INTRODUCTION
The crowning of the Companies Act, 2013 (“new act”) is all ready to rule & reign the territory with everlasting superseding powers but the stick of administration has still not been completely passed into its hand, as still there are sections which needs to be notified so as to reign the entire region with conformity and one among such section is Section 92 which relates to the concept of Annual returns.
The new act has brought about a wide range of difference with the older act in respect of dealing with the concept of annual returns and hence, there always remains an urgent need to disentangle the difference in order to demystify the present act. Apart from other differences, one of the major differences lies especially in the portfolio of signing and certification whereby now a listed company and certain prescribed companies needs to get its annual return certified from a Company Secretary in whole-time practice and thereby increasing the liability for the newly yet to be called Governance Professionals.
IMPORTANCE OF ANNUAL RETURN:
Annual return is an important document just like an audited Annual accounts designed to provide information to members/ other stakeholders about the company, promoters, members, meetings and remuneration of directors and key managerial persons (“KMP”). Its importance will be obvious from the fact that every company has to make arrangements to make Annual returns available for inspection by any member or debenture holder without payment of fee and to others on payment of prescribed fee during working hours of the company (Section 94).
The certification by directors and company secretary/company secretary in practice prima facie establish the correctness of particulars stated therein (Section 95).
ANNUAL RETURN UNDER THE OLD ACT (Section 161):
The companies act 1956, has validly set the requirement for any company to get the Annual Return signed by two directors (if there is no secretary), company secretary and director (Managing director/Whole time director if any) but for the purpose of any Listed companies, it needs to get the return verified and signed by a company secretary in whole-time practice in addition to certification by directors. There was no requirement at all for any kind of certification by a company secretary in Practice (the expression used is ‘signing’ – Proviso to sub-section (1) of Section 161) in order to file the returns and hence prescribe liability as such for the company secretary in Practice in this regard is minimal.
ANNUAL RETURN UNDER NEW ACT (SECTION 92):
Under Section 92 of the Companies Act, 2013, every company shall prepare annual return in the prescribed form and signed by a director and the company secretary, or where there is no company secretary, by a company secretary in whole-time practice. In case of One Person Company and small company the annual return shall be signed by the company secretary and not by the director. However, where company has no company secretary, annual return shall be signed by the director, not by a company secretary in whole-time practice. The annual return, filed by a listed company or, by a company having such paid-up capital and turnover as may be prescribed, shall be certified by a company secretary in whole-time practice in the prescribed form, stating that the annual return discloses the facts correctly and adequately and that the company has complied with all the provisions of the Act.
Under this Section a company secretary shall certify through a statement about the correctness, adequacy of disclosure in annual return and compliance of the Companies Act, 2013 made by the company. Draft rule suggests that the annual return, filed by a listed company or a company having paid-up share capital of Rs. 5 crore or more and turnover of Rs. 25 crore or more, shall be certified by a Company Secretary in whole-time practice.
Proposed form of annual return runs nearly 40 pages and statement of company secretary runs in three pages. At the same time, the provision of section 2(38) magnifies and overemphasizes the profession of company secretaries by including company secretary in the definition of “Expert”. Clause (38) of section 2 states that “expert” includes an engineer, a valuer, a chartered accountant, a company secretary, a cost accountant and any other person who has the power or authority to issue a certificate in pursuance of any law for the time being in force.
Certificate by Company Secretary: The annual return, filed by a listed company or, by a company having such paid-up capital and turnover as may be prescribed, shall be certified by a company secretary in whole-time practice in the prescribed form, stating that the annual return discloses the facts correctly and adequately and that the company has complied with all the provisions of the Act. If a company secretary in practice certifies the annual return otherwise than in conformity with the requirements of this section or the rules made there under, he/she shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees. This certificate is almost a replacement of compliance certificate of earlier Act.
Meaning of certified: under the Companies (Court) Rules, 1959, the word ‘Certified’ means in relation to a copy, certified as provided in section 76 of the Indian Evidence Act, 1872 and evidence act interpreted certifies as a certificate issued by an authorized officer by law certifying the validity and correctness of the information under his hand and seal. A process, often voluntary, by which individuals who have demonstrated the level of knowledge and skill required in the profession, occupation, role or the competent use or support of a product, are identified to the public and other stakeholders…..
Difference between Certification and Signing
One of the major differences that exist between signing and certification is that mere signing does not imposes or bestow liability on the person signing it. In one of the landmark case of Kashinath vs New Akoy Ginning and pressing Co. Ltd. (1950) 20 Comp. Cas 225(Nag.) it was held that mere signing of a balance sheet does not operate to save limitation because the person in drawing up the document does not do so with the intention of acknowledging liability but under a duty where he is bound to set out among other things, the claim made on the company.
Therefore we could say that signing does not impose liability but rather certification shows that the person has authenticated the document, verified and is therefore taking the responsibility and liability upon itself.
PURPOSE FOR CERTIFYING OF ANNUAL RETURN ONLY FOR LISTED COMPANIES AND SUCH OTHER PRESCRIBED COMPANIES
The annual return of the company is a public document. In Rashmi Sethi V. chemon India Pvt. Limited {(1995) 82 Comp Cas 563(CLB)} it has been held that it is a prima facie evidence that the specific number of shares was held by a member as on particular date to claim his rights. The annual return of a listed company is further more important to settle number of issues and therefore, it has been made compulsory that the content of the annual return of such companies will have to be verified by a Secretary in Wholetime Practice by inspecting the relevant records of the company.
The act requires every company to comply with certain provisions and any non-compliance, whether deliberate or unintended, of the provisions attracts penalties and prosecutions of the company. Certification would caution the company secretary of unintended non-compliance so that the compliance could be established and the consequences that would follow because of that are avoided. Further, it acts as an effective tool to ensure that the legal and procedural formalities are complied with. When a certificate is issued, the confidence level of compliance of the provisions is built up and ensures a professional discipline.
The statistics generated by the Government of India from the office of the Registrar of Companies reveals that, several documents are returned for rectification of defects and also some remain pending for being taken on record. The Ministry of Company Affairs also institutes a large number of prosecutions against the companies and their officers who are in default for contravention of various provisions of the act, including non-filling of the documents. Further, the reasons for such errors or omissions arise on account of wrong interpretation or ignorance of the provisions of the law. The object behind the provisions relating to obtaining of Certificate by certain companies of certain size is to create awareness among companies to comply with the provisions of the act and also to provide for a mechanism of self regulation.
PENALTY FOR NON COMPLIANCE OF SECTION 92
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By Company: The Company shall be punishable with a fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees.
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By Officers in default: Every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to six months or with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees, or with both.
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By Company Secretary in practice: If a company secretary in practice wrongly certifies the correctness of annual return, he shall be punishable with a fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees.
CONCLUSION
Penalty has been substantially increased by the new Act and Company Secretary in Practice has to certify that the company has complied with all the provisions of the Act. Scope of verification by practicing Secretary is enlarged as he has to confirm compliance of provisions of the companies Act besides the correctness of contents of Annual Return. Thus a huge responsibility is thrust not only on the company’s directors and secretary of the company but as well as on the professional who signs the Annual return. Professionals will bound to exercise their diligence for avoiding any penalties.
Disclaimer: The entire contents of this document have been developed on the basis of relevant information and are purely the views of the authors. Though the authors have made utmost efforts to provide authentic information however, the authors and the company expressly disclaim all and any liability to any person who has read this document, or otherwise, in respect of anything, and of consequences of anything done, or omitted to be done by any such person in reliance upon the contents of this document.