Non-filling of Annual Return and the Financial statement is a criminal offence under companies act, 2013. The proposal to decriminalize the non-filing of annual return comes as a relief to all the directors of the companies.
The committee is likely to implement changes in section 92, 134 and section 137 of the companies act. Non-filling of the financial statement and annual return will be considered only a civil offence and the directors of the companies will be levied with only fines instead of prior practice which involved penalizing the directors and as well as imposing imprisonment along with it.
The recommendation committee has 10 members who will submit the report with Corporate Affair Minister Arun Jaitley. The committee is headed by Corporate Affair Secretary Injeti Srinivas.
This high-level committee consists of a top bureaucrat, well-known industrialist bankers and lawyers. The amendment to the act will come after due consideration, and the committee has come to a conclusion that simple violations like non-filing of financial statement and annual return should be considered civil offence and hence could be handled by Ministry of corporate affairs itself instead of implementing a new case with the criminal court.
Ease of Doing Business
- Currently, non-filling of financial statement and annual return is considered to be a criminal offence where the offender is charged with a fine and also imprisoned as per companies act 2013
- Corporate affairs minister Arun Jaitley is likely to hear from the committee about various offences under the companies act which can be decriminalized.
Penalties as per Current Framework
Non Filing of copy of both Annual Return and the Financial statement is a criminal offence, and hence it is essential for all the people involved in the corporate sector to understand the penalties which will be imposed upon them.
- Non-filling of Annual Return
If the company officials or the company does not file their annual return within the prescribed period the fine imposed is 50,000 which may extend to 5 lakh rupees, or the officials can be imprisoned for 6 months
- Non-filing of Financial Statement
Non-filing of financial Statement amounts to imprisonment which may extend up to 3 years and fine which may extend up to 25 lakh.
- If the Financial Statement is in Contravention of the provisions relating to the Financial statement
If the financial statement submitted is in any way found to be in contradiction with the provisions of the act the fine imposed will be 1000 every day until the fine reaches the limit of 10 lakh and the sentence for imprisonment may go up to 6 months.
In all the above cases the fine and imprisonment can be imposed together for the company officials.
If the corporate ministry implements this recommendation which will bring relief in the corporate sector as it will decriminalize the non-filling and it will then only be dealt with a civil offence.