Case Study: The Companies Act, 2013

QUESTION

As on 30th November 2018, the filing status of the financial statement or annual return of ABC Limited for the last 4 financial year is as under:

On the basis of above please advise:

i. Due date of the filing of the Financial Statement and Annual Return for the FY 2015-16.

ii. On the basis of the above filing status, whether the directors of the company are being disqualified or not under section 164(2) of the Companies Act, 2013.

iii. Whether the company has made any non-compliance in calling of the AGM.

iv. Consequence to the company for the Non filing of the Financial Statement.

ANSWERS

i) Due date of the filing of the Financial Statement and Annual Return for the FY 2015-16. As per the Section 137 of the Companies Act, 2013, A copy of the financial statements, includingconsolidated financial statement, if any, along with all the documents which are required to be or attached to such financial statements under this Act, duly adopted at the annual general meeting of the company, shall be filed with the Registrar within thirty days of the date of annual general meeting.

In the above case the AGM is held on the 30th of May 2016 accordingly, the financial statement of the company should be filed on or before the 29th ofJune 2016.

As per section 92 of the companies act, 2013 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 isheld or where no annual general meeting is held in any year within sixty days from the dateon which the annual general meeting should have been held together with the statement specifying the reasons for not holding the annual general meeting.

In the above case the AGM is held on the 30th of May 2016 accordingly, the financial statement of the company should be filed on or before the 29th ofJuly 2016.

ii) On the basis of the above filing status, whether the directors of the company are being disqualified or not under section 164(2) of the Companies Act, 2013.

As per Section 164 (2) of the Companies Act, 2013, No person who is or has been a director of a company which –

(a) has not filed financial statements or annual returns for any continuous period of three financial years; or

(b) has failed to repay the deposits accepted by it or pay interest thereon or to redeem any debentures on the due date or pay interest due thereon or pay any dividend declared and such failure to pay or redeem continues for one year or more, shall be eligible to be re-appointed as a director of that company or appointed in other company for a period of five years from the date on which the said company fails to do so.

As per the above filing status, the company has not filed the financial statement for the FY 2016 -17 and 2017-19 and the Annual return for the FY 2014-15 and 2015-16. Hence, all the Director of the company are disqualified. However, in case any director appointed during the FY 2016-17 and 2017-18 will not be disqualified for appointment or reappointment in any company.

iii) Whether the company has made any non-compliance in calling of the AGM.

As per section 96 of the Companies Act, 2013 every company other than a One Person Company shall in each year hold in addition to any other meetings, a general meeting as its annual general meeting and shall specify the meeting as such in the notices calling it, and not morethan fifteen months shall elapse between the date of one annual general meeting of a company and that of the next:

From the above table it can be seen that the company has call AGM on 05th June 2017 and the AGM for the FY 17-18 is called on 25th September 2018, which is called after the gap of fifteen months which was expired on 05th September 2018. However, if the company has taken the prior approval of the registrar of companies for extension of the date of the Annual general meeting, the company is in compliance with the law.

iv. Consequence to the company for the Non-filing of the Financial Statement.

As per section 137 of the companies Act, 2013 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 therein the company shall be liable to a penalty of one thousand rupees for every day during which the failure continues but which shall not be more than ten lakh rupees, and the managing director and the Chief Financial Officer of the company, if any, and, in the absence of the managing director and the Chief Financial Officer, any other director who is charged by the Board with the responsibility of complying with the provisions of this section, and, in the absence of any such director, all the directors of the company, shall be shall be liable to a penalty of one lakh rupees and in case of continuing failure, with further penalty of one hundred rupees for each day after the first during which such failure continues, subject to a maximum of five lakh rupee.

The company has not filed the financial statement for the year 2016-17 and 2017-18 and company is liable to pay additional fees as per section 403 and the penalty of one thousand rupees for every day during which the failure continues but which shall not be more than ten lakh rupees.

STATUTORY PROVISIONS

SECTION 92 of the Companies Act, 2013;( ANNUAL RETURN)

(1) Every company shall prepare a return (hereinafter referred to as the annual return) in the prescribed form containing the particulars as they stood on the close of the financial year regarding—
(a) its registered office, principal business activities, particulars of its holding, subsidiary company and associate companies.
(b) its shares, debenture and other securities and shareholding pattern.
(c)
(d) its members and debenture-holders along with changes therein since the close of the previous financial year.
(e) its promoters , directors, key managerial personnel along with changes therein since the close of the previous financial year.
(f) meetings of members or a class thereof, Board and its various committees along with attendance details.
(g) Remuneration of directors and key managerial personnel
(h) penalty or punishment imposed on the company, its directors or officer and details of compounding of offences and appeals made against such penalty or punishment.
(i) matters relating to certification of compliances, disclosures as may be prescribed.
(j) details, as may be prescribed, in respect of shares held by or on behalf of the Foreign Institutional Investors and
(k) such other matters as may be prescribed, and signed by a director and the company secretary, or where there is no company secretary, by a company secretary in practice :

Provided that in relation to One Person Company, small company and private company (if such private company is a start-up), the annual return shall be signed by the company secretary, or where there is no company secretary, by the director of the company.

Provided further that the Central Government may prescribe a bridged form of annual return for “One Person Company, small company and such other class or classes of companies as may be prescribed”.

(2) The annual return, filed by a listed company or, by a company having such paid-up capital or turnover as may be prescribed, shall be certified by a company secretary in practice in the prescribed form, stating that the annual return discloses the facts correctly and adequately and that the company has complied with all the provisions of this Act.

