Clarification And Impact Regarding Extension of AGM, CFSS And Filing of Financial Statements & Annual Returns
In order to provide relaxation in compliance of various provisions of the Companies Act, 2013 due to the outbreak of Coronavirus, the Ministry of Corporate Affairs had extended the Companies Fresh Start Scheme, 2020 and the LLP Settlement Scheme, 2020 vide General Circular Nos 30/2020 & 31/2020 dated September 28, 2020 and in the same month all the jurisdictional RoCs granted a general extension in the time limit for holding AGM for the year 2020. As the deadline of the Schemes are nearing, many questions are arising related to extension of AGM and the scheme. This write up makes an attempt to provide a suitable solution to all those questions.
Q. Is 31st December, 2020 the “general due date of AGM” for all companies?
Ans. No.c Section 96(1) and the first proviso, the AGM shall be held within 15 months from the date of last AGM or within six months from the closure of the financial year (i,e 30th September, 2020) whichever is earlier. Due to COVID-19 outbreak, on 8th September all the ROCs granted extension of the due date by further three months from the original due date. For example, ABC Limited held its AGM on 15th July, 2019 in the previous calendar year, the due shall be earlier of 14th September, 2020 or 30th September, 2020, and that comes 14th September, 2020, and after considering the extension by ROC, company can hold AGM is 14th December, 2020. So, the due date will differ for all companies.
Q. Whether there will be any further extension in the time limit for holding the AGM? Or can any company may apply for extension of the time limit of AGM beyond the extended time limit?
Ans. Due to the outbreak of COVID-19 the RoCs have allowed a common extension for all companies, to hold AGM till the end of three months from the due date of AGM which is the maximum extension that can be granted under Section 96, so the extension of time limit beyond the already extended time period is not possible.
Q. What is the consequence if the AGM is not held even till the expiration of the extended time limit of AGM?
Ans. If any company is not able to held AGM till the extended time limit, it shall be an offence under Section 99 of the Act and the company and every officer in default may be prosecuted and fine of upto Rs 1 lakh may be imposed and if the offence is a continuing one with an additional fine of Rs 5,000 per day may be imposed during which the offence continues. Apart from this, Section 97 empowers the members of the company to apply NCLT to direct the company to hold AGM, and one of the important features of Section 97 is that even a preference shareholder of the company not having any voting right may also file an application to NCLT under Section 97.
Q. Can a company claim non-finalisation of annual financial statements as a reason for not holding the AGM till the extended due date of AGM?
Ans. One of the most common queries coming is what if annual accounts are not finalised till the extended time limit of holding AGM? Well, non finalisation of accounts can be reason on whose basis any company seek extension of time for holding AGM from jurisdictional ROC, but in the current situation extension powers of ROC is already exhausted and no further extension is possible and in such case the company would also become a defaulter, in case of non-finalisation under Section 129(7) and Section 134(8) apart from Section 99. Section 129 (2) read with Section 134(3) mandates all companies to lay annual financial statements and Directors’ Report at each AGM and in case of any default, it becomes a punishable offence. So, non-finalisation of annual accounts is no more cause for not holding AGM till the extended due date.
Q. If any company has 31st December, 2020 as its extended due date and holds AGM on that date, does the company require to file Form CFSS for Forms AOC-4/CFS/XBRL, MGT-7 and ADT-1 (if applicable) in January?
Ans. For companies planning to hold AGM on 31st December, 2020, such companies are not required to file the Form CFSS for filing its financial statements, annual return & auditor appointment (if applicable), as their due date of filing falls in January only. But in case any company having the extended due date of AGM on 30th November, 2020 or earlier, they need to file the Form CFSS if they filed financial statements, annual returns and auditor appointment after the due date provided the filing shall be completed till 31st December, 2020.
Q. What if any company filed Form GNL-1 for AGM extension and ROC granted a common extension and form is still pending?
Ans. The extension orders contain clear explanation to the effect that all pending applications seeking time extension for holding AGM and rejected applications shall be covered under the “common extension order”.