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Signing of Annual return in new Companies Act

Zalak Talreja , Last updated: 29 June 2015  



Section 1956 V/S Section 2013:

Earlier the provisions of Annual Return were governed under Section 159,160,161, 162 & Schedule V of the Act, 1956 where as now the all the sections are merged into one hut under Section 92 of the Act, 2013 excluding format for the same which is provided in Form No. MGT-7 prescribed in Rule 11 of the Companies (Management & Administration) Rules, 2014.

Scope 1956 V/S Scope 2013:

The Scope of the provisions under Act, 2013 are more exhaustive and widening as compared to Act, 1956. The certification of Annual Return under Act, 2013 not only limited to the certification of Annual Return itself but also compliances with all the provisions of the Act, 2013 along with SEBI regulations for listed Companies. The format also includes the certificate to be given to under Form MGT-8 which stands similar to Compliances Certificate as issued under Act, 1956 for prescribed companies.

Effective Date 1956 V/S Effective Date 2013:

The Annual Return is suppose to be filed within sixty days of Annual General Meeting. Hence, the details provided in Annual Return were as on the date of Annual General Meeting or the last date on which Annual General Meeting was to be held.

The Act, 2013 provides for details to be provided in conformity of the Financial Statement and not as on the date of Annual General Meeting. Moreover, the extracts of the Annual Return are to be included in the Board’s report which forms the part of Annual Report to be distributed to shareholders. Hence, the shareholders being the king of the Company will now be in access of much more informative documents as compared to earlier. The format of extracts of Annual Return is provided in Form 7.9 of the Act, 2013.

Formats 1956 V/S Format 2013:

Under the earlier Act, 1956 different formats were provided for companies having share capital and Companies not having share capital. Under Act, 2013 the entire format is applicable to all the companies where as different companies have to select there sub-category.

Particulars 1956 V/S Particulars 2013:

Under earlier Act, 1956 the disclosures as per the format of Schedule V included following details:

  • Company’s Name, CIN, Registered Office, particulars of authorised, issue of Shares and debentures.
  • Particulars of past and present directors, details of shareholders including transfer of shares in between previous Annual General Meeting and present Annual General Meeting.
  • Indebtedness figures of the Company.
  • Break-up of shareholding under specific heads.

Under Act, 2013 along with the above mentioned details the disclosures as per Form MGT-7 includes:

  • Principal business activities of the Company.
  • Particulars of holding, Subsidiary and associate Company.
  • Details of other securities in addition to share capital, debentures and Figures of Securities Premium Account.
  • Turnover and net worth of the Company.
  • Names of promoters, Key Managerial Personnel and changes made therein since last Annual Return.
  • Dates of meetings of members, directors and various committees of directors along with attendance details.
  • Remuneration of Directors and Key Managerial Personnel.
  • Penalties and Punishment imposed on the company, its directors and Key Managerial Personnel.
  • Particulars of compounding of offences, appeals made against any penalty or prosecution.
  • Disclosures further go in providing particulars of declaration of dividend, inter corporate loans & investments and related party transactions, etc.
  • Details of shares held by Foreign Institutional Investors with full particulars of such institutions.
  • Separate disclosure on corporate social responsibility.
  • Disclosure of directors.
  • Confirmation about appointment of auditor.
  • Details of Registrar and Transfer Agent (RTA)
  • Details of Split and Consolidation of Shares in case of changes during Financial Year.
  • Disclosures regarding closure of register of members / debenture holders/ other security.
  • Indebtedness now includes bifurcation into Secured loans, Unsecured loans and Deposits.

Certificate 1956 V/S Certificate 2013

Under Act, 1956 there was no provision for different certificate to be obtained by Practicing Company Secretary, however, the certificate itself formed the part of Annual return which was limited to the following:

a. the return states the facts as they stood on the date of the annual general meeting aforesaid, correctly and completely;

b. since the date of the last annual return the transfer of all shares, debentures, the issue of all further certificates of shares and debentures have been appropriately recorded in the books maintained for the purpose;

c. the whole of the amount of dividend remaining unpaid or unclaimed for a period of three years from the date of transfer to the special account has been transferred to the General Revenue Account of the Central Government as required under sub-section (5) of Section 205 A:

d. the company has not, since the date of the annual general meeting with reference to which the last return was submitted, or in the case of a first return, since the date of the incorporation of the company, issued any invitation to the public to subscribe for any shares or debentures of the company;

e. where the annual return discloses the fact that the number of members of the company exceed fifty, the excess consists wholly of persons who under sub-clause (1) section 3 are not to be included in the reckoning the number of fifty.

