Recently, we have observed that the Companies who failed to comply with the provisions of the Companies Act, 2013 within the stipulated time are witnessing the show cause notice from the Registrar of Companies in pursuance to power vested u/s 454 of the Companies Act, 2013 and consequently, penalties are being imposed upon the Company and its officer in default. This highlights the importance of adhering to statutory provisions within the stipulated timelines.
Importance of Timely Compliance under Companies Act, 2013 & Consequence’s of non-compliance
In this article, we delve into the critical aspect of compliance, its timely significance, and the repercussions of failing to meet the stipulated timelines. It reminds all companies and their officers to prioritize time compliance to ensure smooth operations and legal standing.
♦ Compliance
Compliance means an act of adhering to the applicable rules and laws. It includes country-specific laws and requirements from the regulatory authorities under which jurisdiction the entity is operating and carrying out its business and any other applicable law.
Nowadays, the most usual form of doing business is in the form of a “Company” which immediately after incorporation attracts the obligation to adhere to the post-incorporation, annual, and event-based compliances as prescribed under the provisions of the Companies Act, 2013 read with the rules made thereunder in addition to the compliance with the requirements of any other specific law, if any, applicable upon the Company.
♦ Let’s glance at Post Incorporation and Annual Compliances prescribed under the Companies Act, 2013?
| Post-Incorporation Compliances | |||
| S.no. | Applicable Provision | Compliance | Time Period |
| 1. | Section-173 | Convene First Board Meeting | Every company shall hold the first meeting of the Board of Directors within thirty days of the date of its incorporation and thereafter hold a minimum number of four meetings of its Board of Directors every year in such a manner that not more than one hundred and twenty days shall intervene between two consecutive meetings of the Board |
| 2. | Section-139 | Appointment of First Auditor | The first auditor of a company, other than a Government company, shall be appointed by the Board of Directors within thirty days from the date of registration of the company and in the case of failure of the Board to appoint such auditor, it shall inform the members of the company, who shall within ninety days at an extraordinary general meeting appoint such auditor and such auditor shall hold office till the conclusion of the first annual general meeting. |
| 3. | Section-12 | Situation of Registered Office | The company shall furnish to the Registrar verification of its registered office within thirty days of its incorporation if the company has not situated the registered office at the time of incorporation of the Company. |
| 4. | Section-10A | Commencement of Business | A company having a share capital shall not commence any business or exercise any borrowing powers unless a declaration is filed by a director within a period of one hundred and eighty days of the date of incorporation of the company for every subscriber to the memorandum has paid the value of the shares agreed to be taken by him on the date of making of such declaration and the company has filed with the Registrar a verification of its registered office as provided in sub-section (2) of section 12. |
| Annual Compliances | |||
| 1. | Section 405 | Form for furnishing half-yearly return with the registrar regarding outstanding payments to Micro or Small Enterprise. | All companies, who get supplies of goods or services from micro and small enterprises and whose payments to micro and small enterprise suppliers exceed forty five days from the date of acceptance or the date of deemed acceptance of the goods or services as per the provisions of section 9 of the Micro, Small and Medium Enterprises Development Act, 2006 (27 of 2006) (hereafter referred to as “Specified Companies”), shall submit a half yearly return to the Registrar of Companies in form MSME Form-1 for the period April-September by 31st October and for the period October-March by 30th April, |
| 2. | Rule 9A of the Companies (Prospectus and Allotment of Securities) Rules, 2014 | Reconciliation of Share Capital Audit Report | Every unlisted public company governed shall submit Form PAS-6 to the Registrar within sixty days from the conclusion of each half-year duly certified by a company secretary in practice or chartered accountant in practice. |
| 3. | Rule 16 of the Companies (Acceptance of Deposits) Rules, 2014 | Return of Deposit | Every company shall on or before the 30th day of June, of every year, file with the Registrar, a return in Form DPT-3 and furnish the information about the sum of money treated as a deposit or not to be treated as a deposit. |