(3) Every company shall place a copy of the annual return on the website of the company, if any, and the web-link of such annual return shall be disclosed in the Board's report.

(4) 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,.

(5) If any company fails to file its annual return under sub-section (4), before the expiry of the period specified therein, such company and its every officer who is in default shall be liable to a penalty of ten thousand rupees and in case of continuing failure, with a further penalty of one hundred rupees for each day during which such failure continues, subject to a maximum of two lakh rupees in case of a company and fifty thousand rupees in case of an officer who is in default;

(6) If a company secretary in practice certifies the annual return otherwise than in conformity with the requirements of this section or the rules made thereunder, he shall be liable to a penalty of two lakh rupees.

SECTION 96 of the Companies Act, 2013;(ANNUAL GENERAL MEETING)

(1) Every company other than a One Person Company shall in each year hold in addition to any other meetings, a general meeting as its annual general meeting and shall specify the meeting as such in the notices calling it, and not more than fifteen months shall elapse between the date of one annual general meeting of a company and that of the next:

Provided that in case of the first annual general meeting, it shall be held within a period of nine months from the date of closing of the first financial year of the company and in any other case, within a period of six months, from the date of closing of the financial year:

Provided further that if a company holds its first annual general meeting as aforesaid, it shall not be necessary for the company to hold any annual general meeting in the year of its incorporation:

Provided also that the Registrar may, for any special reason, extend the time within which any annual general meeting, other than the first annual general meeting, shall be held, by a period not exceeding three months.

(2) Every annual general meeting shall be called during business hours, that is, between 9 a.m. and 6 p.m. on any day that is not a National Holiday and shall be held either at the registered office of the company or at some other place within the city, town or village in which the registered office of the company is situated:

Provided that annual general meeting of an unlisted company may be held at any place in India if consent is given in writing or by electronic mode by all the members in advance:

Provided further that the Central Government may exempt any company from the provisions of this sub-section subject to such conditions as it may impose.

Provided further that the time, date and place of each annual general meeting are decided upon before-hand by the Board of Directors having regard to the directions, if any, given in this regard by the company in its general meeting.

Explanation. - For the purposes of this sub-section, “National Holiday” means and includes a day declared as National Holiday by the Central Government.

SECTION 137 of the Companies Act, 2013

(1) A copy of the financial statement, including consolidated financial statement, if any, along with all the documents which are required to be or attached to such financial statements under this Act, duly adopted at the annual general meeting of the company, shall be filed with the Registrar within thirty days of the date of annual general meeting in such manner, with such fees or additional fees as may be prescribed.

Provided that where the financial statements under sub-section (1) are not adopted at annual general meeting or adjourned annual general meeting, such unadopted financial statements along with the required documents under sub-section (1) shall be filed with the Registrar within thirty days of the date of annual general meeting and the Registrar shall take them in his records as provisional till the financial statements are filed with him after their adoption in the adjourned annual general meeting for that purpose:

Provided further that financial statements adopted in the adjourned annual general meeting shall be filed with the Registrar within thirty days of the date of such adjourned annual general meeting with such fees or such additional fees as may be prescribed.

Provided also that a One Person Company shall file a copy of the financial statements duly adopted by its member, along with all the documents which are required to be attached to such financial statements, within one hundred eighty days from the closure of the financial year :

Provided also that a company shall, along with its financial statements to be filed with the Registrar, attach the accounts of its subsidiary or subsidiaries which have been incorporated outside India and which have not established their place of business in India.

Provided also that in the case of a subsidiary that has been incorporated outside India (herein referred to as “foreign subsidiary”), which is not required to get its financial statement audited under any law of the country of its incorporation and which does not get such financial statement audited, the requirements of the fourth proviso shall be met if the holding Indian listed company files such unaudited financial statement along with a declaration to this effect and where such financial statement is in a language other than English, along with a translated copy of the financial statement in English.

(2) Where the annual general meeting of a company for any year has not been held, the financial statements along with the documents required to be attached under sub-section(1), duly signed along with the statement of facts and reasons for not holding the annual general meeting shall be filed with the Registrar within thirty days of the last date before which the annual general meeting should have been held and in such manner, with such fees or additional fees as may be prescribed;

(3) 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 specified period in section 403 therein, the company shall be liable to a penalty of ten thousand rupees and in case of continuing failure, with a further penalty of one hundred rupees for each day during which such failure continues, subject to a maximum of two lakh rupees, and the managing director and the Chief Financial Officer of the company, if any, and, in the absence of the managing director and the Chief Financial Officer, any other director who is charged by the Board with the responsibility of complying with the provisions of this section, and, in the absence of any such director, all the directors of the company, shall be liable to a penalty of ten thousand rupees and in case of continuing failure, with further penalty of one hundred rupees for each day after the first during which such failure continues, subject to a maximum of fifty thousand.

SECTION 164(2) of the Companies Act, 2013

(2) No person who is or has been a director of a company which -

(a) has not filed financial statements or annual returns for any continuous period of three financial years; or
(b) has failed to repay the deposits accepted by it or pay interest thereon or to redeem any debenture on the due date or pay interest due thereon or pay any dividend declared and such failure to pay or redeem continues for one year or more, shall be eligible to be re-appointed as a director of that company or appointed in other company for a period of five years from the date on which the said company fails to do so.

Provided that where a person is appointed as a director of a company which is in default of clause (a) or clause (b), he shall not incur the disqualification for a period of six months from the date of his appointment.

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