- By ADMIN
- Posted 15 Apr, 2023
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Consequences Of Non-Maintenance Of Registers & Records under Companies Act, 2013
Every Company is required to maintain certain registers, records, papers and books of accounts which must be kept at the Registered Office of Company in Paper or in electronic form.
Hence, it is important for all the Companies including private limited company, public limited company, one person Company or other companies incorporated in India under Companies Act, 2013 to mandatorily maintain and preserve these registers and records for eight years.
Inspection:
Some of the Registers/Records are required to be kept open for inspection by Directors, Members, Creditors and by other persons including Registrar of Companies during the business hours. However, a member of the Company is not entitled to inspect the minutes of meetings of the Board.
Inspection of Minutes Book may be provided in physical or in electronic form. If the Company refuses to allow the inspection, the company shall be liable to a penalty of Rs.25,000 and every officer of the company who is in default shall be liable to a penalty of Rs.5,000 for each such refusal or default.
Few case laws regarding Inspection and maintenance of minutes
1. It has been decided in the case of Ross Porter (D). v Pioneer Steel Co Ltd. (1990) 68 Comp Cas 145 (Del), that the concerned director should be allowed inspection of the following books only, Bank statements, Accounts with Bank, Financial institution and private parties form whom loan had been taken by the company, and register of movable assets.
2. A director may inspect the books of account either personally or through some agent. Vakharia v Supreme Film Exchange Co. Ltd. (1948) 18 Comp Cas 34 (Bom)
3. The Supreme Court, in Madhusoodhanan (M.S) v Kerala Kaumudi (P) Ltd (2003) 117 Comp Cas 19 (SC): (2003) 4 Comp Lj 185 (SC). Where the minutes of meeting have been duly kept, the following presumptions arise until the contrary is proved-
a. The meeting has been duly called and held;
b. All proceedings threat did duly take place;
c. The resolutions passed by postal ballot to have been duly passed; and
d. In particular, all appointments of directors, key managerial personnel, auditors or company secretary in practice, shall be deemed to be valid. [Section 118(8)]
The minutes are prima facie evidence of what happened at the meeting.
Extracts from the Registers:
A Company is also required to provide the extracts from the Register. If demanded by Directors, Members, Creditors and by other persons, on payment of specified fees.
Maintainability:
The Registers need to be maintained and updated eventually and should be kept at the Registered Office of the Company. It is assumed that statutory registers are kept at the address of the Registered Office of the Company.
Preservation of Statutory Registers/Books:
1. The books of account etc. of every company relating to a period of not less than eight financial years immediately preceding a financial year shall be kept in good order.
2. All books and Document relating to the issue of share certificate including blank share certificate shall be preserved for not less than thirty years.
3. Register of members and Foreign Register of members shall be preserved permanently.
Persons Responsible for creation, maintenance and retention of registers, records, papers and Books of accounts:
i. Managing Director
ii. Whole-Time Director,
iii. Chief Financial Officer or
iv.Any other person of a company charged by board.
Consequences:
Requirement to maintain the Statutory Registers and Records arises due to the various applicable provisions of the Act, Rules framed there under. Non-compliance of these Sections and Rules attracts huge penalties on the companies and on its officers in default.
