Section 92: Annual Returns

Introduction

Section 92 of Companies Act, 2013, is part of chapter VII which primarily lays down and discusses the nitty gritties with respect to annual returns that a company needs to file annually. Annual returns of a company give a fair analysis of its financial capabilities and performance in a year. This is a mandatory requirement that any company needs to follow. Annual returns by company also in a way provides relevant information to the world and its investors and shareholders with respect to how the money invested was used and gives a holistic picture of performance of the company. Any misstatement or not following the proper requirements and conditions by any company with respect to their annual statements has grave consequences for the company. This analysis will give a comprehensive understanding of this section and its consequences.

Purpose of Section 92

This is a very important section of the act, 2013 and briefly lays down the following provisions:

Section 92 imposes an obligation on all companies with or without share capital or companies who file/do not file annual returns. The annual return shall contain particulars as they stood on the close of the financial year and not the date of annual general meeting as was provided under 1956 Act. Further full annual return is required to be filed every year unlike the 1956 act.
The information about following particulars have to be mentioned in the annual returns (a) its registered office, principal business activities, particulars of its holding, subsidiary and associate companies (b) its shares, debentures and other securities and shareholding pattern (c) its indebtedness (omitted by 2017 amendment act) (d) its members and debenture holders along with changes therein since the close of the previous financial year (e) its promoters, directors, key managerial personnel along with changes therein since the close of the previous financial year (f) meetings of members or a class thereof, Board and its various committees along with attendance details (g) remuneration of directors and key managerial personnel (h) 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 (i) matters relating to certification of compliances, disclosures as may be prescribed (j) details, as may be prescribed, in respect of shares held by or on behalf of the foreign institutional investors (k) such other matters as may be prescribed. Now various additional information also has to be stated which was not prescribed by 1956 act.
Annual return is required to be signed by one director along with company secretary and where there is no company secretary by a company secretary in whole-time practice. In relation to one-person company and small company, the company secretary shall sign the annual return, or where there is no company secretary, by the director of the company according to this section.
Companies (Amendment) Act, 2017 has inserted a second proviso, to sub-section (1) which states that the Central Government may prescribe abridged form of annual return for one-person company, small company and such other class or classes of companies as may be prescribed.
In case of listed company or by a company having paid up share capital of ten crore rupees or more or turnover of fifty crore rupees or more, the annual return shall be certified by a company secretary in practice in form MGT-8 stating that the annual return discloses the facts correctly and adequately and that the company has complied with all the provisions of this Act. Thus the 2013 Act extends the requirement of certification of annual return by a practicing company secretary to unlisted companies as well having paid up share capital of ten crore rupees or turnover of fifty crore or more. If a company secretary in practice certifies the annual return otherwise than in conformity with the requirements of this section or the rules made thereunder, he shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees and thus law creates here a check balance.
Companies (Amendment) Act, 2017 omits the requirement of form MGT-9 i.e. extract of annual return to form part of the Board’s report. Instead, the copy of annual return shall be uploaded on the website of the company, if any, and its link shall be disclosed in the Board’s report.
Every company has to 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.
Time limit of 270 days within which annual return could be filed on payment of additional fee has been done away with by the Companies (Amendment) Act, 2017. A company can now file the annual return with ROC at any time on payment of prescribed additional fee.
If a company fails to file its annual return with the registrar in accordance with this section, the company will be punishable with fine and every officer of the company who is in default will be punishable with imprisonment or with fine or with both according to this section. If a company secretary in practice certifies the annual return otherwise than in conformity with the requirements of this section or the rules made thereunder, he shall be punishable with fine.

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Section 92 must be read with the Companies (Management and Administration) Rules, 2014. The important aspects that need to be adhered to are as follows:

Every company shall prepare its annual return in form No. MGT-7.
The annual return, filed by a listed company or a company having paid up share capital of ten crore rupees or more or turnover of fifty crore rupees or more, shall be certified by a Company Secretary in practice and the certificate shall be in form No. MGT-8[1].
Annual return filed under section 92 shall be furnished to any member, debenture-holder, other security holder or beneficial owner of the company or any other person on payment of such fee as may be specified in the articles of association of the company have to be supplied by the company within a period of seven days from the date of deposit of fee to the company[2].

Secretarial standard on board meetings (SS-1) lay down that the annual return of a company has to disclose the date of the annual general meeting held during the financial year [3].

Situation Before Enactment of Section 92

This section corresponds to section 159 (Annual return to be made by company having share capital), section 160 (Annual return to be made by company not having share capital), section 161 (Further provisions regarding annual return and certificate to be annexed thereto) and section 162 (Penalty and interpretation) of the 1956 Act. The act, 2013 has consolidated all these sections into one section for better applicability and understanding.

