Serious Penal Consequence of late Annual Filing – landmine ahead

[The law stated in this post is effective from the 7^th day of May 2018]

There is a perception that filing of financial statements and other documents with additional fee absolve the company from consequences under section 92, section 137 and conditional exemption given to certain companies by certain notifications issued by the Ministry of Corporate Affairs.

This is also a general view of the companies that any extension granted for the filing of the financial statements and other documents without additional fee grant immunity to the companies from its liabilities under mentioned provisions.

I beg to differ, conditionally.

Filing of Financial Statements (Section 137)

The statutory time period for filing a copy of the financial statements is within thirty days of the date of the trigger event. With effect from 7^th May 2018, the statutory time period for filing financial statement is 30 days, with or without an additional fee. No subordinate legislation or departmental action may extend this statutory period.

There is one exceptional case of One Person Company which has the time of 180 days from the closure of the financial year.

Various trigger events are clearly mentioned in the statutory law the Companies Act, 2013.

Adoption of financial statements in the Annual General Meeting

 A copy of the financial statements, including consolidated financial statement, if any, along with all the documents which are required to be or attached to such financial statements under this Act, duly adopted at the annual general meeting of the company, shall be filed with the Registrar within thirty days of the date of annual general meeting in such manner with such fees or additional fees as may be prescribed. [Section 137(1)]

No Adoption of financial statements in the Annual General Meeting

There is a provision of filing provisional financial statement in case, financial statements was not adopted in the annual general meeting or adjourned annual meeting within thirty days of the date of annual general meeting and the Registrar shall take them in his records as provisional till the financial statements are filed with him after their adoption in the adjourned annual general meeting for that purpose. [Section 137(1)]

Adoption of financial statements in the Adjourned Annual General Meeting

The financial statements adopted in the adjourned annual general meeting shall be filed with the Registrar within thirty days of the date of such adjourned annual general meeting. [Section 137(1)]

Annual General Meeting Not held

Where the annual general meeting of a company for any year has not been held, the financial statements along with the documents required to be attached under sub-section (1), duly signed along with the statement of facts and reasons for not holding the annual general meeting shall be filed with the Registrar within thirty days of the last date before which the annual general meeting should have been held and in such manner, with such fees or additional fees as may be prescribed. [Section 137(2)]

Direct Consecution of no – filing of financial statements within the statutory time period – Punishment

If a company fails to file the copy of the financial statements under sub-section (1) or sub-section (2), of section 137, as the case may be, before the expiry of the period specified therein, the company and its management shall be punishable.

Please note the additional fee is not the punishment. This is just an additional fee for providing filing window by the registrar. Such an additional fee is mentioned in Section 403 read with Rule 12 of the Companies (The Registration Office and Fees) Rules 2014 read with sub – item A of Item I of Annexure Table of Fees. These provisions of additional fee for financial statements were discussed earlier here.

Punishment for the company

If a company fails to file the copy of the financial statements under sub-section (1) or sub-section (2), the company shall be punishable with fine of one thousand rupees for every day during which the failure continues but which shall not be more than ten lakh rupees.

Punishment for the managing director, chief financial officer etc.

If a company fails to file the copy of the financial statements under sub-section (1) or sub-section (2), flowing person shall be punishable with imprisonment for a term which may extend to six months or with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees, or with both:

1. the managing director and the Chief Financial Officer of the company, if any,
2. in the absence of the managing director and the Chief Financial Officer, any other director who is charged by the Board with the responsibility of complying with the provisions of this section,
3. in the absence of any such director, all the directors of the company.

Filing of Annual Return (Section 92)

Every company shall file with the Registrar a copy of the annual return, within sixty days from the date on which the annual general meeting is held or where no annual general meeting is held in any year within sixty 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 as may be prescribed. [Section 32(4)]

With effect from 7^th May 2018, statutory time period for filing financial statement is 30 days, with or without additional fee. No subordinate legislation or departmental action may extend this statutory period.

Direct Consecution of non – filing of Annual Return within statutory time period – Punishment

If a company fails to file the copy of the Annual Return under sub-section (4) or sub-section (2), of section 137, as the case may be, before the expiry of the period specified therein, the company and its management shall be punishable.

Please note additional fee is not the punishment. This is just an additional fee for providing filing window by the registrar. Such addition fee is mentioned in Section 403 read with Rule 12 of the Companies (The Registration Office and Fees) Rules 2014 read with sub – item A of Item I of Annexure Table of Fees. These provisions of additional fee for financial statements were discussed earlier here.

Punishment for the company

If a company fails to file its annual return under sub-section (4) of section 92, before the expiry of the period specified therein, the company shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees

Punishment for officer in default

 If a company fails to file its annual return under sub-section (4) of Section 92, before the expiry of the period specified therein, every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to six months or with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees, or with both.

Who want extension of date for filing of financial statement or annual return?

Any extension for filing of financial statement or annual return without additional fee may not work in favor of company or any officer in default. The department may be lenient, but punishable default is certainly there.

The record of seeking extension for filing of annual financial statements and annual return is very interesting. Interestingly, no one claims that their financial statements are not prepared before scheduled date of sending notices for their annual general meeting. No one claims their annual financial statement was not adopted by company in its annual general meeting. Everyone has problem with a simpler task of filling a form for annual filing.

Everyone missed to seek general extension of date for holding annual general meeting for certain classes of companies.

Indirect consequence for certain class companies

Our readers must have remembered following paragraph of notifications popularly known as exemption notifications:

“2A. The exceptions, modifications and adaptations provided in column (3) of the aforesaid Table shall be applicable to a Government company which has not committed a default in filing its financial statements under section 137 of the said Act or annual return under section 92 of the said Act with the Registrar. [G.S.R.. 582(E) dated 13^th June 2017]

 “2A. The exceptions, modifications and adaptations provided in column (3) of the aforesaid Table shall be applicable to a private company which has not committed a default in filing its financial statements under section 137 of the said Act or annual return under section 92 of the said Act with the Registrar.” [G.S.R.. 583(E) dated 13^th June 2017]

“2A. The exceptions, modifications and adaptations provided in column (3) of the aforesaid Table shall be applicable to a company covered under section 8 of the said Act which has not committed a default in filing its financial statements under section 137 or annual return under section 92 of the said Act with the Registrar.” [G.S.R.. 584(E) dated 13^th June 2017]

There is no prize to understand these exemptions may not be available for the period of default and may be cured only on compounding.

We earlier here discussed the law related compounding as presently in force with effect from 7^th May 2018.