Every company in India needs to prepare the Return under section 92 sub-section-1, called Annual Return.
No company enjoys any exemption from the preparation of the Annual Return, whether the One Person Company, Small Company, Private Company, Public Company, or Not For Profit Company, etc.
Section 92 sub-section 1 also provides the content of the Annual Return. The Annual Return contains details such as the address of the registered office of the company, principal business, details regarding joint venture, subsidiary, and holding companies, shares, debentures, directors’ detail, shareholding pattern etc., of the company.
The Companies (Amendment) Act, 2017 inserted the new proviso in Section 92 sub-section 1, with effect from 5th March 2021. As per the new proviso, the government can specify an abridged annual return for the small company, one person company, and such other class of companies as the government deems fit.
However, Rule 11 sub-rule 1 of the Companies (Management and Administration) Rule, 2014, provides that the Small Company and One Person Company shall file Annual Return in new e-form MGT-7A.
There is an alteration in the definition of a small company with effect from 01st April 2021. The new clause “t” is added to Rule 2(1) of the Companies (Specification of Definitions Details) Rules, 2014. The new clause came into effect from 1st April 2021.
WHAT IS SMALL COMPANY
Small company means a company other than a public company,—
1. paid-up share capital of which does not exceed fifty lakh rupees or such higher amount as may be prescribed which shall not be more than ten crore rupees; and
2. turnover of which as per profit and loss account for the immediately preceding financial year] does not exceed two crore rupees or such higher amount as may be prescribed which shall not be more than one hundred crore rupees:
Provided that nothing in this clause shall apply to—
A. a holding company or a subsidiary company;
B. a company registered under section 8; or
C. a company or body corporate governed by any special Act;
As per the new Rule 2(1)(t) of the Companies (Specification of Definitions Details) Rule, 2014, the prescribed paid-up capital is INR 2 crore and turnover of INR 20 crore for the small company.
We have to check above criteria on year to year basis.
The following companies can never be a small company
♦ Public company;
♦ Holding or subsidiary Company;
♦ Not For Profit Company;
♦ Company or Body Corporate governed by the special act example company governed by IRDA;
♦ A private company whose paid-up capital is more than INR 2 cr, or the turnover exceeds INR 20 cr in the immediately preceding financial year.
A small company can have an associate company and joint venture.
WHAT IS OPC
One Person Company means a company which has only one person as a member.
There are some significant amendments in the provisions governing the incorporation and management of the OPC, with effect from 1st April 2021 through the Companies (Incorporation) Second Amendment Rules, 2021.
Earlier only Resident Indian Citizens can incorporate OPC. Now Non-Resident Indian Citizens can also incorporate OPC.
However, the person having foreign citizenship cannot incorporate OPC.
Earlier only Resident Indian Citizens can be the nominee in OPC. Now Non-Resident Indian Citizens can also be the nominee of the OPC.
However, the person having foreign citizenship cannot become a nominee in the OPC.
Further, Rule 7 of the Companies (Incorporation) Rules, 2021, has been omitted by the Companies (Incorporation) Second Amendment Rules, 2021, with effect from 1st April 2021.
So, the company can voluntarily convert itself into any other kind of company without any limitation. However, before this amendment, OPC cannot voluntarily convert itself into any other kind of company; unless two years expire from the date of incorporation.
OPC can now remain OPC without converting itself into any other kind of company irrespective of Paid-up Capital or Turnover.
Earlier, If OPC increase paid-up share capital beyond fifty lakh INR or its average annual turnover during the relevant period exceeds two crore INR, it cannot remain OPC.
DIFFERENCE BETWEEN MGT-7 AND MGT-7A
As per the second proviso to Section 92(1), MGT-7A is the abridged form of MGT-7. On a plain reading of the MGT-7A, I found no difference between both forms. However, there are some minor differences between both forms. MGT-7A does not require details such as holding and subsidiary company, number of committee meetings etc.
As per the first proviso to section 92(1), there is no need to affix the signature of PCS on the Annual Return for small companies and OPCs, so there is no space provided for the same.
REQUIREMENT OF MGT-8
As per the provisions of Section 92 and rules made thereunder, MGT-8 need to be attached with MGT-7 by; every listed company and every public or private company having paid-up share capital of more than INR 10 crore or more or turnover of INR 50 crore or more.
REQUIREMENT OF ATTACHING MGT-9 WITH BOARD REPORT
To understand this, we have to read section 92 with rule 12 of the Companies (Management and Administration) Rules, 2014 and section 134 (3). Both sections and rule provide, company need to upload annual return on the company’s website if any. Requirement of attaching extract of annual return as specified under rule 12 of the Companies (Management and Administration) Rules, 2014 is omitted with the introduction of the Companies (Management and Administration) Amendments Rules, 2014.
FILLING OF THE ANNUAL RETURN
Every company should file an Annual Return within 60 days from the date of AGM or the due date of AGM.
PENALTY IN CASE OF DEFAULT
If the company fails to file the Annual Return within the stipulated time, in case of one-time default, INR 10000, and in case of continuous default, INR 100 per day subject to the maximum of INR 2,00,000.