Importance of receiving communication from Government Departments: Section 12 of Companies Act, 2013

Importance of receiving communication from Government Departments: Section 12 of Companies Act, 2013

In the intricate web of corporate governance, directors play a pivotal role in steering the ship of a company. Their responsibilities encompass a myriad of tasks, including compliance with legal obligations. In the realm of Section 12 of the Companies Act, 2013, the registered office of the Company shall be able to receive communication from the government departments all the time after the incorporation and encompasses the responsibility on the Directors to stay proactive for receiving any communication and to take necessary actions in a timeframe manner. In such a recent ROC adjudication order in the Matter of M/s Zenith Drilling Private Limited, failure to do so have led to imposition of severe penalties on the Company and Directors, making it imperative for directors to stay vigilant and proactive in their role.

Understanding Section 12 of the Companies Act, 2013

Section 12 of the Companies Act, 2013, casts a legal obligation on companies to maintain registered office and to intimate the Registrar of Companies (RoC) about any changes promptly within 30 Days of any such change. This section mandates that any communication addressed to the company and its directors by the government, or any regulatory authority should be appropriately received. Furthermore, it necessitates the directors to take cognizance of such communication within the stipulated timeframe.

The Dire Consequences of Non-Compliance

Non-compliance with the provisions laid down in Section 12 can expose directors and the company to a host of penal consequences. These penalties may include fines, prosecution, or even disqualification of directors. Additionally, the company may face legal repercussions, tarnishing its reputation and potentially endangering its operations. one such case is highlighted by the ROC in the matter of M/s Zenith Drilling Private Limited where Directors failed to receive the communication from the ROC and failed to maintain the registered office as per the Companies Act, 2013. And the ROC after considering the reply and latest financials of the Company, had imposed penalty of Rs. 35,000 on the Company and both the Directors individually amounting to Rs. 1,05,000/-.

Rationale Behind Directors Receiving Communication

The rationale behind directors receiving communication from government departments is multifaceted. Firstly, it ensures that directors are kept abreast of any legal obligations or regulatory changes that may impact the company’s operations. This timely dissemination of information empowers directors to make informed decisions in the best interest of the company and its stakeholders.

Secondly, receiving communication directly aligns with the principles of accountability and transparency. Directors cannot claim ignorance of any communication or regulatory requirements when they are directly in receipt of such information. This fosters a culture of accountability within the company and strengthens corporate governance practices.

Mitigating Risks Through Proactive Communication

To mitigate the risks associated with non-compliance, directors must adopt proactive measures. This involves establishing robust communication channels within the company to ensure that all relevant communication from government departments is promptly received and disseminated to the concerned directors. Implementing effective systems and processes for record-keeping and documentation can further streamline this process, reducing the likelihood of oversights or lapses.

Additionally, directors should stay abreast of their legal obligations under the Companies Act, 2013, and other relevant legislations. Regular training sessions and workshops can enhance directors’ understanding of their roles and responsibilities, equipping them with the knowledge necessary to navigate the complex regulatory landscape.

Conclusion

In conclusion, the receipt of communication from government departments by directors of a company is not merely a procedural formality but a crucial aspect of corporate governance. Compliance with Section 12 of the Companies Act, 2013, is imperative to avoid the penal consequences associated with non-compliance. By staying vigilant, proactive, and well-informed, directors can uphold the highest standards of corporate governance, thereby safeguarding the interests of the company, its stakeholders, and themselves.

*****

Disclaimer:-  The above information is purely and solely for informative purposes. This in no way should be construed to be any professional advice, as these are merely general information and our interpretations of the laws and the Act. Viewers are requested to consult us before taking any action based on our interpretations. Circulation of any information in our name without our permission is not allowed.

The author is a Practicing Company Secretary and GST practitioner and may be reached at: csmalkitsingh@gmail.com or +91-9711975109