Corporate law and governance provide the support where the companies are initiated, operate their business grow organically and inorganically and finally disappear into memory. Companies Act, 2013 is the key legislation that delivers the governance and compliance framework for companies in India.
Currently, there are 1.62 million corporate entities in India. The company management and professionals must file the required forms and documents on time and always on time. The Ministry of Corporate Affairs (MCA) holds a tab on the filings being done by corporates
Let us explore the compliance through filing of various ROC forms and penalties for non-compliance. For ease, we have classified the compliances under generic mandatory and event-based compliances:
Generic Mandatory Compliances Unerd MCA
| MCA Compliance Section | MCA Forms and Due Date | Penalty Charges for Non-Compliance of Filing Forms |
|---|---|---|
| Annual Return Filing (Sec 92) | As per the regulations, it is mandatory to file the MGT-7 form within 60 days of conducting an Annual General Meeting. | INR 10K for the particular company and its officers, in addition to a daily fine of ₹100 until they comply, capped at ₹2 lakh for the company and ₹50,000 for officers. |
| Financial Statements (Sec 129) | MCA AOC-4 form Within 30 days of holding the particular Annual General Meeting | Penalties of ₹10,000 for the company, with an upper limit of ₹2 lakh, and ₹10,000 for directors, with an increase to ₹50,000 in case of non-compliance. |
| Appointment of auditor (Sec 139) | ADT-1 Form Within 30 Days of Incorporation | ADT-1 Form Within 30 Days of Incorporation |
| Disclosure of interest by Directors (Sec 184) | Form MBP-1, 1st Meeting in which he Participates as a Director | Penalty Extenstion to INR 1,00,000 |
| Board meeting (Sec 173) | Within 30 days of incorporation, companies are required to file form MGT-14 | The amount of money to be paid by a specific company is INR 25,000, and each official who has failed to meet their responsibilities will be charged INR 5,000. |
| General meeting (Sec 96) | MGT-14 On or Before 30th September | For that particular company, there is a fine of INR 25,000. Additionally, each official who fails to meet their obligations will be fined INR 5,000. |
| Declaration of commencement of business(Sec 10A) | Within 180 days of incorporation, the company must file the form INC-20A | The penalty for the company is INR 50,000 and for each official who fails to meet their responsibilities, the penalty is INR 1,000 per day. |
| Statutory Registers | MGT-1 (Members) SH-7 (Shareholders) | INR 1,00,000 and may extend to INR 10,00,000. |
| Maintain Books of Accounts (Sec 128) | The cost could range from INR 50,000 to INR 5,00,000. |
Event-Based Compliances Under MCA Act
| MCA Compliance Section | MCA Forms with Due Date | Penalty Charges for Non-compliance of Filing |
|---|---|---|
| Change in registered office (sec 13(4)) | Form INC-22 Within 15 days of such type of change | The agreement states that a penalty of INR 1,000 will be charged per day until the default is resolved, but the total amount of penalty charged cannot exceed INR 1,00,000. |
| Change in Directors or KMP | DIR-12 form Within 30 days of such change | The penalty for the offence is at least INR 50,000 and can go up to INR 5,00,000. |
| Increase in Authorized Share capital (sec 61(1)) | Increase in Paid share capital (Issue of security) | Each defaulting official and the corporation will be fined INR 500 per day, up to a max of INR 5 lakh for the company and INR 1 lakh for each individual official. |
| Increase in Paid up share capital (Issue of security) | PAS-3: The deadline for submitting the necessary documents for the allotment process is 15 days from the date of allotment | The amount of delay in payment and the size of the company’s investments can affect how much penalty is charged. |
| Application for KYC of Directors | The DIR-3 KYC Form must be submitted by the 30th of April of the following financial year. | There won’t be any fine, but Din will be marked as deactivated, INR 5000 due to late filing |
| Alteration of Memorandum or Articles of Association (Sec 13, 14) | The resolution must be implemented within 30 days of its passing (MGT-14) | The penalty for the offence is a minimum of INR 100,000 and a maximum of INR 1,000,000 |
| Change or modification of charge (Sec 77) | CHG-1 / CHG-9 Within 30 days of its creation | Within 30 days of passing an ordinary resolution, the SH-7 form |
| Change in companies Name (Sec 16) | INC-24 Within 30 days of passing a resolution or 60 days of registrar approval, choose a name. | A fine of 1000 rupees per day will be imposed for non-compliance with the default. Officers may face penalties ranging from INR 5000 to 100,000 rupees |
| Change in place of books (Sec 128) | Within seven days of passing the board resolution, file AOC-5. | INC-24 Within 30 days of passing a resolution or 60 days of registrar approval, choose a name. |
Glancing at the amount of monetary penalties, it is recommended to comply rather than to pay heavy fines. Presently MCA is active and frequently it comes in press that the companies have been penalized cumulatively to the extent of Rs. 5 lakhs to even Rs. 50 lakhs or exceeding that.
Company law compliance is a separate domain and it should not be treated as if finance professionals know everything and can do these compliances, unless skilled and trained in that domain.
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