Annual Compliance Compliances

Checklist for Certification of Annual Return

Certification of Annual Return

Every company needs to file an annual return. Basically, this is a document that contains information about the activities that took place in the company in the last year and also other related details. This is filed at the end of every year. But before filing the annual return it has to be certified by a practising CS in certain cases certifying the particulars of the document to be true. Now let’s learn about Certification of Annual Return in detail.

What is Annual Return?

Annual Return according to the Section 92 of Companies Act 2013 is the yearly statement/document that gives information about the firm such as, the firm’s composition and various other related activities performed by the firm. The form for filing an annual return in MGT-7. This is filed with the Registrar of Companies. Every company needs to file an annual return with the MCA before 30th November, i.e. at the end of the year, irrespective of its type.

Forms Filled by Company for Filing Annual Return

Under the norms of the Companies Act 2013, annual returns are divided into three parts which are as follows;

  • Form MGT7- it is the annual return form as per the Section 92
  • Form MGT-8- is the certification by the practising Company Secretary {CS} as per Section 92(2)
  • Form MGT-9- is the Extract of the Annual Return as the part of Board’s report under Section 92(3)

Annual Return Form as per the Section 92

Form MGT 7 is the annual return form as per Section 92 of the Companies Act, 2013. This form is duly filled, signed and certified and then filed with the Registrar of Companies. Every company irrespective of their type has to file the annual return in form MGT 7 to the Registrar. The due date for filling this form is within 60 days from the date of commencement of the Annual General Meeting which is before 30th September at the end of the year.

Which Companies Need to Fill Form MGT-8?

Complying with Section 92[1] all companies need to get annual return certification. The types of companies who need to get certification by PCS in form MGT-8 are as follows;

  • Company having paid-up capital of Rs. 10 crores or more
  • Having a turnover of Rs. 50 crore or more
  • Should be a listed company
Note- According to Section 92 of Companies Act 2013, in small companies and One Person Company the annual return is signed by the company secretary or only by the director if there is no CS in the company.

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What is the Objective of Filing Annual Return?

The main purpose of filing Annual Return is to provide annual information of the company’s activities to the Registrar of Companies and its members about the company’s registered office, capital structure, debts, members, CS, directors, details of any penalty imposed on company, details board meetings, debenture holders, etc.

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It is the responsibility of the management department of the company to file the Annual Return. This helps shareholders to ensure that the company is working in compliance with all the norms as prescribes by the government. It also helps to monitor if the functions of the company are in the interest of its members and creditors.

The Necessity of Signing and Certification of Annual Return

  • The Signing of the Annual return

According to Section 92(1) of the Companies Act, the annual return must be signed by the Director and Company Secretary. However, in small companies, the director certifies the document in the absence of a Company Secretary.

  • Certification of the Annual return

Certification of Annual Return is not mandatory in the case of small companies. According to Section 92(1) of the Companies Act and the Companies rules, 2014 the annual return must be certified by the Practicing / Company Secretary.

Extract of the Annual Return as per Section 92(3)

Form MGT 9 contains the following information divided into seven parts;

Registration Details

  • Name of the company
  • CIN
  • Date of incorporation
  • Category of the company
  • Address and contact details
  • Registered office
  • Name, address and contact details of RTA

Primary Business Activities of the company

  • Details of all activities of the business

Details of Holding, Subsidiary and Associate Companies

  • Name & address of these companies along with
    • Corporate identity number/ Global Location Number
    • Nature of relation
    • Percentage of holdings

Pattern/Category wise Shareholding of Promoters

  • Foreign/Indian
  • Shareholding of promoters
  • Public Shareholding
  • Custodian for GDR and ADR
  • Change in promoters’ shareholding
  • Shareholding of directors and other key managerial people
  • Shareholding pattern of top 10 shareholders
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Indebtedness

  • Deposits
  • Unsecured loans
  • Secured loans excluding deposits
  • Total Indebtedness at the beginning of the financial year/any change during the year/ or at the  end

Remuneration of Directors and other Key Managerial People

  • Remuneration to managerial/whole-time directors and managers along with the details of Remuneration
  • Remuneration to other directors {Independent, other non-executive directors} with particulars

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Documents which needs Verification for Certification

These documents need to be obtained for verification to get the certification are as follows;

  • Register of members
  • Forms and receipts filed with the registrar of Companies
  • Memorandum and article of association
  • Share transfer register
  • Register of charges
  • Disclosure forms from directors for the period before the annual return certification
  • Minutes of the board meeting, AGM, transfer of shares, remuneration, audit committees
  • Copy of latest balance sheet with notice of AGM
  • List of shareholders in CD in PDF format, details of share transfer taking place between the current and previous AGM date etc.
  • Certificate from RTA depicting the number shareholders at the end of the financial year
  • Signed indebtedness certificate
  •  Register of investments of the company
  • Other documents that may be required

Who Certifies the Annual Return?

In companies other than One Person Company or small companies a practising company secretary certifies the annual return. The PCS issued the certification in the form MGT 8 which proves that all the particulars of the annual return to be true and in compliance with the provisions of this act. This is done as per the Sub-section 2, Section 92 of the Companies Act, 2013.

However, in small companies and One Person Company, this is done by the company director in case there is no company secretary.

What does Section 92 of the Companies Act Specify?

Annual return according to this section is a return that every company needs to file every year irrespective of their type.

  • Sub-Section 1: Sub-section 1 specifies that it is mandatory for every company to file this return at the end of every financial year and it should contain the following;
  • Particulars of the shareholders
    • Debenture holders
    • Details of the Company’s directors/secretaries
    • List of any charges against the assets of that firm
    • Address of registered office
    • Indebtedness
    • Location of registered members
    • Particulars of meetings of members/class of members/board/committees of the board of directors
    • Copy  of financial statement
    • Registration details of the company
    • Details of the turnover and net worth of the company
  • Sub-Section 2: The annual return filed by a listed or a company or company with specified paid-up capital should get it certified by a practising company secretary in the specified form.
  • Sub-Section 3: Sub-section 3 prescribes an extract of the annual report to be a part of the company’s Board’s report
  • Sub-Section 4: Every company needs to file a copy of the annual return to the registrar within sixty days of Annual General Meeting.
  • Sub-Section 5: Sub-section 5 states that the defaulter company is liable for a fine from Rs. 50,000 to Rs. 500,000. Also that every defaulting officer can be punished with a fine ranging from Rs.50,000 to Rs. 500,000 or with imprisonment up to six months or both.
  • Sub-Section 6: If a PCS certifies an annual return that does not comply with the specified rules is liable for a fine ranging from Rs.50, 000/- to Rs. 5,00,000/-.
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What is Certification and why is it Necessary?

Certification is proof that states the particulars contained in the annual return are true and they are in compliance with the provisions of the Companies Act, 2013.

Penalty on Failing to File Annual Return

Any company who fails to file their annual return according to the Sub-section 5, Section 92 of the companies Act, 2013 is liable for penalties as follows;

  • Fine ranging from Rs.50,000 to Rs. 5 lakhs
  • Every officer in default of the company is liable for imprisonment up to six months or a fine of Rs.50,000 to Rs. 5 lakhs or both

To Conclude

Every company needs to file an annual return with the Registrar of Companies before the 30th of September every year. That has to be certified before filing. Small companies and One Person Company it is signed by the company secretary or the director signs it in case there is no CS in the company.

Certifying proves the data to be correctly contained in it and also they are in compliance with the Companies Act, 2013. This is done in the form MGT 8 in case of prescribed companies. Furthermore, the form used by companies to file the annual return to the registrar is the form MGT 7.

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