Importance of Authorised Signatory details in Company Correspondences: A Case Study and Implications

Introduction:

The Companies Act, 2013 [“the Act”] requires companies and its officials to ensure that all its official publications and official communications must have certain disclosures as are prescribed by the Act. It includes disclosures on its letterhead, disclosures on website of company, disclosures which must form part of director’s report etc.,

Fifth proviso of Rule 7 of the Companies [Registration Office and Fees] Rules, 2014 [“the Office and Fees Rules”] requires certain disclosures to be given on any official correspondence under the Act.  It states as follows: “any official correspondences [whether physical or electronic] required to be filed under the Act viz every application, financial statements, prospectus, returns, declarations, memorandum, articles, particulars of charges, or any other particulars or documents or any notice, or any communication or intimations must contain the name, designation, address, membership number or Director Identification Number as the case may be of the authorised signatory of such document.

This requirement of providing disclosures was recently enforced in a recent adjudication order dated July 7^th, 2023 passed by Registrar of Companies, Mumbai [“ROC Mumbai”] in the matter of Marathon Nextgen Townships Private Limited [“Company”].

Facts of the case:

The Company was in the process of Amalgamation under section 230-232 of the Act with its holding company viz, Marathon Nextgen Realty Limited.

The Company had vide a letter dated September 6^th, 2021 furnished with the Regional Director [Western Region] the copy of the order passed by the Hon’ble National Company Law Tribunal admitting inter alia the Company scheme application, the additional affidavit and the interlocutory application filed for taking voting on record.

The aforesaid letter was signed by the authorised signatory of the Company who had only mentioned his DIN while signing such letter. However as per the requirement of fifth proviso of Rule 7 of the Office and Fees Rules the designation and address of the authorised signatory was also required to be mentioned but which was not mentioned inadvertently.

Thus, the Regional Director [Western Region] on finding such a violation directed the Company to adjudicate the matter before ROC Mumbai.

Findings and Penalty Imposed:

ROC Mumbai observed that the Company indeed failed to comply with the requirement set forth by the fifth proviso of Rule 7 of the Office and Fees Rules as it had not provided the required details of the authorized signatory in their correspondences.

The Company was thus penalised under section 450 of the Act, since no specific penalty is prescribed for violations under Rule 7 of the Office and Fees Rules.

Thus, penalty for the violation was levied as under:

Visual Representation of such compliance requirement:

Conclusion:

This order passed by ROC Mumbai sets forth a precedent. It also highlights the importance of details which must be provided by authorised signatories of companies while signing of any official communications.

Also, it forces us to ponder upon the intent of such specific requirement of mentioning specific details by authorised signatories of companies which is provided for in the Act. The possible reasons might be:

• To ensure the authenticity and accountability of the person signing such document or correspondences under the Act.
• To prevent forgeries or frauds or impersonation by persons who are not otherwise authorised or qualified from signing such documents.
• To facilitate the regulator and other stakeholders in the verification and identification of the person signing such document on behalf of the company.
• To maintain records and proper databases of such company officials who are accountable on behalf of the company and to have a track record of which other corporates the concerned signatory is associated with.

Thus, if properly analysed the Act’s purpose is not to burden the companies with such minute compliances but it only wants to ensure that there is enough transparency in the company’s operations and dealings with the stakeholders.

This article is written by – Vallabh M Joshi –  Senior Manager and Shravan Pai – Management Trainee