This write-up covers the effect of the amendments to Section 92(3), 134 (3)(a) of the Companies Act, 2013 and Rule 12 of the Companies (Management and Administration) Rules, 2014 including the latest amendment to Rule 12 with the Companies (Management and Administration) Amendment Rules, 2021 dated 05.03.2021, and addresses the questions- “Whether an Extract of Annual Return (MGT-9) is required to be attached to the Board’s Report of a Company? Or is it a copy of Annual Return (in Form MGT-7) that is required to be attached to Board’s Report?
Previous & Present position with regard to Extract of Annual Return (in Form MGT-9)/ Annual Return (in Form MGT-7) & its disclosures in the Board’s Report of the Company:
Effective from 01/04/2014 till 30/07/2018:
(a) An extract of Annual Return in Form MGT-9 is required to be attached to Board’s Report of every company.
From 31/07/2018 till 27/08/2020:
(a) An extract of Annual Return in form MGT-9 is required to be attached to Board’s Report of every company.
(b) web address, if any, of the extract of Annual Return to be disclosed in the Board’s Report.
From 28/08/2020 till 04/03/2021:
(a) Every company shall place a copy of the annual return (in Form MGT-7) on the website of the company, if any.
(b) The web-link of such annual return shall be disclosed in the Board’s report.
(c) If the web link of such annual return has NOT been disclosed in the Board’s report/ If the Company does not have any website, an extract of the annual return to be attached with the Board’s Report in Form MGT-9.
From 05/03/2021 onwards:
(a) Every company shall place a copy of the annual return (in Form MGT-7/MGT-7A as the case may be) on the website of the company, if any.
(b) The web-link of such annual return shall be disclosed in the Board’s Report.
Key points to be considered (with reference to Annual Return) while preparation of Board’s Report for the FY 2020-21 onwards: (w.e.f 05/03/21)
1) Web link of Annual Return in Board’s Report:
(i) Copy of the Annual Return has to be placed on the website of the company.
(ii) Web link of the copy of Annual Return (in Form MGT-7/Form MGT-7A as the case may be) as placed on the website to be disclosed in the Board’s report.
(iii) If the company does not have a website, mention such fact in the Board’s report and no requirement to annex/attach the Annual Return to the Board’s Report.
2) Extract of Annual Return (MGT-9) is no longer required as this stands omitted.
3) For the FY 2020-21 onwards, Annual Return means :-
- MGT-7A : for One Person Companies(OPCs) and Small Companies
- MGT-7: for all Other companies.
4) Sec 92(3) is not applicable to Specified IFSC private/public companies w.e.f. 04.01.2017 and hence, no requirement of placing copy of the annual return on the website of the company nor disclosure of web-link of such annual return in the Board’s report.
5) New eorm MGT-7A and revised eorm MGT-7 are available on MCA portal from 16/07/2021.
6) Small Company threshold limits (paid up capital and turnover) increased from April 1, 2021. Ideally status of the company as on the close of the financial year (31st March) has to be considered for opting Form MGT-7A or Form MGT-7. However, it is pertinent to note that, the MCA/e-form is considering the status of the company as on the date of filing. Hence, appropriate care has to be taken accordingly.
7) Practical Difficulties faced recently with e-Form MGT-7/7A:
a. Annual Return has to be prepared based on the particulars as they stood on the close of the financial year. However, the system/e-form is considering the date of filling/filing the form- to determine the status of a company whether it is a small company or not. For example, a company previously not being a small company and presently has become a small company by virtue of increased thresholds, and e-form prompting an error to choose e-form MGT-7A even for previous financial year filings though Rule 11(1) mentions that “One Person Company and Small Company shall file annual return from the financial year 2020-2021 onwards in Form No.MGT-7A”
b. Though holding / subsidiary companies are not small companies, the system/e-form is treating these companies as small companies based on the paid up capital and turnover criteria and throwing an error to choose e-form MGT-7A.
c. As the eform does not accent future date, AGM date can not be filled electronically before the date of AGM i.e. at the time of preparation of the Board’s Report. Hence, such date can be inserted manually.
What is a small company?
Small company means a company, other than a public company
(i) Whose paid up capital and turnover does not exceed Rupees 2 (two) Crores and Rupees 20 (twenty) Crores respectively, and
(ii) Which is not a holding / Subsidiary/ Section 8 company or governed by any special Act.
Relevant provisions are reproduced below for quick reference:
Rule 12 Extract of Annual Return – Omitted vide the Companies (Management and Administration) Amendment Rules, 2021 dated 05.03.2021
(1) The extract of the annual return to be attached with the Board’s Report shall be in Form MGT-9.
Provided that a company shall not be required to attach the extract of the annual return with the Board’s report in Form MGT-9, in case the web link of such annual return has been disclosed in the Board’s report in accordance with sub-section (3) of section 92 of the Companies Act, 2013.
Sec 92 (3) 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.
Rule 11 (1) to the Companies (Management and Administration) Rules, 2014
Every company shall file its annual return in Form MGT-7 except One Person Company (OPC) and Small Company. One Person Company and Small Company shall file annual return from the financial year 2020-2021 onwards in Form No.MGT-7A.
Sec 134 (3) There shall be attached to statements laid before a company in general meeting, a report by its Board of Directors, which shall include—
(a) the web address, if any, where annual return referred to in sub-section (3) of section 92 has been placed.
Sec 2 (85) “small company” means a company, other than a public company,—
(i) paid-up share capital of which does not exceed fifty lakh rupees or such higher amount as may be prescribed which shall not be more than ten crore rupees;and
(ii) turnover of which as per profit and loss account for the immediately preceding financial year does not exceed two crore rupees or such higher amount as may be prescribed which shall not be more than 18[one hundred crore rupees:]
Provided that nothing in this clause shall apply to—
(A) a holding company or a subsidiary company;
(B) a company registered under section 8; or
(C) a company or body corporate governed by any special Act;
Rule 2(1)(t) of the Companies (Specification of Definitions Details) Rules, 2014
For the purposes of sub-clause (i) and sub-clause (ii) of clause (85) of section 2 of the Act, paid up capital and turnover of the small company shall not exceed rupees two crores and rupees twenty crores respectively.
Disclaimer: The above views are the personal views of the author and the Readers are requested to exercise their due diligence before taking action.
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