Penalty for Late Filing of Annual Return of Company

As per the Companies (Management and Administration) Rules, 2014 all companies are required to prepare and file an annual return. The annual return of the company shall be filed in MGT-7 containing the annual information about the Company's general compliances. Further, it is mandatory for every company to file the annual return within 60 days of holding the annual general meeting or within 60 days from the last date on or before which an annual general meeting must have been held by the Company.

Applicability of Annual Return Filing

The following companies incorporated in India are required to file annual return at the end of each financial year.-

1. Private Limited Company
2. One Person Company
3. Limited Company
4. Section 8 Company
5. Producer Company
6. Nidhi Company

Further, even the companies which no longer exist are required to file annual returns till the name of the company is struck off from the Register of Companies by the Registrar. Moreover, nonfunctioning companies or companies with no activity are also required to file the annual return at the end of each financial year. Thus the fact that a company has not been functioning does not exempt the company from its requirement for filing of the annual return.

Penalty for Failure to File Annual Return

A penalty would be levied in case a there is a failure in filing the annual returns of the company or the returns are not filed within the due dates.

Section 9(25) specifies the penalty provision in this regard. As per this section, the company will be punishable with a fine shall not be less than Rs.50000 but which may extend to Rs.5 lakhs. Further, every Officer (Director) 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 Rs.50,000 but which may extend to Rs.5 lakhs, or both.

In addition to this if the company secretary in practice certifies the annual returns, which is not in conformity with the rules made in this regard than he shall be punishable with the fine which shall not be less than Rs 50,000 but which may extend to Rs 5 Lakhs.

Disqualification of Director

To make directors accountable for filing the annual returns of the company properly the provision for disqualification of directors in this regard has been made. Any director of the company will be disqualified, in case the annual return of a company is not filed continuously for three financial years. Further, he would not be eligible for appointment as a Director of any other company for a period of five years from the date on which the defaulting company failed to file annual returns.

Miscellaneous Provisions for punishment regarding failure to file annual returns by company

To ensure proper Corporate Governance and Proper Compliance of provisions of Companies Act, the following action would be implemented by ROC:

1. The ROC would not accept any other e-filing of the company from Directors of defaulting companies for any other company also.
2. No certificates will be issued to such defaulting company by the members of ICAI, ICSI and ICWAI.
3. A strict action will be taken against defaulting companies and their Director in default in coordination with RBI and SEBI.
4. The Company Secretaries and Auditors of defaulting companies would not be allowed to sign and certify the filing with the MCA-21 system, till the defect is rectified.

Author: Dushyant Sharma

Hey there, I'm Dushyant Sharma. With the extensive knowledge I've gained in past 8 years, I have been creating content on various subjects such as banking, insurance, telecom, and all the important registration and licensing processes for various companies. I'm here to help everyone with my expertise in these areas through my articles.