[Opinion] RoC Penalizes Co. and its Directors for Filing Incomplete Financial Statements & Failure of CSR Disclosure
- Blog|News|Company Law|
- 4 Min Read
- By Taxmann
- |
- Last Updated on 7 November, 2023
Latest from Taxmann
Prof R Balakrishnan – [2023] 156 taxmann.com 141 (Article)
1. Background of the case
This is the case in which M/s La-fin Financial Services Private Limited, situated in Vile Parle of Mumbai while filing the financial statement for the year ended as at 31st March 2015, failed to attach the extract of the annual return which was required to be attached as per the provisions of section 136 of the Companies Act 2013. Further to this, the company also did not disclose additional details relating to CSR activities in its board report for the same year. After filing the financials with the Registrar of Companies of Mumbai, the company realized its mistake and then refiled the entire set of financial statements, including MGT-9 along with the board report for the financial year ended 31st March 2015 online via e-form GNL-2 and made a request to the Registrar of Companies to replace the incomplete/erroneous attachments filed by the company earlier via e-form AOC-4.
Registrar of Companies of Mumbai decided to adjudicate this matter and accordingly issued a personal hearing notice to the company and its directors by providing an opportunity to be heard before the matter was adjourned since the company had already led to non-compliance with the provisions of the Companies Act 2013 for which the company and directors were liable for penal action. According to the Registrar of Companies, though the company had rectified the deficiency, the non-compliance which had already occurred was punishable under the provisions of the Companies Act 2013 and accordingly, after following the due procedure, the Registrar imposed a penalty upon the company and its two of the directors for the violation to a tune of Rs. 0.35 lakh.
This case clearly brings out the principle of doing the right things the first time by exercising due checks and balances and compliance could not be taken lightly as a box-ticking exercise. Failure to comply with the applicable rules and regulations, it not only impact the company’s financial health but also the reputation of the company. Let us go through this case in detail to know what exactly happened that led to the adjudication order of the Registrar of Companies.
2. Provisions relating to the cases discussed under the Companies Act 2013.
The provisions under the Companies Act 2013, relevant to the cases are as given below:-
| Companies Act 2013 Chapter IX – Accounts of Companies Section 136 – Right of member to copies of audited financial statement |
|
| Section | Provision |
| 136 (1) | A copy of the financial statements, including consolidated financial statements, if any, auditor’s report and every other document required by law to be annexed or attached to the financial statements, which are to be laid before a company in its general meeting, shall be sent to every member of the company, to every trustee for the debenture-holder of any debentures issued by the company, and to all persons other than such member or trustee, being the person so entitled, not less than twenty-one days before the date of the meeting: |
| Provision | Provided that if the copies of the documents are sent less than twenty-one days before the date of the meeting, they shall, notwithstanding the fact, be deemed to have been duly sent if it is so agreed by members – |
| (a) | holding, if the company has a share capital, majority in a number entitled to vote and also represent not less than ninety-five percent, of such part of the paid-up share capital as the company as gives a right to vote at the meeting or; |
| (b) | having, if the company has a share capital, not less than ninety-five per cent, of the total voting power exercisable at the meeting. |
| Proviso | provider further that in the case of the listed company, the provisions of this section shall be deemed to be complied with, if the copies of the documents are made available for inspection at its registered office during working hours for a period of twenty-one days before the date of the meeting and a statement containing the salient features of such documents in the prescribed form or copies of the documents, as the company may deem fit, is sent to every member of the company and to every trustee for the holders of any debentures issued by the company not less than twenty-one days before the date of the meeting unless the shareholders ask for full financial statements |
| Proviso | Provided also that every listed company having a subsidiary or subsidiaries shall place separate audited accounts in respect of each subsidiary on its website, if any; |
| Provision | Provided also that a listed company which has a subsidiary incorporated outside India (hereinafter referred to as “foreign subsidiary”) |
| (a) | where such foreign subsidiary is statutorily required to prepare a consolidated financial statement under any law of the country of incorporation, the requirement of this proviso shall be met as if the consolidated financial statement of such foreign subsidiary if placed on the website of the listed company. |
| (b) | where such a foreign subsidiary is not required to get its financial statement audited under any law of the country of incorporation and which does not get a financial statement audited, the holding Indian listed company may place such unaudited financial statement on its website and where such financial statement is in a language other than English, a translated financial statement in English shall also be placed on the website. |
| 136 (2) | A company shall allow every member or trustee of the holder of any debentures issued by the company to inspect the documents stated under sub-section (1) at its registered office during business hours. |
| Proviso | Provided that every company having a subsidiary or subsidiaries shall provide a copy of a separate audited or unaudited financial statement as the case may be, as prepared in respect of its subsidiary to any member of the company who asks for it |
| Penalty for default/non-compliance | |
| 136 (3) | If any default is made in complying with the provisions of this section, the company shall be liable to a penalty of twenty-five thousand rupees and every officer of the company who is in default shall be liable to a penalty of five thousand rupees. |
Click Here To Read The Full Article
Disclaimer: The content/information published on the website is only for general information of the user and shall not be construed as legal advice. While the Taxmann has exercised reasonable efforts to ensure the veracity of information/content published, Taxmann shall be under no liability in any manner whatsoever for incorrect information, if any.
Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.
The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:
- The statutory material is obtained only from the authorized and reliable sources
- All the latest developments in the judicial and legislative fields are covered
- Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
- Every content published by Taxmann is complete, accurate and lucid
- All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
- The golden rules of grammar, style and consistency are thoroughly followed
- Font and size that’s easy to read and remain consistent across all imprint and digital publications are applied
Sign Up
To subscribe to our weekly newsletter please log in/register on Taxmann.com
Latest Books
Everything on Tax and Corporate Laws of India
To subscribe to our weekly newsletter please log in/register on Taxmann.com