The new act, 2013 has introduced a plethora of new disclosures in the annual return, which were not part of the traditional format of annual return under the old act, 1956. This is a welcome feature, as the companies now need to be more transparent in their disclosures and this would lead to proper governance. Companies under the new act, 2013 amongst other disclosures, are also now required to give complete disclosures about penalties and punishments imposed on the company, its directors and officers along with details of compounding of offences. This will enable the investors or even public at large to understand the philosophy of the company towards regulatory compliances and capabilities of its officers in managing the affairs of the company within the four corners of law. All such enhanced disclosures will lead to good corporate governance.
The new act, 2013 has also increased roles and responsibilities of whole-time company secretary and the company secretary in practice. The new act, 2013 has introduced a provision for compulsory certification of the annual return by a practicing company secretary for companies with paid-up capital and turnover as specified in the relevant rules whereas under the old act, 1956 such requirement was only with respect to the listed companies.
The new act, 2013 provides that all types of companies, whether with or without share capital have to comply with the requirement of filing of annual return in the same form, whereas under the old act, 1956, companies not having share capital have to file a separate return.
Penal provision has now been introduced for violations by the practicing company secretary who is certifying the annual return.
Under the new act, 2013 the annual return is to be prepared up to the date of closure of the Financial Year and not up to the date of annual general meeting as provided under the old act, 2013.
Under the new act, 2013 only one director along with the company secretary (if no company secretary then by a company secretary in practice) is required to sign the annual return in place of two directors (if there is no manager or secretary in the company) as provided in the old act, 1956. More responsibilities have been shouldered on company secretary and company secretary in practice.
Under the new act, 2013 there are enhanced penalties for non-compliance of the provisions with respect to filing of annual return.
The requirement of intimation to the Registrar for the number of shares, which were converted into stock in annual return under the old act, 1956, has been dropped under the new act.

Application of Section 92

This section comes into application annually for every company when it’s time to file the annual returns. This is an extension of the disclosure regime in India and makes sure those financial records and capabilities of the company are easily available to the investors-present and potential.

Amendment to Section 92

Section 92 has been amended by the Companies (Amendment) act, 2017 and 2019. By 2017 amendment act in sub-clause (1) clause (c) was omitted, in clause (J) the words “indicating their names, addresses, countries of incorporation, registration and percentage of shareholding held by them” were omitted, another proviso was added which states “Provided that the central government may prescribe abridged form of annual returns for “One Person Company and such other classes of company as prescribed”. Further also Sub-section 3 was substituted as “every company shall place a copy of the annual returns on the website of the company if any and the web-link of such annual returns shall be disclosed in the board’s report”. In sub-section (4) the word and figures “within the times as specified under section 403” are omitted and in sub-section (5) the words “under section 403 with additional fee” and the word “therein” was substituted. These amendments in 2017 brought more clarity to this provision and omitted the parts, which were not useful.

By the Companies (Amendment) act, 2019 the sub-section (5) is substituted by following: “If any company fails to file its annual return under sub-section (4), before the expiry of the period specified therein, such company and its every officer who is in default shall be liable to a penalty of fifty thousand rupees and in case of continuing failure, with a further penalty of one hundred rupees for each day after the first during which such failure continues, subject to a maximum of five lakh rupees”. Now only a fine, as penalty, is imposed and imprisonment for officers in default is striked out after this amendment.

Cases at a Glance

The important principles as laid down by court on this section are as follows:

A.L. Mudaliar v. Asst. Registrar of Companies[4]: In this case the court held that where the petitioner was a non-executive director of the company and had resigned as director several years before, he could not be held responsible for the alleged default of non-filing of balance sheet for a recent year for which complaint was filed by the Registrar of Companies.
State of Bombay v. Bandhan Ram Bhandhani [5]: In this case the court held that failure to hold an annual general meeting is no defense for non-filing or belated filing of annual return.
Registrar of Companies v. Utkal Distributors Pvt. Ltd. [6]: In this case the court held that holding of an annual general meeting is not a condition precedent to filing of return before the registrar.

Concluding Summary

This is a very important section as it lays down the requirements and procedure vis-à-vis annual returns by any company. As this analysis shows the new act, 2013 have widened the scope and lays down more requirements and requires more disclosures. This is done to make sure there is proper corporate governance structure or system in a company, and this helps preserve the rights of a company and the interest of its shareholders. This section in totality is one of the sections that every company must pay attention to and adhere to the same and follow every procedure or the company will pay the grave penalties that this section provides.

References:

[1] The Companies (Management and Administration) Rules, 2014, r. 11 (MCA).

[2] The Companies (Management and Administration) Rules, 2014, r. 16 (MCA).

[3] Secretarial standard on board meeting, 2017, Clause 20 (ICSI).

[4] A.L. Mudaliar v. Asst. Registrar of companies (2009) 97 CLA 103 (Mad.).

[5] State of Bombay v. Bandhan Ram Bhandhani (1961) 31 CompCas 1 (SC).

[6] Registrar of Companies v. Utkal Distributors Pvt. Ltd (1978) 48 CompCas 768 (Ori.).