PRACTICALITY OF COMPOUNDING OF ANNUAL GENERAL MEETING

INTRODUCTION

Companies are expected to comply with the Law applicable to them. In the context of the Annual General Meeting as per Section 96 of the Companies Act, 2013 every Company is required to convene the Annual General Meeting of the Company within:-

  • six months from the end of the Financial year. i.e 30th September
  • Nine months from the end of the Financial year. i.e 31st December

CONSEQUENCE OF NON-CONVENING OF ANNUAL GENERAL MEETING WITHIN STIPULATED TIMELINE 

As per section 99 of the Companies Act, 2013, if a Company fail to convene Annual General Meeting within a specified timeline (Except where the company has taken Extension approval):-

Company The Company shall be punishable with fine which may be extended to:-

  • One Lakh Rupees
  • In case of continuing default INR 5000 every day during which such default continues.
Officer in Default Every Officer in default shall be punishable with fine which may be extended to:-

  • One Lakh Rupees
  • In case of Continuing Default INR 5000 every day during which such default continues.

Note:- Each officer in default is counted separately for calculating fine under this section.

For example: – XYX Ltd. Having two Director Mr. A and Mr. B and the Company fail to convene Annual General Meeting within 6 months of Annual General Meeting the fine shall be levied as follow:-

Company
  • Maximum fine upto 1 Lac
  • 5000 per day in case of Continuing Default
Mr A
  • Maximum fine upto 1 Lac
  • 5000 per day in case of Continuing Default
Mr B
  • Maximum fine upto 1 Lac
  • 5000 per day in case of Continuing Default

WHAT IS COMPOUNDING

Compounding of an offence is an opportunity given to companies to make good the non-compliance

committed by them. The concept of compounding of offences was incorporated as a measure to avoid the long-drawn process of prosecution, which would save both cost and time in exchange of payment of a Fine.

APPLICABLE PROVISION:-  

Section 441 of the Companies Act 2013, deal with the Compounding of offence

DEFINITION

Compounding is not defined in the Companies Act 2013. As per the Black’s Law Dictionary, to “Compound” means “to settle a matter by a money payment, in lieu of other liability.”

WHICH OFFENCES CAN BE COMPOUNDED

Any offence punishable under this Act not being an offence:-

  • punishable with imprisonment only
  • punishable with imprisonment and the Fine may be compounded.

WHO ARE THE COMPOUNDING AUTHORITIES

The following are the two compounding authorities:

  • Regional Director: Where the maximum amount of fine which may be imposed for an offence is upto 25Lakh
  • National Company Law Tribunal:- where the amount of offence is exceed 25 Lakh

Process of Compounding

As discussed above, the Compounding of offence is an opportunity given by law to make good Non-Compliance. In the context of the Annual General Meeting following are the brief steps for Compounding of offence.

Steps Particular
Step 1 Convening of Annual General Meeting of the Company
Step 2 Filing of all Annual Filing form i.e AOC-4 and MGT-7 with Registrar within 30 and 60 day from the date of Annual General Meeting.
Step 3 Call for a Board Meeting to decide the following matter :-

1. Approval for filing of Application for Compounding of an offence under section 441 of the Companies Act, 2013

2. Arrive at the amount of the fine involved in the offence.

3. Provide necessary authorisation for compounding.

Step 4 Preparation of Compounding application and file with Registrar of the Companies in e-form GNL-1
Step 5 Submit three Copies with the Registrar of the Companies (RoC).
Step 6 On receipt of the application, RoC will write its comments and send the same to RD/NCLT (concerned authority).
Step 7 On receiving of the Copies, the Concern Authority will call for a hearing and decide the amount of Fine to be levied and pass the Compounding Order.
Step 8 On the receiving of order, the company shall pay the amount of fine through www.mca.gov.in
Step 9 The company shall file a copy of the order with concerned Registrar of Companies in form INC-28.

CS Akash Verma | Managing Partner|Switch2Legal | Email:- csaksh29@gmail.com

Author Bio

Qualification: CS
Company: Akash V & Associates
Location: New Delhi, Delhi, India
Member Since: 20 Jan 2022 | Total Posts: 2
CS Akash Verma is an Associate Member of Institute of Company Secretaries of India. He has rich Experience in handling Corporate Legal Advisory matters, Regulatory Authority Approvals Matter, Legal Due diligence, Setting up of Business in form of LLP and Company including wholly owned subsid View Full Profile

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