Section 92 of the Companies Act, 2013 states that every company in India shall prepare and file an annual return capturing prime details about its structure, finances, and governance at the close of every financial year. In other words, the annual return of a company is considered to be a comprehensive record of its stakeholders for the core operational and managerial features.
Annual return is a transparency cover where all information related to its registered office, shareholding pattern, indebtedness, members, promoters, meetings, penalties, and or legal actions brought about against the company, compliance disclosures, and the disclosures on foreign investments are documented. These enforcements make corporate bodies more answerable, thereby increasing public confidence in knowing the true picture of the company's health and general well-being.
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Section 92 of the Companies Act, 2013
Section 92 of the Companies Act, 2013 pertains to the preparation and filing of an annual return by companies and seeks their obligation to give publicly critical aspects of operations and governance. This section is divided into eight sub-sections as follows:
1. Annual Return Preparation (Section 92(1)):
Contents Mandates: The annual return shall contain, as on the last day of every financial year, the following particulars
(a) Registered office, primary activities, and information about any holding, subsidiary, or associate companies.
(b) Share and debenture capital, the different securities issued, and shareholding pattern.
(c) Indebtedness
d) Members/debenture holders during the year.
e) Promoters, directors, key managerial personnel, and change in such personnel
f) Members' meetings, board meetings, and of its committees with a number of meetings attended.
g) Remuneration of directors and key managerial personnel
h) Penalties or punishments upon the company or officers. And appeals.
(i) Compliance certificates and declarations.
(j) Shares held by or for Foreign Institutional Investors with such details as names, addresses, countries of incorporation, and percentage holdings
(k) Other prescribed particulars.
Signing Requirement: The annual return shall be signed both by a director or the company secretary, and where there is no company secretary, it shall be signed by a practicing company secretary. In the case of One Person Company or a small company the secretary or director alone requires signing. In case there is no company secretary, the annual return shall be signed by the director of the company.
Also, Learn about How net worth is Calculated using Companies Act?
2. Certification for Certain Companies (Section 92(2))
Named or Listed Companies: In the case of named companies or companies with stated paid-up capital and turnover, the annual return shall be authenticated by a practicing company secretary with its correctness and compliance with the Companies Act.
3. Report by Board (Section 92(3))
Extraction of Annual Return: Extraction of the annual return in a manner provided on an annexed form shall be enclosed to the report by the Board.
4. Attending Copy with Registrar (Section 92(4))
Deadline: File annual return with the Registrar within 60 days of conducting the annual general meeting. In case no general meeting is conducted, file the return within 60 days of the date on which the annual general meeting would have been held along with an explanation for failure to conduct such a meeting.
Fees: Filing is required to be accompanied by fees payable as prescribed or additional fees as may be applicable, under Section 403
5. Penalty for Non-Compliance (Section 92(5))
Failure to File: Where the annual return is not filed within time, then it would attract a penalty of ₹10,000 and in case of continuing failure, the penalty shall be one hundred rupees for every such day during which the failure continues, to a maximum of two lakh rupees in case of the company.
Officer Penalty: Officers in default can be punished with a fine of ₹50,000.
6. Certification Penalty (Section 92(6)):
If a company secretary in practice certifies the annual return other than in conformity with the requirement of this section or the rules made thereunder, he shall be liable to a penalty of two lakh rupees.
Check out the difference between the Companies Act 1956 and 2013.
Illustration on Section 92 of the Companies Act, 2013
ABC Technologies Ltd., being a medium-sized software company in India, has just closed its financial year on March 31. As required by Section 92, ABC Technologies must prepare and file an annual return with the Registrar of Companies (ROC) within the due date. Let's break down their annual return below:
Company Details:
ABC Technologies consists of its registered office address, nature of key business activities (software development and IT consulting), holding companies with which it is associated, as well as the names of holding and subsidiary companies involved, such as its parent company, XYZ Holdings, and the subsidiary it has, PQR Solutions.
Capital Structure:
It provides total issued shares with shareholding patterns along with major shareholder positions and how these have changed with time. ABC Technologies also announces debentures or any other securities issued by it.
Liabilities:
The company presents loans and outstanding liabilities in order to show its obligation on the books.
Changes in Members and Debenture Holders:
ABC Technologies provides the names of its members and debenture holders; accession or departure since the previous year's balance sheet
Directors and Key Personnel:
The corporation states the names of board members and key managerial officers, including CEOs and CFOs, besides noting changes in the form of retirements of a director and the appointment of a new director.