f. since the date of annual general meeting with reference to which the last return was submitted or in the case of a first return since the date of the incorporation of the private company, no public company or deemed public company has or have held twenty five percent, or more of its paid up share capital;

g. the company did not have an average turnover of Rs. Ten Crores or more during the relevant period;

h. since the date of annual general meeting with reference to which the last annual return was submitted or since the date of incorporation of the company, if it is first return, the company did not hold twenty five percent or more of the paid up share capital of one or more public companies; and

i. the private company did not accept or renew or invite deposits from the public.

Under Act 2013, the certification is in the below mentioned format:

a. The return states the facts, as they stood on the date of the closure of the financial year aforesaid correctly and adequately.

b. The whole of the amount of unpaid/ unclaimed dividend/other amounts as applicable have been transferred to the Investor Education and Protection Fund in accordance with section 125 of the Act.

c. The Company has maintained all the registers as per the provisions of the Act and the rules made there under and

d. Unless otherwise anything in contrary is stated expressly elsewhere in this Return, the Company has complied with the applicable provisions of the Act during the financial year.

(Certificates to be given by Private Companies)

(e)  The company has not, since the date of the closure of the last financial year with reference to which the last return was submitted or in the case of a first return since the date of the incorporation of the company, issued any invitation to the public to subscribe for any securities of the company.

(f) Where the annual return discloses the fact that the number of members, except in case of a one person company, of the company exceeds two hundred, the excess consists wholly of persons who under second proviso to clause (ii) of sub-section (68) of section 2 of the Act are not to included in the reckoning the number of two hundred.

The Company continues to be a Private Company during the financial year.

Certificate to be given only by One Person Company / Small Company)

The Company continues to be one Person Company / small company.

In case of a listed companies or companies having paid up share capital of ten crore rupees or more or turnover of fifty crore rupees or more, the Annual Return has to be certified by Practicing Company Secretary. The certificate shall be as prescribed in Form MGT-8.

The Companies (Management & Administration) Rules, 2014 prescribes that certification by Practicing Company Secretary should be in Form 7.8 (MGT-8). The Practicing Company Secretary has to consider following points before certification of Form 7.8:

  • The status of the Company under the Act.
  • Maintenance of registers and records and entries therein.
  • Filing of forms and returns.
  • Meeting of directors and members.
  • Closure of register of members.
  • Advances of loans to its directors and other persons.
  • Contracts and arrangements.
  • Issue of allotments of shares and transfers.
  • Matters relating to rights to dividend, rights to bonus shares.
  • Declaration and payment of dividend
  • Signing of audited financial results.
  • Constitution of Board of directors, Key Managerial Personnel and their remuneration.
  • Appointment of auditors.
  • Approvals.
  • Deposits.
  • Borrowings.
  • Loan and investments.
  • Alteration to Memorandum of Association and Articles of Association.   

While certifying he is authorized to mentioned any   qualification, reservation or adverse remark, if any.

Looking to the above mentioned points make us remember of Compliance Certificate which was applicable to Companies having paid up capital of ten lacs or more but less than 5 crore rupees. However, under Act, 2013 the requirement of Compliance Certificate is done away with but the above prescribed companies are required to get certificate by Practicing Company secretary under Form MGT-8 which seems to be similar to Compliance Certificate and forms the part of Annual return.

Form 1956 V/S Forms 2013:

Under Act, 1956 there was only one specified form which was mentioned in Part II of Schedule V of the Act, 1956.

Under Act, 2013 the Annual Return is itself divided in three forms via MGT 7 the main part of Annual Return, MGT 8 which is applicable to listed and prescribed companies and MGT 9 which forms the part of the Board’s Report.

