Preparation of Annual Return
Every company shall prepare a return (called the ‘Annual Return’) in the e-form MGT-7 containing the particulars as they stood on the close of the financial year regarding—
-its registered office, principal business activities, particulars of its holding, subsidiary and associate companies;
-its shares, debentures and other securities and shareholding pattern;
-its members and debenture-holders along with changes therein since the close of the previous financial year;
-its promoters, directors, key managerial personnel along with changes therein since the close of the previous financial year;
-meetings of members or a class thereof, Board and its various committees along with attendance details;
-remuneration of directors and key managerial personnel;
-penalty or punishment imposed on the company, its directors or officers and details of compounding of offences and appeals made against such penalty or punishment;
-matters relating to certification of compliances, disclosures as may be prescribed;
-such other matters as may be prescribed in e-form.
Abridged form of Annual Return
The Central Government may prescribe abridged form of annual return for One Person Company and Small Company. But as of now, Govt. has not prescribed any abridged format for OPC or Small Company.
Extract of Annual Return
Ministry of Corporate Affairs vide its notification dated 28th August, 2020, amended the rule 12 of the Companies (Management and Administration) Rules, 2014 and also appoints that date for the enforcement of Section 23(ii) of the Companies Amendment Act, 2017. Now, according to this amendment:
Every company shall place a copy of the annual return on the website of the company, if any, and the web-link of such annual return shall be disclosed in the Board’s report.
Now, in this regard many corporates and professionals have following few concerns which we tried to answer:
Q.1 Is this compulsory for every company to have a website and place annual return in it?
Ans: No. The wording of Section 92(3) says, every company shall place a copy of the annual return on the website of the company, if any, and the web-link of such annual return shall be disclosed in the Board’s report. The word “If any” used after the website of the Company denotes that if companies are having websites then only they have to place a copy of an annual return there.
Q.2 What if Companies doesn’t have any website?
Ans: Rule 12 of the Companies (Management and Administration) Rules, 2014 clearly says that, a company shall not be required to attach the extract of the annual return with the Board’s report in case the web link of such annual return has been disclosed in the Board’s report. So, from the above, we can conclude that for the companies not having website, extract of an annual return in form MGT-9 still needs to be attached with the Board’s report.
Q.3 What if Companies are having informational / commercial website and they are not willing to place annual return there?
Ans: Most of the unlisted companies doesn’t have website with dedicated investor section as their investor base is not that much wide. They have only informational or commercial websites. The word used in the Section 92(3) depicts that if company has website then it must put annual return there. But, for unlisted companies where there are having only family and friends as shareholders, we can take a lenient view and attach MGT-9 in Board’s report without posting it in its website as it will unnecessarily create burden on them. So, according to our view, they can choose to prepare extract of annual return in form MGT-9 and attach it with Board’s report.
Q.4 From when it is applicable?
Ans: Ministry has notified the applicability of these provisions from 28th August, 2020. So, Companies who are finalizing Board’s report after 28th August, 2020, it needs to comply with these provisions from this year only.
Q.5 How to give link and publish annual return in advance before AGM and before filing it with Registrar?
Ans: According to Section 92(3), the web-link containing annual return must be mentioned in Board’s report and Board’s report along with the notice of an AGM must be dispatched to the shareholders before the 21 clear days of an AGM. So, how we can finalize the annual return in advance of AGM and put it on website?
According to us, Companies must create a page in its website in advance for putting an annual return and the link of the said page must be mentioned in the Board’s report. Once AGM is held and annual return is filled with the Registrar, thereafter it should be uploaded on the website so that any member can see it by clicking the link mentioned in Board’s report.
Signing of Annual Return
Annual Return shall be signed by a director and the company secretary, or where there is no company secretary, by a company secretary in practice. However, in relation to One Person Company and small company, the annual return may be signed only by the director of the company in the absence of the company secretary.
Certificate from Company Secretary in Practice
The annual return, filed by a listed company or a company having paid-up share capital of Rs. 10 Crore or more or turnover of Rs. 50 Crore or more, shall be certified by a Company Secretary in practice and the certificate shall be in Form MGT.8 stating that the annual return discloses the facts correctly and adequately and that the company has complied with all the provisions of this Act.
Filing of Annual Return
Every company shall file with the Registrar a copy of the annual return, within 60 days from the date on which the annual general meeting is held or where no annual general meeting is held in any year within 60 days from the date on which the annual general meeting should have been held together with the statement specifying the reasons for not holding the annual general meeting, with such fees or additional fees.
Failure to file Annual Return
Companies Amendment Act, 2020 which was published in gazette on 28th September, 2020 reduced the penalty amount for non-filing of an annual return. If any company fails to file its annual return before the expiry of the period specified therein i.e 60 days from the date of an AGM, such company and its every officer who is in default shall be liable to a penalty of Rs. 10,000/- (Earlier, 50,000) and in case of continuing failure, with further penalty of Rs. 100/- for each day during which such failure continues, subject to a maximum of Rs. 2 lakh (Earlier, 5 lakh) in case of a company and Rs. 50,000/- in case of an officer who is in default.
Companies Amendment Act, 2020 also added proviso after the sub-section 3 of Section 454 of the Companies Act, 2013 which states that in case the default relates to non-compliance of filing an annual return or financial statement and such default has been rectified either prior to, or within 30 days of the issue of the notice by the adjudicating officer, no penalty shall be imposed in this regard and all proceedings under this section in respect of such default shall be deemed to be concluded.
Penalty on Company Secretary
If a company secretary in practice certifies the annual return otherwise than in conformity with the requirements of this section or the rules made thereunder, he shall be liable to a penalty of two lakh rupees.
It is clear from above that preparation of extract of an annual return in the form of MGT-9 is not completely done away and it is still required to be prepared for certain companies. Companies Amendment Act, 2020 has added a provision, to comply with the notice received from adjudicating officer within 30 days. It is welcome provision as it will give an additional opportunity for corporates to get their pending statutory documents filled if it remain unfilled inadvertently.