Before knowing how to draft a reply to Show cause Notice, we need to understand what is a SHOW CAUSE NOTICE???
Show Cause Notice
Certain Compliances are required to be made by Corporates as per Law. Non compliance of which might lead to receiving of Show Cause Notice as in asking why the compliance has not been made or why it was not done within the time frame. Show Cause Notice is sent on either Company’s Mail or at registered office through registered post or any other viable mode. Notice generally contains Ref No. , Date, Time, Section or provision which was violated, time limit to reply to the same etc. Not reverting to the same within the time limit allotted will lead to legal/penal action.
Fundamental question that is asked by all is HOW TO REPLY TO SHOW CAUSE NOTICE RECEIVED FROM ROC/RBI/MCA etc???
There is no formula on how to respond to Show Cause Notice as each case is different. However the following things must be looked while drafting a reply to the show cause Notice:
1. What non compliance leads to show cause notice??
What Issues has been raised in the Show cause Notice? Whether the Non compliance has been made? So the Very First thing to do is to understand the reason for receiving the Show Cause Notice. If you do not precisely understand the reason you will not be able to provide an effective response.
For Ex: A Show Cause Notice is received by the Company from Registrar of Companies u/s 248 of Companies Act, 2013, that the company is not carrying on any business or operation for a period of 2 immediately preceding financial years, so the Registrar of Companies is willing to struck off the name of the company from the Registrar of Companies.
Therefore, there is a need to understand what led the Registrar of Companies to believe that Company is not Carrying operation for a period of 2 immediately preceding financial years. The Reasons might be non filing of Financial Statements and Annual Return in the Form AOC-4 and Form MGT-7. Also the Company might be a dormant Company and still the company might have not filed to ROC any application within such period for obtaining the status of Dormant Company u/s 455 of Companies Act,2013.
2. Why the non compliance was done?
Once you are aware of the reason for receiving the Show Cause Notice, the next step is to see if the default has been committed then WHY the default was committed and if the default has not been committed then you have to give valid proof to counter the same. This Para is the Body of the Reply which should have a valid and reasonable ground for committing the default or for countering the default if the same has not been committed. This step is basically to justify the OPPORTUNITY OF BEING HEARD.
For Ex: Continuing with the above mentioned example ROC had a reason to believe that the Company was not carrying any business. But as per the Company after analyzing the Show Cause Notice has a reason to believe was carrying on operation so the Company can reply that that the Company has been operative and carrying on its business activity and have the revenue from operations and also complying with its mandatory compliances regarding Annual Filings till 2015. Also can mention that the Company is in process of filing for remaining years. Form and Pay later Challan is also attached. Financial Statements of the Company are hereby enclosed for your reference.
3. Why action should not be taken? What are my options???Relief sought
Now after understanding the reason for getting the Notice and giving reasonable ground for committing the default or for countering the default, the next step is to look out the options available. Justification is required so that legal action is not taken against the Company. Prayer should be done so that legal action is not taken against the Company by the Concerned Department.
Note: Time period within which reply has to be made is mentioned in the Show cause Notice. So, it is very important to do the same within the Time Frame Allotted .If the same is not done within the time frame than can lead to legal/penal consequences .For Ex. : In the Example mentioned above if reply is not made within 30 days, the registrar will struck off the Company from the Register of Members.
While Preparing the Reply of the Show Cause Notice one should be careful regarding the Legal Provisions of the Act and also regarding the Legal responsibility of Promoters/directors.
| EXAMPLE OF REPLY TO SHOW CAUSE NOTICE REGARDING STRIKE OFF NOTICE RECEIVED FROM REGISTRAR OF COMPANIESU/S 248 OF
COMPANIES ACT 2013 DATE: To, The Registrar of Companies NCT of Delhi and Haryana IFCI tower, 4th floor, Nehru Place, New Delhi-110019 REF NO: Your letter No. ROCDelhi248 (1)XXXXXXX dated ………….. Subject: Representation in reply of Form No. STK 1 (Notice by Registrar for removal of name of a company from the register of companies); SIR, This is to bring to your kind notice that aforesaid Form No. STK 1 (Notice by Registrar for removal of name of a company from the register of companies) has been served to (Name of Company) and also to the company’s director by the Registrar of Companies, NCT of Delhi and Haryana, intending to remove the name of company from the Register of Companies, pursuant to sub-sections (1) and (2) of Section 248 of the Companies Act, 2013 and requiring to send representation along with copies of the relevant documents, if any, within thirty days from the date of receipt of aforesaid Form No. STK 1. Further we would like to state that the Company has been operative and carrying on its business activity and have the revenue from operations and also complying with its mandatory compliances regarding Annual Filings till 2015. The Company is in process of filing. Form and Pay later Challan for your reference for the Financial Year 2016, 2017 is attached as Annexure 1.Financial Statements are also enclosed as Annexure II. Since the Company is engaged in …… Business and there is wide competition in that sector but its market was lapsed in last few years and we were not getting any revenue due to downturn in that sector. But our management is planning to expand our work profile by indulging in new ventures which will results in company’s overall growth and expansion which will likely to increase our Revenue in future. By considering the above facts we request you to kindly drop any legal action, if any proposed to be taken against the Company and kindly look into the matter and dispose off the notice served to the Company in form STK-1.We request you to kindly drop any legal action, if any proposed to be taken against the Company and kindly look into the matter and dispose off the notice served to the Company in form STK-1. We shall however submit any further information/clarification as may be required by your good selves. Thanking You Yours Sincerely/Faithfully For and on Behalf of (Name of the Company) Name of Director Director DIN:………………. ENCLOSURE: Please Mention, if any |
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| FORMAT OF REPLY TO SHOW CAUSE NOTICE
DATE: To, Name of Authority who has sent the Show Cause Notice Address of Authority who has sent the Show Cause Notice REF NO: (Please Refer to the Ref No. mentioned on the Show Cause Notice received) SUB: It should state the purpose in clear and understandable form SIR, PARA 1 It should mention the reason for receiving the Show cause Notice. It should particularly state the cause of Show Cause Notice. Basically, why the notice has been received should be disclosed. Bare Language of Notice along with certain modifications will form part of First Paragraph. PARA 2 It is the Body of the Reply .As the Authority has given the company an Opportunity of being heard so the Company should take full opportunity to specify the reason why the particular law was not followed and if followed then the company should give valid proofs of the same and counter itself. This Para should be reasonable with unambiguity and should state valid reasons. PARA3 This Para should be the concluding Para which shall state the options that are available or should state and ask for relief if the company has defaulted in complying with Law .Prayer to be done by the company to the Department to grant relief and should also state that the company is ready to furnish more information in case required. Further any additional information and enclosure if any which the company seems fit can be done for further clarity. Thanking You Yours Sincerely/Faithfully For and on Behalf of (Name of the Company) Name of Director Director DIN:………………. ENCLOSURE: Please Mention, if any |
DISCLAIMER: The Entire Contents of this document have been prepared on the basis of relevant provisions and information available at that time and prepared with due accuracy and reliability. But In No event I will be liable for any damages caused in connection with use of this information.
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