Certification 1956 V/S Certification 2013:

Under Act, 1956 the annual Return was to be signed by two directors (if there is no secretary), Company Secretary and a director (Managing Director/Whole-time Director if any) but for the purpose of any listed companies, it was needed to get verified and signed by a Company Secretary in whole time practice in addition to certification by directors. There was no requirement of Company Secretary in Practice to certify the Annual Return (as the word ‘signing’ was used in proviso to sub-section (1) of Section 161) and hence the liability of Company Secretary in Practice was minimal.

Under Act, 2013 the Annual Return shall be signed by a director and a Company Secretary or where there is no Company Secretary by a Company Secretary in whole time practice. In case of OPC and small company Annual Return shall be signed by company secretary and director of a company or where there is no company secretary by director of a company. Annual return filed by listed company and such companies as prescribed shall be signed by director and a Company Secretary and it shall be certified by a Company Secretary in Whole time practice.

The word ‘Certified’ means in relation to a copy, certified as provided in section 76 of the Indian Evidence Act, 1872 and evidence act interpreted certifies as a certificate issued by an authorized officer by law certifying the validity and correctness of the information under his hand and seal. A process, often voluntary, by which individuals who have demonstrated the level of knowledge and skill required in the profession, occupation, role or the competent use or support of a product, are identified to the public and other stakeholders…..

Difference between Certification and Signing

One of the major differences that exist between signing and certification is that mere signing does not imposes or bestow liability on the person signing it. In one of the landmark case of Kashinath vs New Akoy Ginning and pressing Co. Ltd. (1950) 20 Comp. Cas 225(Nag.) it was held that mere signing of a balance sheet does not operate to save limitation because the person in drawing up the document does not do so with the intention of acknowledging liability but under a duty where he is bound to set out among other things, the claim made on the company.

Therefore we could say that signing does not impose liability but rather certification shows that the person has authenticated the document, verified and is therefore taking the responsibility and liability upon itself.

Purpose for Certifying of Annual Return only for Listed Companies and such other Prescribed Companies

The annual return of the company is a public document. In Rashmi Sethi V. chemon India Pvt. Limited {(1995) 82 Comp Cas 563(CLB)} it has been held that it is a prima facie evidence that the specific number of shares was held by a member as on particular date to claim his rights. The annual return of a listed company is further more important to settle number of issues and therefore, it has been made compulsory that the content of the annual return of such companies will have to be verified by a Secretary in Wholetime Practice by inspecting the relevant records of the company.

The act requires every company to comply with certain provisions and any non-compliance, whether deliberate or unintended, of the provisions attracts penalties and prosecutions of the company. Certification would caution the company secretary of unintended non-compliance so that the compliance could be established and the consequences that would follow because of that are avoided. Further, it acts as an effective tool to ensure that the legal and procedural formalities are complied with. When a certificate is issued, the confidence level of compliance of the provisions is built up and ensures a professional discipline.

The statistics generated by the Government of India from the office of the Registrar of Companies reveals that, several documents are returned for rectification of defects and also some remain pending for being taken on record. The Ministry of Company Affairs also institutes a large number of prosecutions against the companies and their officers who are in default for contravention of various provisions of the act, including non-filling of the documents. Further, the reasons for such errors or omissions arise on account of wrong interpretation or ignorance of the provisions of the law. The object behind the provisions relating to obtaining of Certificate by certain companies of certain size is to create awareness among companies to comply with the provisions of the act and also to provide for a mechanism of self regulation.

Penalty 1956 V/S Penalty 2013:

Under Act, 1956 the Company was liable to pay additional fees in case of non-filing of Annual Return with the Registrar of Companies. Moreover, if company fails to file Annual Return the Company and every officer in default was punishable to a fine which may extend to Rs. 500 for every day during which default continues. There was no specified provision relating to penalty of Practising Company Secretary with regards to wrong verification and signing Annual Return.

Under Act, 2013 the Company shall be punishable with a fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees. Every officer in default shall be punishable with imprisonment for a term which may extend to six months or fine which shall not be less than fifty thousand rupees bit which may extend to five lakh rupees, or with both. Moreover, if a Company Secretary in Practice wrongly certifies the correctness of Annual Return, he shall be punishable with a fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees.

The penalty has been increased and Practicing Company Secretary has to certify that Company has complied with all the provisions of Act, 2013. The scope of Practicing Company Secretary has been widened and huge responsibility rests with the professionals certifying the Annual Return.

CS Zalak Talreja

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Zalak Talreja
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