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Compounding offenses occurred when a company has done some violation of act or rules and willing to comply voluntarily. In this article, we will discuss the Compounding of offenses under companies act 2013.
Non-compliance with Law results in offenses by Company or Officer in Default. The Offences can be of civil or criminal nature. To Compound means to settle a matter by paying money, instead of other liability. It is a form of Settlement Mechanism wherein one has to settle by paying the penalty instead of facing the prosecution for the offense committed. The word compounding of offense has not been defined under the Companies Act, 1956/2013. However, in layman’s language, it means “admission of guilt.”
In this process, the person may either on his own or receipt of notice of default or initiation of proceedings admit the commission of default and make an application for compounding of offense and agree to pay a penalty which may be ordered by the Central Government.
In case of compounding of an offense under the Companies Act, the accused is not required to appear personally and can be discharged upon payment of a requisite penalty. However, in case of prosecution for an offense in a criminal court, the accused has to appear before the Court at every hearing which is time-consuming and expensive.
The Power to Compound offense rests with NCLT[1]/ Regional Director/ Special Court authorized by Central Government:
Also, Read: Mandatory Compliances under Companies Act 2013.
According to Section 441, an application for compounding of the offense shall be made to Registrar of Companies, who shall forward the same to NCLT or RD or any person as may be authorized by the Central Government. Application for compounding is required to be filed in e-form GNL-1.
The NCLT/Regional Director after examining the matter will pass an order on the date of hearing. The hearing can be attended by Director/Company secretary/ or any other authorized officer of Company or by an authorized representative like the advocate or a practicing CS/ CMA/ CA. The Regional Director or the NCLT is required to abide by the rules of natural justice and give the company and the officer in-default, a reasonable opportunity of being heard.
Also, Read: Key Managerial Personnel Companies Act 2013.
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