In this editorial author shall discuss the provisions of Compounding of AGM. Many professionals asked this question, How to go for compounding in case of holding of AGM after Due date.
PROVISION OF LAW:
As per Section 96 of Companies Act, 2013, Every company should hold one Annual General Meeting of Members of the Company.
TIME PERIOD OF HOLDING OF AGM
AGM should hold within 15 months from the date of the last AGM or 6 months from the end of the financial year, whichever is earlier.
EXTENSION OF AGM:
The company if required can apply to ROC for extension of AGM. However, ROC has the power to give an extension maximum of 3 months from the due date of AGM.
i. Whether Company can apply for extension after Due date of AGM:
The extension can be applied only before the due date of AGM. After the due date of AGM legally companies are not allowed to apply for an extension.
ii. The maximum period for which Extension can be applied by Companies:
Companies can apply for an extension maximum period of 3 months from the due date of AGM.
Also Like: Annual Compliance for Section 8 Companies
PENALTY FOR HOLDING OF AGM AFTER DUE DATE:
If any default is made in holding a meeting of the company in accordance with Section 96 or section 97 or section 98 or in complying with any directions of the Tribunal,
- the company and
- every officer of the company who is in default shall be punishable with
- fine which may extend to one lakh rupees and
- in the case of continuing default, with a further fine which may extend to five thousand rupees for every day during which such default continues.
HOW TO CALCULATE PENALTY:
Let’s take an example:
- The due date of AGM was 30th November 2021 (As extension granted)
- Company Holds AGM on 15th January 2022
- Delay of 46 Days
The penalty shall be calculated as follow:
|S. No.||Particular||Days of Default||Fix Fine||Fine per Day||Total Variable Fine (46*5000)||Total Fine|
|b)||Director Mr. A||46||100,000||5000||230,000||330,000|
|c)||Director Mr. B||46||100,000||5000||230,000||330,000|
HOW TO MAKE PAYMENT OF FINE:
The payment of the fine in case of default of holding of AGM can be done through Compounding. Section 441 of the Companies Act 2013 as amended (the “Companies Act”) has the provision for filing applications for the offenses to be compounded.
Any offense punishable under this Act (whether committed by a company or any officer thereof) 1[not being an offense punishable with imprisonment only, or punishable with imprisonment and also with fine], may, either before or after the institution of any prosecution, be compounded by—
(a) the Tribunal; or
(b) where the maximum amount of fine which may be imposed for such offense does not exceed twenty-five lakh rupees, by the Regional Director or any officer authorized by the Central Government,
In other words:
Power of compounding vested with Regional Director and National Company Law Tribunal. It depends upon the amount of fine that who will initiate the application of compounding.
- If the Total fine is up to 25 Lakh, then the matter goes to Regional Director.
- If the total fine exceeds 25 Lakh, then the matter goes to National Company Law Tribunal.
In the above-given example, the total fine is Rs. 990,000/- therefore, the application shall be filed with the Regional Director instead of NCLT.
*A Company/ professional always have to take care that whether they have to file an application with Regional Director or NCLT. To analyze this they have to calculate the amount of fine.