Tag Archives: penalties

MCA – penalties for late filings

Section 403 of the Companies Act, 2013 is a wake up call for companies in India. Not any more they can afford to relax and file documents months and years after they are supposed to do so.

Section 403(1) provides that documents should be submitted, filed, registered or recorded within the time specified in the relevant section for the same. For eg. most of the forms require to be filed within 30 days of the event, save for a few provisions such as Auditors appointment within 15 days, annual return within 60 days and charge registration/ modification within 300 days of the event.

The first proviso to section 403(1) provides for additional time within which the documents can be filed by paying additional filing fees. This additional period is 270 days beyond the original period of filing. Therefore in most cases a 300 days period is given for filing the document by paying the normal fees and additional filing fees.

The second proviso to section 403(1) provides that such documents can be filed beyond the said 300 days but it says “without prejudice to any other legal action or liability under the Act”

Section 403(2) provides that where the company fails to submit/ deliver the documents within the time specified including the additional time given, the company and every officers of the company shall be liable for penalty or punishment provided under the Act. This is apart from the fees and additional filing fees payable by the company for filing the document.

The various sections give different penalties for delayed filing beyond the normal period and additional period given thereunder, for eg.

1) delayed filing of annual return under section 92 is liable for a penalty of minimum Rs.50,000 but which may extend to Rs.5 lakhs and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to six months or with fine which shall not be less than Rs.50,000/- but which may extend to Rs.5 lakhs or with both;
2) for failure to file documents required under section – minimum penalty is Rs.5 lakhs but which may extend to Rs.25 lakhs for the company and every officer of the company who is in default shall be punishable with fine which shall be minimum Rs.1 lakh but which may extend to Rs.5 lakhs;
3) Audited financial statements under section 137 – Fine of Rs.1000/- per day during which the failure continues but which shall not be more than Rs.10 lakhs and MD and CFO (or in the absence of MD/ CFO, any director who is charged by the Board of complying with this section, or in the absence of any such director, all directors of the company) shall be punishable with imprisonment for a term which may extend to six months or with fine, which shall not be less than Rs.1 lakh but which may extend to Rs.5 lakhs or both;

Apparently the system will not allow filings to take place after the period stipulated in section 403 unless the company applies for a an application for condonation of delay with the prescribed authorities which in this case is the REgistar of Companies of the respective jurisdiction.

Therefore Compliance is the Need of the Hour for every company in India. Gone are the days when the companies can sleep for years on end without doing any filings whatever.

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Share Certificates

The provision regarding the time limit for issue of share certificates to members consequent to new/ fresh allotment of shares or transfer/ transmission of securities are to be found in section 56 of the Companies Act, 2013 which has got a heading “Transfer & Transmission of Securities” instead of at section 46 which has the heading “Certificate of Shares”

According to Section 56(4) share certificates have to be issued to members within 

(a) 2 months from the date of incorporation, in case of subscribers to the memorandum; (previously there was no such time limit);

(b) 2 months from the date of allotment of shares in case of any other allotment (previously it was 3 months u/2 113 of CA 1956);

(c) 1 month from the date of receipt of transfer of securities or date of intimation of securities – (here the word used is securities rather than shares, so it includes both shares as well as debentures, previously it was 2 months time limit);

(d) 6 months from the date of allotment of debentures (previously the time limit was 3 months)

Under proviso to section 113(1) of the Companies Act, 1956 companies could apply for an extension of time limit for issue of certificates upon allotment/ transfer of debentures by a further period of 9 months. Now under the Companies Act, 2013, that proviso has been removed, so the above limits under section 56(4) (a) to (d) are absolute and if the company is unable to issue certificates within that period then penalty process is attracted under section 56(6)  which is minimum Rs.25,000/- for the company but may extend to Rs.5.00 lakhs and minimum Rs.10,000/- for every officer which could extend upto Rs.1.00 lakh per officer.

So all the more reason to adopt a strict compliance system to be in consonance with the new norms of the Act.  The only way for companies to ensure that they have a robust compliance system in place is to effectively engage company secretaries. 

 

 

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