Meetings and Attendance:
ABC Technologies also presents the record of its Board of Directors meetings, shareholders' meetings, and committees' meetings, with the attendance proving that the company follows its governance standards.
Director Remuneration:
The company discloses the remuneration details of directors and other employees of the company. Thus, in this way, transparency about executive compensation appears on open records.
Legal Penalties and Compliance:
In case ABC Technologies was penalized by the regulatory bodies during the year for minor breaches in compliance, then it did this with a record of what appeals were made.
Foreign Investment:
ABC Technologies has some shares outstanding with a few foreign institutional investors, so it keeps their names, countries of incorporation, and shareholding percentages.
Certification and Filing:
Annual return is certified by the company secretary, who checks whether all the information is correct and the company complies with it. A practicing company secretary also certifies the return for added comfort, as ABC is a listed entity.
ABC Technologies files the annual return with the ROC within 60 days from its Annual General Meeting so that it does not miss any deadline.
Outcome:
To comply with Section 92, ABC Technologies has met the legal requirement and provided clear evidence of its financial and governance structure for stakeholders and regulators. In case of non-compliance, it could have put ABC in the dock for fines and other penalties, making it a very important provision in building trust and accountability over corporate governance.
Also, read about the Companies Act 1956.
Recent Amendments in Section 92 of the Companies Act
Following are the amendments that help simplify compliance and reduce administrative requirements while keeping in view the need for greater transparency in corporate governance:
Annual Return in abridged form for Small and OPCs: This form MGT-7A was introduced by MCA, effective from 5th March 2021 for small companies and one-person companies for ease in its compliance route.
Elimination of MGT-9: Earlier, it was mandatory to annex Form MGT-9, which is an extract of the annual return, along with the report of the Board. That provision has been dispensed with, but the company has to place the full annual return on its website and indicate the web link in the Board's report.
Annual Return to be Disclosed on Company Website: Companies are now statutorily obligated to post their annual return, if any, on their website, and the said web link must be furnished by the company in the Board's report. It thus helps support transparency and allows for easier access to company data from stakeholders' ends.
Cancellation of Liability Information: The mandate of a company to furnish liability information in the annual return has been canceled. It is done so to minimize the burden of reporting by companies.
Certification of Company Secretary in Practice: For quoted companies and those exceeding the prescribed thresholds of paid-up capital and turnover, annual return should be certified by a company secretary in practice that the return is a fair representation of the company's situation and that it complies with the requirements of the Act.
Conclusion
Section 92 of the Companies Act, 2013 is an essential proof of the transparency, accountability, and regulatory compliance by Indian companies. It ensures that all necessary details from shareholding patterns, details of key managerial personnel, and records of compliance are maintained accurately and made available to its stakeholders as well as regulatory authorities. This legal requirement, in the long run, provides robust corporate governance, investor trust, and protection to the shareholders by using the avenue of making correct information accessible and keeping the entities within regulatory control. The section also stresses that penalties for non-compliance further provide the final reason why Section 92 is an important component of corporate reporting in India.
Section 92 of the Companies Act 2013: FAQs
Q1: What is an annual return, as required under Section 92 of the Companies Act, 2013?
An annual return is an annual document filed with the Registrar of Companies by every company of all the major parts of the structure of the company, financial information, shareholding pattern, directors, key managerial persons, compliance certificates, and much more at the end of the financial year.
Q2: Who is supposed to sign the annual return?
The annual return should be delivered together with a certificate of compliance, signed by a director and the company secretary. If there is no company secretary, the return must be certified by a practicing company secretary. One-person companies and small companies can have either the company secretary or the director signing the return.
Q3: Are there additional requirements for listed companies?
Yes, for listed companies and companies fulfilling certain paid-up capital and turnover requirements, the annual return shall be certified by a practicing company secretary, who shall ensure the accuracy of such annual return and its conformance to the Companies Act.
Q4: What is the latest date for filing the annual return?
The annual return is to be filed within sixty days from the date of the annual general meeting (AGM). Even when the AGM was not held, the return is to be filed within sixty days from the date on which the AGM ought to have been held.
Q5: What are the consequences if a company does not file its annual return?
It is liable for a fine amounting from ₹10,000 to ₹2,00,000 in case an annual return is not filed within the prescribed time. Any defaulting officer may be liable for a fine, imprisonment, or both, depending on the gravity of the default.
