Late filing of balance sheet

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Naseef Ummer (Querist)
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16 April 2016 Hi there! Our firm is a private limited company incorporated in December 2011. The company has not yet opened a bank account as we were not in operation. We were outside India and now plan to start operations but we are told by the CA that due to non-filing of balance sheet for the last five years we need to pay a hefty fine to get clear of the irregularity. Though we had deldgated the duty to the CA to take care of such formalities promptly but he has been ignorant about it for the last 5 years. I wish to know (a) sections that are violated and (b) how much would be the total due including fine?

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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16 April 2016 I know entrepreneurs like you incorporating company with two persons and 1 lac authorized capital and leave India for some reason or other without starting business and returning after few years with the blame on the professional for all the legal defaults. Government has hosted a scheme ( Fast Track Exit mode) for such persons to wind up the company with a meager fees instead of paying the hefty fee to make the company live. Please choose the scheme , if you so wish, and start the business afresh as PROPRIETORY CONCERN.

Naseef Ummer

Naseef Ummer (Querist)
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17 April 2016 Thank you for your reply, Mr. Warrier. The reasons for the default are best known to the parties involved and I hope you could avoid generalizations as I still look up to CAs with a professional up-keep to seek their valued advices in this matter. We would like to retain the compaby name and avoid going through all incorpration formalities and delay operations. That is why I wanted to know if such hefty fees of nearly INR 1 Lakh are applied?

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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02 August 2024 ### **Non-Filing of Balance Sheet: Consequences and Sections Involved**

When a private limited company fails to file its balance sheets and annual returns on time, it can face substantial penalties under the Companies Act, 2013. Here’s a detailed overview of the relevant sections and potential consequences:

#### **1. Sections Violated:**

1. **Section 92 of the Companies Act, 2013**:
- **Annual Return**: Every company must file an annual return with the Registrar of Companies (RoC) within 60 days from the date of the Annual General Meeting (AGM). Failure to do so attracts penalties.

2. **Section 137 of the Companies Act, 2013**:
- **Filing of Financial Statements**: The financial statements, including the balance sheet and profit & loss account, must be filed with the RoC within 30 days of the AGM. If not filed, penalties apply.

3. **Section 403 of the Companies Act, 2013**:
- **Late Filing**: This section details the penalties for delayed filings, including annual returns and financial statements. It mandates that if a company fails to file documents within the prescribed time, a late fee is applicable.

#### **2. Potential Penalties:**

- **Late Fee for Non-Filing**:
- **Annual Return (Section 92)**: ₹100 per day of delay, up to a maximum of ₹5,00,000.
- **Financial Statements (Section 137)**: ₹100 per day of delay, up to a maximum of ₹5,00,000.

- **Additional Penalties**:
- **Section 450 and 451**: Imposition of penalties for violations of the provisions, which can include fines ranging from ₹1,00,000 to ₹10,00,000 depending on the nature and severity of the default.

#### **3. Calculation of Total Due:**

To estimate the total penalty, consider the following factors:

1. **Duration of Delay**: Calculate the number of days delayed for both annual returns and financial statements. For each day of delay, ₹100 per day applies.

2. **Maximum Limits**: Both penalties have a cap of ₹5,00,000 each for the total delay period. Therefore, if the delay is extensive, the maximum fee might apply.

3. **Additional Penalties**: There may be additional fines based on the severity of the non-compliance, which can be significant.

**Example Calculation** (Assuming 5 years of delay):
- **Annual Return**: ₹100 per day × 365 days/year × 5 years = ₹1,82,500 (Capped at ₹5,00,000).
- **Financial Statements**: ₹100 per day × 365 days/year × 5 years = ₹1,82,500 (Capped at ₹5,00,000).

### **4. Practical Steps:**

1. **Regularize the Filings**: File all pending balance sheets and annual returns as soon as possible to mitigate further penalties.
2. **Consult a Professional**: Engage a CA or company secretary to handle the filings and ensure compliance with current regulations.
3. **Negotiate with RoC**: Sometimes, negotiating with the RoC or requesting a waiver for penalties due to genuine oversight or delays might be possible, though it's not guaranteed.

### **Conclusion:**

Given that penalties can be substantial, it's crucial to address the non-compliance urgently. The fees and fines can indeed add up to significant amounts, potentially around ₹1 lakh or more depending on the delay period and additional penalties.

Engaging with a professional to rectify the filings and liaising with the RoC to address the delays is the best course of action to minimize further complications and potential penalties.

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