CA Loan Bajaj Finserv
CA Final Online Classes
CA Classes

Share on Facebook

Share on Twitter

Share on LinkedIn

Share on Email

Share More

MGT 7 - Regulator is not clear what it wants

Sundharesan Jayamoorthi 
on 20 October 2015

LinkedIn


MGT 7 – Difficulty of Reporting Compliance in India

The principle, “when the regulator is not clear what it wants, give the regulator  what you want”, applies to the annual filing of 2015.

MGT 7 is the Annual Return for all companies to be filled, signed and filed with the  Ministry of Corporate Affairs. The Ministry of Corporate Affairs has changed the  annual filing e-forms for filing annual return as per Section 92 of the Act which is now  changed from form 20B to e-form MGT 7. The Ministry had issued circular on July  13, 2015 stating that the electronic versions of forms were being developed and will  be made available latest by September 30, 2015. The Circular further provided  relaxation of filing above stated forms without additional fee up to October 31, 2015.

Current Status:

MGT 7 was made available to the public on September 28, 2015 and the version of form is being changed/updated by the Ministry very often. It is getting difficult for  professionals to file the form, as every time the version changes it is required to fill in fresh form. Ministry has not clarified on certain mandatory attachments as to what exactly the attachment should include. 

The mail from the Ministry:

The Ministry is sending a standard mail to all the Companies, requesting the companies to file the annual filing forms to avoid last minute rush. Before sending this mail to the perturbed directors, the Ministry should have released final version of forms. 

Annual return –Form MGT 7:

The form MGT 7 i.e., annual return for the period commencing form April 1, 2014 to March 31, 2015 is pretty elaborative. The details to be given in the form go beyond the Companies Act i.e., the details under other Enactments/ Legislations is also to be given in the form. Please read point 11 & 12 of the e-form MGT 7 that deals with compliance in general. There is absolutely no clarity from the regulators on what are the details to be filled in the form. Are these details only for Companies Act 2013 or for all laws that are applicable to the Company? This interpretation is on account of details required under Point 12 which states “Name of the act and section under which penalised/ punished”.

Professional Be Aware

The details in the Annual return regarding points XI & XII

Point XI – Matters related to certification of compliances and disclosures

A. Certification of compliances

Whether company has made all compliances and disclosures during the year If no, give details along with the reasons and supporting documents

Compliance

The regulator is not clear, companies are confused on details of compliance &  disclosures in this column:

i) What are these compliances & disclosures?
ii) Which are the legislations?
iii) Why is this clause finding a place in annual return?

Point XII – Penalty & Punishment – details thereof

A. Details of penalties/ punishments imposed on Company / Directors/ Officers

The further details are:

i) Name of the Company/ Directors/ Officers
ii) Name of the court/ concerned authority
iii) Date of Order
iv) Name of the act and section under which penalised/ punished
v) Details of penalty/ punishment
vi) Details of appeal (if any) including present status

B. Details of Compounding of Offences:

The meaning of penalty includes a fine, sentence and punishment among other  things. How can a professional in a company track all the penalty. In India a penalty can start with Rs.100 (rupees one hundred) or even less and punishment can be for  any offence and for any act that is not legal.

CASE 1: If the Company owns a car and the car jumps the signal a challan is  generated to pay a fine of Rs.100/-. This penalty has to be paid by the Company as the car is in the name of the company.

CASE 2: The director of the same company in the same car is caught speaking on a  phone while driving and he has to pay a fine, which is personal.

Both the offence is committed under the Motor vehicles Act and as per Clause XII  point A of MGT 7 the following is the reporting that is required to be made:


  CASE 1 CASE 2
Name of the Company/ Directors/ Officers XYZ Enterprises Limited Mr. X
Name of the court/ concerned authority Traffic Police Traffic Police
Date of Order 15.10.2015 15.10.2015
Name of the act and section under which penalised/ punished Section 177 of the Motor Vehicle Act, 1988 Section 177 of the Motor Vehicle Act, 1988
Details of penalty/ punishment Rs. 100 for stopping in Zebra Crossing Rs.100 for speaking on phone
Details of appeal (if any) including present status NIL NIL

Interpretation by Professionals

Many professionals seem to be taking a stand that only Compounding orders are  required to be disclosed in point A as the word “order” is mentioned in column 3 of  point XII(A). If that was the intention of the regulator, point B again requires the Company to state the details of compounding, which allows for an interpretation that any offence committed by the Company or the Director has to be reported irrespective of the amount of penalty, which seems the intent based on the details sought for in all other columns of point XII(A). Professional is playing the role of opinion provider to Company as the regulators have left the interpretation to professionals in consultation with the Company to provide these details.

Difficulty of Reporting Compliance in India:

If this is what the regulator requires the Company to report, imagine the annexure that the Company is required to attach to MGT 7. Is this what regulators are looking for? Why are the regulators making a mockery of governance and compliance in this country? On one hand we are marketing this country to do business and on the other the regulator is introducing pathetic format that have no semblance to the initiatives of a country.


Tags :



Category Corporate Law
Other Articles by -
Sundharesan Jayamoorthi 

Report Abuse

LinkedIn



Comments


update

X

Do you have any Tax Queries

Submit