Management and Administration) Ru1es, 2014.]

Small companies or one Person Company would have the annual return signed by a company secretary. However, if there is no company secretary, it would be signed by the Director of the company. A small company means any company other than a public company with paid up share capital of up toRs.50lakh or having a turnover of Rs.2 Crores. The government may specify higher limits for a small company but it cannot exceed paid up share capital of Rs.5 Crores or turnover ofRs.20Crores.The annual return by a listed company or a public company with paid up share capital ofRs.10Crores or more OR turnover ofRs.50Crores or more shall be mandatorily certified by a Company Secretary in Practice and the Certificate shall in form MGT 8.An extract of the annual return is required to be attached to and shall form part of the Board report. This form of annual return is in form MGT 9. The time period required for filing of the annual return for such situations is the same, that is, 60 days from the Annual General Meeting.

3. CHECKING AUTHENTICATION OF ANNUAL RETURNS FILEDAnnual Return shall be signed by the company secretary, or In the absence of company secretary, it would be signed by the Director of the company.Certification of Annual Return by PCS:The annual return which is filed by any listed company or a company having paid-up capital of Rs. 10 Crores or more, or companies having a turnover of Rs. 50 Crores or more, shall be certified by a PCS in Form No. MGT-8. Moreover, it would state that the annual return which is being filed correctly discloses all the facts and that the company has complied with all the provisions of this act.Therefore, for the above-mentioned companies, signing of the annual return is enough. It is the task of the PCS to ensure that the said company has not violated any provision of the act.The Annual Return certification is presently mandatory for listed companies only. This certification is slowly being extended to other companies which are not listed.Extract of Annual Return:An extract of the annual return in Form No MGT-9 shall be attached to and form part of the Boards report.Filing of Annual Return:Every company shall file a copy of the annual return with the Registrar.If AGM is held- File Annual Return within 60 days from the date on which the AGM is held orIf no AGM is held in any year- Even though no AGM has been held the company has to comply with the requirements of section 92.[footnoteRef:13] A person who could have called the meeting by not calling the meeting rely on his own default and say that because no meeting has been held, he could not file the annual return.[footnoteRef:14] In such a case, the Annual Return must be filed within 60 days from the original date of the Annual General Meeting. Moreover, a statement should also be provided with in regard to the reasons for not conducting the Annual General Meeting as per the schedule. [13: State of Bombay v. Bhandhan Ram Bhandani, Air 1961 Sc 186] [14: State v. Tank colico printers, (1963) 2 Comp LJ 87.]

It does not matter whether the Annual General Meeting was held or not. The annual return made up to the due date must be filed within sixty days of the last date on or before which the meeting should have been held; where the meeting had not been held, the return must specify the reasons for not holding the meeting.[footnoteRef:15] [15: Supra at 12.]

Even if no general meeting was held, the annual return has to be filed by the company. Just because no general meeting was held cannot be a ground for not complying with the provisions of the section. A person who could have called the meeting cannot, by not calling the meeting, rely on his own default, and say that because no meeting was he could not file the annual return. [footnoteRef:16] [16: Saraswati Printers Ltd. v. State (1960) 30 Com Cases 523 (Raj).]

The fact that the company did not function is also not an excuse for not making the filings. [footnoteRef:17] [17: Madan Gopal Dey v. Sate of West Bengal AIR 1968 Cal 79.]

4. ANNUAL RETURN FOR FOREIGN COMPANIESUnder the Companies Act, 1956, annual return had to be filed by each and every company under section 159 or section 160 as the case may be. The same was applicable to the foreign companies.[footnoteRef:18] However, the Companies Act, 2013 has brought about a significant change. A different form needs to be filled by the foreign companies under the provision of Section 384 which is present in Chapter XXII of the Act, and talks about Debentures, Annual return, Registration of Charges, Books of Account and their inspection.[footnoteRef:19]Section 384(2) deals with the Annual Return of the Foreign Companies[footnoteRef:20] and says that the provisions of section 92 shall, subject to such exceptions, modifications and adaptations as may be made therein by rules made under this Act, apply to a foreign company as they apply to a company incorporated in India. [18: A Ramaiya , Guide to Companies act, 1922(17th ed. 2010).] [19: Section 384, Companies Act, 2013.] [20: Section 384 (2), Companies Act, 2013.]

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 such fee as provided in the Companies (Registration Offices and Fees) Rules, 2014 containing the particulars as they stood on the close of the financial year.[footnoteRef:21] [21: Rule 7, Companies (Registration of Foreign Companies) Rules, 2014.]

5. CONSEQUENCES OF NOT FILING ANNUAL RETURNSSection 92(5) has categorized the consequences of non-filing of annual returns into two parts, namely, monetary provision and penal provision.[footnoteRef:22] A company which fails in its duty to file the annual return under sub-section (4) before the time period mentioned under section 403 would be liable to pay a monetary penalty which could vary from 50,000 to 5, 00,000. [22: Section 92 (5), Companies Act, 2013.]

