Article explains provisions related to Compounding of delay in Annual General Meeting (AGM) holding under Companies Act, 2013 read with Companies (Management and Administration) Rules, 2014. It explains about Extension of AGM, Penal Provisions related AGM, Practical problems w.r.t AGM after due date and Compounding Law with RD or NCLT.
The Companies Act, 2013 read with the Companies (Management and Administration) Rules, 2014 deals with the convening of Annual General Meeting.
It is mandatory to hold an Annual General Company to discuss the Annual results and other important discussions.
The company must give a clear 21 days notice to its members for calling the AGM.
Due to non-preparation of Financial Statements if any company desires an extension for AGM then the company can apply for an extension to ROC before the due date only.
ROC can give the extension maximum for 3 months only.
Special Note: Extension application cannot be done after expiration of due date of AGM for that relevant F.Y
Companies have to comply with sections 96,97 & 98 for holding an AGM as per the law of the Companies Act 2013.
In case of contravention of the above sections, Companies have to bear the penalties and connected default fines.
Let’s take an example for F.Y 2020-21.
Many Auditors have signed the Financials as of the current date due to the late preparation of Financial Statements.
In such a case, Companies need to hold the AGM on the Current date only.
So, there is a contravention of the above sections of AGM.
In our case of a company,
Now we are calculating the amount of penalty for holding AGM after due date.
Total period of delay is 96 Days
|Particulars||Mandatory Fine||Period of delay||Fine as per period of delay||Total Fine as on date|
|Company itself||Rs. 1,00,000/-||96||Rs. 4,80,000/-
|Director 1||Rs. 1,00,000/-||96||Rs. 4,80,000/-
|Director 2||Rs. 1,00,000/-||96||Rs. 4,80,000/-
Many Professionals sometimes ask for saving the penalties of the respective clients that can we sign the Backdated Financials.
As per ICAI UDIN law doing such kind of Practice is wrong and unlawful so kindly ignore such type of backdated signature of Financial Statements.
It’s better to do AGM on the current date and go for Compounding the matter with RD or NCLT.
The Power of compounding is vested with Regional Director and National Company Law Tribunal.
It is totally depended on the amount of fine that who will initiate the application of compounding.
>If the Total fine is up to 25 Lakhs, then the compounding application deal is in the jurisdiction of the Regional Director.
>If the total fine exceeds 25 Lakhs, then the compounding application deal is in the jurisdiction of the National Company Law Tribunal.
In our case, the matter is in the jurisdiction of RD because the penalty amount is Rs. 17,40,000/-