The following are the list of registers and records to be maintained under Companies Act, 2013 and its consequences of non-maintenance: -
|
Name of the Register & prescribed FORM |
Punishment to the Company |
Who else liable? & what are the punishments? |
|
Register of Members in FORM MGT-1
(It is a permanent record) |
Penalty: ₹ 3,00,000 |
Managing Director, Director, Whole-time-director, Manager, any other person authorized by Board (like share transfer agents, registrars, merchant bankers). Penalty: ₹ 50,000 each |
|
Register of debenture securities holders, others in FORM MGT-2 |
Penalty: ₹ 3,00,000 |
Managing Director, Director, Whole-time-director, Manager, any other person authorized by Board (like share transfer agents, registrars, merchant bankers). Penalty: ₹ 50,000 each |
|
Foreign Register of Members, Debenture securities holders, other security holders or beneficial owners resign outside India in FORM MGT-3 |
Penalty: ₹ 3,00,000 |
Managing Director, Director, Whole-time-director, Manager, any other person authorized by Board (like share transfer agents, registrars, merchant bankers). Penalty: ₹ 50,000 each |
|
Register of significant beneficial owners in FORM BEN-3 |
Penalty: ₹ 1,00,000 In case of continuing failure, further penalty ₹ 500 per day (max ₹5,00,000) |
Managing Director, Director, Whole-time-director, Manager, any other person authorized by Board (like share transfer agents, registrars, merchant bankers). Penalty: ₹ 25,000 each In case of continuing failure, further ₹ 200 per day, (max ₹1 lakh) |
|
Register of Renewed and Duplicate Share Certificate in FORM SH-2. |
Penalty: ₹ 10,000 In case of continuing contravention, further ₹1,000 per day, (max ₹ 2,00,000) |
Managing Director, Director, Whole-time-director, Manager, any other person authorized by Board (like share transfer agents, registrars, merchant bankers). Penalty: ₹ 10,000 each In case of continuing contravention, further ₹1,000 per day, (max ₹ 50,000) |
|
Register of Sweat Equity Shares in FORM SH-3 |
Penalty: ₹ 10,000 In case of continuing contravention, further ₹1,000 per day, (max ₹ 2,00,000) |
Managing Director, Director, Whole-time-director, Manager, any other person authorized by Board (like share transfer agents, registrars, merchant bankers). Penalty: ₹ 10,000 each In case of continuing contravention, further ₹1,000 per day, (max ₹ 50,000) |
|
Register of Employee Stock Option in FORM SH-6 |
Penalty: ₹ 10,000 In case of continuing contravention, further ₹1,000 per day, (max ₹ 2,00,000) |
Managing Director, Director, Whole-time-director, Manager, any other person authorized by Board (like share transfer agents, registrars, merchant bankers). Penalty: ₹ 10,000 each In case of continuing contravention, further ₹1,000 per day, (max ₹ 50,000) |
|
Register of Shares/Other Securities Bought back in FORM SH-10 |
Fine: Not < ₹ 1,00,000 but which may extend to ₹ 3,00,000 |
Managing Director, Director, Whole-time-director, Manager, any other person authorized by Board (like share transfer agents, registrars, merchant bankers). Fine: Not < ₹ 1,00,000 but which may extend to ₹ 3,00,000 |
|
Register of Charges in FORM CHG-7 (along with a copy of the instrument creating the charge) |
Penalty: ₹ 5,00,000 |
Managing Director, Director, Whole-time-director, Manager, any other person authorized by Board. Penalty: ₹ 50,000 |
|
Register of Loans, Guarantee, Security and Acquisition made by company, in FORM MBP-2 |
Fine: Not < ₹25,000 but which may extend to ₹ 5,00,000 |
Managing Director, Director, Whole-time-director, Manager, any other person authorized by Board. Imprisonment: 1 year but which may extend to 2 years, and Fine: Not < ₹ 25,000 but which may extend to ₹ 1,00,000 |
|
Register of Investment in any shares or securities made by company Not held in its Own name in FORM MBP-3 |
Penalty: ₹ 5,00,000 |
Managing Director, Director, Whole-time-director, Manager, any other person authorized by Board. Penalty: ₹ 50,000 each |
|
Register of Contracts or Arrangements in Which Directors are Interested in FORM MBP-4 |
- |
Every Director who failing to comply. Penalty: ₹ 25,000 |
|
Record of private placement in FORM PAS-5 |
Penalty: ₹ 10,000 In case of continuing contravention, further ₹1,000 per day, (max ₹ 2,00,000) |