| 4. | Section 96 | Convening Annual General Meeting | Every company other than a One Person Company shall in each year hold in addition to any other meetings, a general meeting as its annual general meeting and shall specify the meeting as such in the notices calling it, and not more than fifteen months shall elapse between the date of one annual general meeting of a company and that of the next general meeting subject to the condition that the Company shall hold its AGM within 6 months from the end of the Financial Year. |
| 5. | Section 139 | Appointment of Subsequent Auditor | If the Company has appointed a statutory auditor in its Annual General Meeting, then, the Company, within 15 days from the date of the Annual General Meeting shall file ADT-1. |
| 6. | Section 137 | Filing of Financial Statements | A copy of the financial statements, including consolidated financial statement, if any, along with all the documents which are required to be or attached to such financial statements under this Act, duly adopted at the annual general meeting of the company, shall be filed with the Registrar within thirty days of the date of the annual general meeting in form AOC-4 and consolidated financial statements in form AOC-4CFS. |
| 7. | Section 92 | Annual Return | Every Company shall within 60 days from the date of Annual General Meeting file with the Registrar of Companies, an Annual Return in form MGT-7 (other than a small company) and in form MGT-7A (Small Company and One Person Company). |
| 8. | Section 121 | Report on Annual General Meeting | Every listed public company shall prepare in form MGT-15 a report on each annual general meeting including the confirmation to the effect that the meeting was convened, held and conducted as per the provisions of this Act and the rules made thereunder and file the same within 30 days from the date of Annual General Meeting. |
| 9. | Rule 12A of the Companies (Appointment and Qualification of Directors) Rules, 2014 | Directors KYC | Every individual who holds a Director Identification Number (DIN) as on 31st March of a financial year shall submit e-form DIR-3-KYC for the said financial year to the Central Government on or before 30th, September of the immediate next financial year.
Further, where an individual has already submitted e-form DIR-3 KYC to any previous financial year, submits web-form DIR-3 KYC-WEB through the web service concerning any subsequent financial year. |
♦ Significance of Timely Compliance:-
Every company must ensure that all the post-incorporation, annual, and event-based compliances shall be made within the stipulated time frame as given under the respective section of the Companies Act, 2013, otherwise, failure to make compliance at a given time can invite the repercussions inter-alia including Penalty upon the part of the Company and its Officer-in-default by the Registrar of Companies.
Recently, the Registrar of Companies, via exercising its power vested under section 454 of the Companies Act, 2013, has passed numerous orders for imposing penalties upon the Company and its Officer in default for non-complying with the Companies Act, 2013 provisions within the stipulated timeframe.
♦ Facts about the concerned case law: –
- In the Matter of Green Cottage and Resorts Ltd:- The Company has defaulted in filing the financial statements of the Company within the stipulated time under section 137 of the Companies Act, 2013 and filed its financial statement with a default of 134 days and accordingly, the Registrar of Companies, Mumbai, after considering the default of 134 days in filing financial statements of the Company, has imposed penalty upon the Company and its Officer in Default.
- In the Matter of Layla Textile and Traders Limited:- The Company has defaulted in filing the Annual Return of the Company within the stipulated time under section 92 of the Companies Act, 2013 and filed its Annual Return with a default of 324 days and accordingly, the Registrar of Companies, Mumbai, after considering the default of 324 days in filing Annual Return of the Company, has imposed penalty upon the Company and its Officer in Default.
♦ Consequence of Non-Compliance
Non-compliance with applicable provisions of the law including the Companies Act, 2013, not only invites a penalty upon the Company and its office in default but also causes
- Financial Loss;
- Reputational Damage amongst the stakeholders,
- Loss of business opportunities;
- Create hindrances to attract potential business partners and investors, etc.
♦ Conclusion:
In conclusion, timely compliance is not just a legal requirement; it is a strategic imperative for businesses aiming to thrive in today’s dynamic environment. It is a fundamental aspect of good governance and responsible business conduct, contributing to long-term success and resilience in an ever-evolving business landscape.
Therefore, every company shall ensure compliance within the stipulated time under the applicable provisions of law which fosters trust and credibility with stakeholders, including customers, investors, and regulatory bodies, promoting better risk management, raising operational efficiency, and helping to attract potential business partners and investors.
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