What are the Consequences of Not Filing Annual Return?

According to the rules and regulations of the Companies Act of 2013, every Company registered under the Ministry of Corporate Affairs must timely file Annual Returns to avoid the levy of hefty penalties for the Directors as well the Company.

What is an Annual Return?

An Annual Return is a document required to be filed by every Company with the Ministry of Corporate Affairs at the closing of each financial year. 

When must Annual Returns be filed?

Annual Returns shall be filed within 60 days from the date of the annual general meeting or, if it is not held in any particular year, from the date at which this meeting shall have been conducted.

What if I don't file the Annual Returns?

As per the Companies Act 2013, any company failing to do so within the prescribed time will be considered an offense for which the punishment will be levied. Therefore, both directors and the Company will have to bear the penalties and fines imposed.  Thus, it is imperative to file accurate and timely returns for every Company.

This blog will discuss the consequences of not filing the Company's annual returns.

What is the Director's punishment for not filing Annual Returns?

Directors are responsible for managing the functions of the Company. Thus, filing timely returns is also the responsibility of the directors only. If they fail to file the returns on time, they will have to face punishment depending on the days the filing is delayed.

Cases of Penalties in case of Non-Compliance

Here are the cases of penalties to be levied on the Directors in case of non-compliance in filing their annual returns:

Non-filing of Annual Returns within 270 days

Suppose the directors have not filed the annual return before the expiry of 270 days from when the return should have been filed originally. In that case, they will be liable to pay an additional penalty. 

The directors will be imprisoned for a period of six months, and the fine of not less than 50 thousand can extend to a total of 50 lakhs or both.

Non-filing of Annual Returns for Three Years

If the annual returns are not filed for three years, the existing or the previous directors will face severe consequences. They will no longer be eligible to be appointed as the Director of the same Company or any other company for a total period of 5 years from the date the Company fails to file returns.

False statements filed by the Director(s)

In case the company returns are filled with false or omitted facts, the Director or any person responsible will be imprisoned for a period of 6 months that may be extended to 10 years. Also, he shall be liable for a fine that would not be less than the amount involved in fraud and can extend up to three times the amount involved in fraud.

What is the Company's punishment for not filing Annual Returns?

The Company is treated as a separate Legal Entity in the eyes of the law. Thus, apart from the directors, the Company will also be held responsible for the non-filing of annual returns by the MCA.

Cases of Penalties in case of Non-Compliance

Following is the amount of fine that the Company is required to pay in different cases-

Period of Delay: 15 days

The amount penalty would be one time of the number of fees usually charged.

Period of Delay: More than 15 days but up to 30 days

The penalty amount would be two times the amount of fees typically charged.

Period of Delay: More than 30 days but up to 60 days

The amount penalty would be four times the fees usually charged.

Period of Delay: More than 60 days but up to 90 days

The amount of penalty would be six times the amount of fees typically charged.

Period of Delay: More than 90 days but up to 180 days

The amount of penalty would be ten times the amount of fees usually charged.

Period of Delay: More than 180 days but up to 270 days

The amount of penalty would be 12 times the amount of fees typically charged.

Period of Delay: More than 270 days

The penalty would be 100 rs per day after the expiry of 270 days.

Period of Delay: For Two years

If the Company fails to file the return for the last two financial years consistently, then the Company will be regarded as inactive. Further, the Company's bank account will freeze, and the Company will issue a notice of strike-off.

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.