Managing Director, Director, Whole-time-director, Manager, any other person authorized by Board (like share transfer agents, registrars, merchant bankers). Penalty: ₹ 10,000 each In case of continuing contravention, further ₹1,000 per day, (max ₹ 50,000) |
|
Index of Member & debenture holders (The maintenance of index is not required if number of members is <50) in a REGISTER. |
Penalty: ₹ 3,00,000 |
Managing Director, Director, Whole-time-director, Manager, any other person authorized by Board (like share transfer agents, registrars, merchant bankers). Penalty: ₹50,000 each |
|
Register of Directors and KMP and Their Shareholding in a REGISTER. |
Penalty: ₹ 50,000 In case of continuing contravention, further Penalty ₹ 500 per day, (max ₹ 3,00,000) |
Managing Director, Director, Whole-time-director, Manager, any other person authorized by Board. Penalty: ₹ 50,000 In case of continuing contravention, further Penalty ₹ 500 per day, (max ₹ 1,00,000) |
|
Register and Index of Beneficial Owner in a REGISTER as per section 11 of the Depositories Act, 1996. |
Penalty: ₹ 3,00,000 |
Managing Director, Director, Whole-time-director, Manager, any other person authorized by Board (like share transfer agents, registrars, merchant bankers). Penalty: ₹ 50,000 each |
|
Register of Deposits in a REGISTER. |
Fine: Not < ₹ 5,000 In case of continuing contravention, further ₹ 500 per day |
Managing Director, Director, Whole-time-director, Manager, any other person authorized by Board. Fine: not < ₹ 5,000 each In case of continuing contravention, further ₹ 500 per day |
|
Copies Annual Return in FORM MGT-7A/ MGT-7/ MGT-8 |
- |
- |
|
Register of postal ballot in a REGISTER. |
Penalty: ₹ 10,000 In case of continuing contravention, further ₹1,000 per day, (max ₹ 2,00,000) |
Scrutinizer (scrutinizer may be a Company Secretary in practice, a Charted Accountant in practice, a Cost Accountant in practice, an Advocate, any other person who is not in the employment of the Company. Penalty: ₹ 10,000 each In case of continuing contravention, further ₹1,000 per day, (max ₹ 50,000) |
|
Minute books of general meeting, meeting of BOD, and other meetings in a MINUTE’S BOOK. |
Penalty: ₹ 25,000 |
Managing Director, Director, Whole-time-director, Manager, any other person authorized by Board Penalty: ₹5,000 each |
|
Books of account All receipts and expenditure, sales and purchase, assets and liabilities, items of cost u/s148 |
- |
Managing Director, Whole Time Director in charge of finance, Chief Financial Officer, or any other person authorised by Board. Fine: Not < ₹50,000 each but which may extend to ₹ 5,00,000 |
|
Book and Paper and Book or paper as per Section 128. Books of account, deeds, vouchers, writings, documents, minutes and registers maintained on paper or in electronic form. |
- |
Managing Director, Whole Time Director in charge of finance, Chief Financial Officer, or any other person authorised by Board. Fine: Not < ₹50,000 each but which may extend to ₹ 5,00,000 |
|
Financial Statements Balance sheet, Profit and loss account, Cash flow statement, etc. Note: Cash flow statement shall not apply for One Person Company, Small Company, Dormant Company, Start up Company. |
- |
Managing Director, Whole Time Director in charge of finance, Chief Financial Officer, or any other person authorised by Board. Fine: Not < ₹50,000 each but which may extend to ₹ 5,00,000 |
Conclusion:
“It is always better to be compliant as the cost of compliant would be much cheaper than the cost of non-compliant”. It is suggested that all companies incorporated under Companies Act, 2013 /1956 is obligated to maintain the above specified records and registers as appropriate to protect themselves from penalties and future litigations. As you may aware that the Government of India is proactively enforcing the provisions of companies act to support the economy for orderly growth by appropriate verification and checks and balances through Ministry of Corporate Affairs and their Offices/Officers empowered under it.
The author Mr. Prabhu Mohan Sivalingam (PMS) is a student of the Institute of Company Secretaries of India and he can be reached at team@ssacas.com
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