In this editorial author shall discuss the provisions of Compounding of Annual General meeting (AGM) under Companies Act, 2013. Many professionals asked this question, How to go for compounding in case of holding of AGM after Due date.
A. PROVISION OF LAW:
As per Section 96 of Companies Act, 2013, Every company should hold one Annual General meeting of Members of the Company.
a) TIME PERIOD OF HOLDING OF AGM
AGM should hold within 15 month from the date of last AGM or 6 month from the end of financial year, Whichever is earlier.
b) EXTENSION OF AGM:
Company if required can apply to ROC for extension of AGM. However, ROC having power to give extension maximum for 3 months from the due date of AGM.
i. Whether Company can apply for extension after Due date of AGM:
Extension can be applied only before the due date of AGM. After due date of AGM legally companies are not allowed to apply for extension.
ii. Maximum period for which Extension can be apply by Companies:
Companies can apply for extension maximum period of 3 months from the due date of AGM.
c) PENALTY FOR HOLDING OF AGM AFTER DUE DATE:
If any default is made in holding a meeting of the company in accordance with Section 96 or section 97 or section 98 or in complying with any directions of the Tribunal,
B. HOW TO CALCULATE PENALTY:
Let’s take an example:
√ Due Date of AGM was 30th November, 2021 (As extension granted)
√ Company Holds AGM on 15th January, 2022
√ Delay of 46 Days
Penalty shall be calculated as follow:
|S. No.||Particular||Days of Default||Fix Fine||Fine per Day||Total Variable Fine (46*5000)||Total Fine|
|b)||Director Mr. A||46||100,000||5000||230,000||330,000|
|c)||Director Mr. B||46||100,000||5000||230,000||330,000|
C. HOW TO MAKE PAYMENT OF FINE:
The payment of fine in case of default of holding of AGM can be done through Compounding. Section 441 of the Companies Act 2013 as amended (the “Companies Act”) has the provision for filing application for the offences to be compounded.
any offence punishable under this Act (whether committed by a company or any officer thereof) 1[not being an offence punishable with imprisonment only, or punishable with imprisonment and also with fine], may, either before or after the institution of any prosecution, be compounded by—
(a) the Tribunal; or
(b) where the maximum amount of fine which may be imposed for such offence does not exceed twenty-five lakh rupees, by the Regional Director or any officer authorised by the Central Government,
In other words:
Power of compounding vested with Regional Director and National Company Law Tribunal. It is depend upon the amount of fine that who will initiate the application of compounding.
√ If Total fine is upto 25 Lakh, then matter goes to Regional Director.
√ If total fine exceed 25 Lakh, then matter goes to National Company law Tribunal.
In the above given example, total fine is Rs. 990,000/- therefor, application shall be file with Regional Director instead of NCLT.
*A Company/ professional always have to take care that whether they have to file application with Regional Director or NCLT. To analyze this they have to calculate the amount of fine.
Author – CS Divesh Goyal, GOYAL DIVESH & ASSOCIATES Company Secretary in Practice from Delhi and can be contacted at [email protected]).