CONDONATION OF DELAY SCHEME, 2018

[Mr. M. GOVINDARAJAN]

Annual Return

Section 92 of the Companies Act, 2013 provides that every company shall prepare a annual return  in the prescribed form containing the particulars as they stood on the close of the financial year regarding-

• its registered office, principal business activities, particulars of its holding, subsidiary and associate companies;
• its shares, debentures and other securities and shareholding pattern;
• its indebtedness;
• its members and debenture-holders along with changes therein since the close of the previous financial year;
• its promoters, directors, key managerial personnel along with changes therein since the close of the previous financial year;
• meetings of members or a class thereof, Board and its various committees along with attendance details;
• remuneration of directors and key managerial personnel;
• penalty or punishment imposed on the company, its directors or officers and details of compounding of offences and appeals made against such penalty or punishment;
• matters relating to certification of compliances, disclosures as may be prescribed;
• details, as may be prescribed, in respect of shares held by or on behalf of the Foreign Institutional Investors indicating their names, addresses, countries of incorporation, registration and percentage of shareholding held by them; and
• such other matters as may be prescribed.

The Annual return shall be signed by a director and the company secretary, or where there is no company secretary, by a company secretary in practice.

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, within the time as specified, under section 403.

If a company fails to file its annual return under sub-section (4), before the expiry of the period specified under section 403 with additional fee, the company shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to five lakhs rupees and 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.

 If a company secretary in practice certifies the annual return otherwise than in conformity with the requirements of this section or the rules made there under, he shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees.

Disqualification of a director

Section 164(2) provides that no person who is or has been a director of a company which has not filed financial statements or annual returns for any continuous period of three financial years shall be eligible to be re-appointed as a director of that company or appointed in other company for a period of five years from the date on which the said company fails to do so.

Section 167(1)(a) provides that the office of a director shall become vacant in case  he incurs any of the disqualifications specified in section 164 i.e., failure to file annual returns for any continuous period of three financial years. 

Rule 14 of the Companies (Appointment and Qualification of Directors) Rules, 2014 provides that every director shall inform to the company concerned about his disqualification, if any, under section 164 (2) in Form DIR – 8.

Company Law Settlement Scheme, 2014

The Ministry of Corporate Affairs had launched a Company Law Settlement Scheme, 2014 which provided an opportunity to the defaulting companies to clear their defaults within the time specified in the scheme and following the due process as notified.

Action of MCA in disqualifying directors

The Ministry of Corporate Affairs in September 2017 identified 3,09,614 directors associated with the companies that had failed to file the financial statements or annual returns in the MCA 21 online registry for a continuous period of three financial years 2013 – 14, 2014 – 15, 2015 – 16 in terms of provisions of section 164(2) read with section 167 (1)(a) of the Act and they were barred from accessing the online registry.  A list of such directors was also published on the website of Ministry of Corporate Affairs.

Condonation of delay scheme, 2018

Consequent of the action made by MCA disqualifying the directors of the companies, there have been a spare of representations from industry, defaulting companies and their directors.  They sought an opportunity to become compliant and normalize operations.  Some persons filed writ petitioners before High Courts seeking relief from the disqualification.

The Ministry of Corporate Affairs has announced a onetime settlement scheme for companies that saw over three lakh directors disqualified from their boards, with a view to giving an opportunity for the non compliant defaulting companies to rectify the default, in exercise of the powers conferred under sections 403, 459 and 460 of the Act.  

Applicability

This scheme is applicable to all defaulting companies, other than the companies which have been struck off or whose names have been removed from the register of companies under section 248(5) of the Act.  A defaulting company is permitted to file its overdue documents which were due for filing till 30.06.2016 in accordance with the provisions of this scheme.

The expression ‘defaulting company’ is defined as a company which has not filed its financial statements or annual return as required under the Companies Act, 1956 or Companies Act, 2013, as the case may be, and the Rules made there under for a continuous period of three years.

Overdue documents

The expression ‘overdue documents’ is defined as the financial statements or the annual returns or other associated documents, as applicable, in the case of a defaulting company.

The following are the overdue documents-

• Form No. 20B/MGT-7 – Form for filing Annual return by a company having share capital;
• Form 21A/MGT-7 – Particulars of Annual Return for the company not having share capital;
• Form 23AC, 23ACA, 23AC-XBRL, 23ACA-XBRL, AOC – 4(CFS), AOC (XBRL) and AOC -4 (non-XBRL) – Forms for filing balance sheet/financial Statement and profit and loss account;
• Form 66- Form for submission of compliance certificate with the Registrar;
• Form 23B/ADT – 1 – Form for intimation for appointment of auditors.

Procedure

The following is the procedure to be followed under this scheme-

• The DINs of the disqualified directors de-activated shall be temporarily activated during the validity period to enable them to file the overdue documents;
• The defaulting company shall file the overdue documents paying the statutory filing fee and additional fee payable under section 403 of the Act read with Companies (Registration Offices and fee) Rules, 2014 for filing these overdue documents;
• The defaulting company after filing the documents under this scheme shall seek condonation of delay by filing e-CODS 2018 along with a fee of ₹ 30,000/- as prescribed under the Companies (Registration Offices and Fee) Rules, 2014 well before the last date of the scheme;
• The DINs of the directors associated with the defaulting companies that have not filed their overdue documents and the eform CODS and these are not taken on record in the MCA – 21 registry and are still found to be disqualified on the conclusion of the scheme shall be liable to be deactivated on the expiry of the scheme.

If the name of the company is removed from the register of companies under Section 248 of the Act and if the said company has filed application for revival under section 252 up to the date of the scheme, the Director’s DIN shall be re-activated only NCLT order of revival subject to the company having filing all overdue documents.

Powers of Registrar

The Registrar concerned shall withdraw the prosecution(s) pending if any before the concerned court(s) for all documents filed under the scheme.  This scheme is without prejudice to action under section 167(2) of the Act or civil and criminal liabilities, if any, of such disqualified directors during the period they remained disqualified.

At the conclusion of the scheme, the Registrar shall take all necessary actions under the respective Act against the companies who have not availed themselves of this scheme and continue to be in default in filing the overdue documents.

Period of the scheme

The scheme shall come into force with effect from 01.01.2018 and shall remain in force up to 31.03.2018.