Moreover, every officer of the Company, who is in default, shall be punishable with imprisonment for a term which may extend to six months. Also, the fine imposed on such an officer shall vary from 50,000 to 5, 00,000.Consequences of False Certification by Company Secretary in PracticeIf the company secretary does not comply with the requirements of this section and certifies the annual return without complying with the provisions of this section, he shall be punished with a fine which may vary from 50,000 to 5, 00,000.[footnoteRef:23] [23: Section 92 (6), Companies Act, 2013.]

Place of Keeping Annual ReturnsSection 94(1) of the 2013 Act says that every company shall keep copies of annual return filed under Section 92 at its registered office.[footnoteRef:24] [24: Section 94 (1), Companies Act, 2013.]

Inspection of Annual ReturnsThe copies of all the returns can be inspected by any member, debenture-holder, other security holder or beneficial owner, during business hours without payment of any fees. Moreover, it can also be inspected by any other person on payment of fees as may be prescribed.[footnoteRef:25]

[25: Section 94 (2), Companies Act, 2013.]

6. COMPARISON BETWEEN RELEVANT PROVISIONS OF COMPANIES ACT, 1956 AND COMPANIES ACT, 20131. Under the Companies Act, 2013, the particulars as mentioned under Section 92 are to be filed as on closing of the financial year not as on date of Annual General Meeting as was a requirement under the 1956 Act.2. A matter in respect of which information has to be provided is enlarged under new Act.[footnoteRef:26] The followings are the new requirements [26: Section 92, Companies Act, 2013.]

Meetings of members or a class thereof, Board and its various committees along with attendance details. Remuneration of directors and key managerial personnel. Penalties or punishments imposed on directors/officers or on company, steps taken for compounding or appeals made against alleged offence. Details of Penalty or punishment imposed on the company, its directors or officers and details of compounding of offences and appeals made against such penalty or punishment. Details, as may be prescribed, in respect of shares held by or on behalf of the Foreign Institutional Investors indicating their names, addresses, countries of incorporation, registration and percentage of shareholding held by them. Any other matters as may be prescribed. 3. Annual return for One Person Company (OPC) and Small Company.4. Segregation of Annual Return Forms.5. An extract of the annual return in Form No. MGT.9 shall be annexed to the Directors Report.[footnoteRef:27] [27: Section 134(3)(a), Companies Act, 2013.]

6. Companies whose paid-up share capital of `Ten crore or more or turnover of `Fifty crore or more is required to obtain a certificate from Company Secretary in Practice. 7. Penalty has been substantially increased. As already mentioned above, fine shall not be less than Rs.50,000/- but which may extend to Rs.5,00,000/-.8. Company Secretary and Company Secretary in Practice brought under penal jurisdiction.9. The certification requirement under the Act of 2013 extends to the unlisted companies having PSC of Rs.10 Crores or more or turnover of Rs.50 Crores or more.

CONCLUSIONNew provisions have made it more comprehensive one albeit it has reduced the period, by deviating the date on which data must be captured, i.e. As on AGM to As on Closing of Financial Year. By doing so, Government has tried to treat every company at par and even availability of almost all those information which a listed company incorporates in its Annual Report in public domain. This will help to curb the irregularity of Private companies which reluctant to share their information. However, this will be the repetition of information in case of listed companies.Since, information provided under Annual return is linked to the closing of financial year date, the time period of 60 days from the date of AGM to file annual return has no relevance. Annual Return can be filed immediately after the closing of financial year, without waiting for AGM. This provision requires a reconsideration.It cast huge responsibility on in house Company Secretaries and Company Secretary in Practice to check not only the veracity of contents of Annual Return but also confirm the compliance of the provision of the Act in letter spirit. Professional need to be more alert and well equipped with the provision of the Act and bound to exercise their diligence for avoiding any penalties as they have been substantially increased in the 2013 Act.

BIBLIOGRAPHYCASES1. State v. Tank colico printers, (1963) 2 Comp LJ 87.2. State of Bombay v. Bhandhan Ram Bhandani AIR 1961 SC 186.3. Saraswati Printers Ltd. v. State (1960) 30 Com Cases 523 (Raj).4. Madan Gopal Dey v. State of West Bengal AIR 1968 Cal 79.5. State of Bombay v. Bhandhan Ram Bhandani, Air 1961 Sc 186.

STATUES1.) Companies Act, 2013.2.) Companies Act, 1956.BOOKS1.) A Ramaiya , Guide to Companies Act (17th ed. Vol.2 2010).2.) KM Ghosh, Company law, 3565 (14th ed. Vol.2 2012).MISCELLANEOUS1) Companies (Registration of Foreign Companies) Rules, 2014.2) General Circular No. 22/2014 vide dated 25th June, 2014.3) Companies (Management and Administration) Ru1es, 2014.

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