Annual return is a comprehensive document containing information of a company relating to its share capital, indebtedness, directors, shareholders, changes in directorships and other important disclosures.
According to the Companies Act 2013, annual return can be divided into three parts;
- Form MGT-7- Annual Return [Sec.92]
- Form MGT-9– Extract of Annual Return which shall form part of Board’s Report [Sec. 92(3)]
- Form MGR-8- Certification by Practicing Company Secretary [Sec. 92(2)]
Our discussion will be about Form MGT-8 – certification by a practicing company secretary.
Certification of annual return is not required in all cases of Companies. As per companies act 2013, certain companies are required to get a certificate from a Practicing Company Secretary on its annual return.
Such certificate should state that the annual return discloses the facts correctly and adequately and that the company has complied with all the provisions of Companies Act 2013.
Category of companies required to get certification has been defined based on their listing with the stock exchange, turnover or paid up share capital. In this article, we will be discussing companies to which certification of practicing company secretary is mandatory and penalty applicable for false certification and in the case of fraud.
As per section 92 (2) read with relevant rules of the Companies (Management and Administration) Rules, 2014, in following cases annual return of a company is required to be certified by a practicing Company Secretary in the Form No. MGT-8;
- Listed company, or
- A company having a paid up share capital of Rs. 10 Crores or more, or
- A company with a turnover of Rs. 50 Crores or more
A practicing company secretary can certify the annual return subject to qualification or reservation by way of annexure to the certificate.
Penalty for false certification of annual return
A practicing company secretary is liable for penalty under various sections of Companies Act 2013 and Company Secretaries Act, 1980 for any false certification or wrong doings.
If the certificate of a practicing Company Secretary is not in conformity with the requirements of section 92 or the rules made there under then the company secretary shall be punishable with fine which shall not be less than Rs. 50,000 but which may extend to Rs. 5 lakh.
Further, the practicing company secretary may attract penalty under section 448 of Companies Act 2013. As per section 448, if any return, report, certificate, financial statement, prospectus, statement or other document required by, or for the purposes of any of the provisions of Companies Act 2013 or the rules made there under, any person makes a statement, –
- Which is false in any material particulars, knowing it to be false; or
- Which omits any material fact, knowing it to be material; he shall be liable under section 447.
Section 447 deals with punishment for fraud which provides that any person who is found to be guilty of fraud, shall be punishable with imprisonment for a term which shall not be less than six months but which may extend to ten years and shall also be liable to fine which shall not be less than the amount involved in the fraud, but which may extend to three times the amount involved in the fraud. In case, the fraud in question involves public interest, the term of imprisonment shall not be less than three years.
A practicing company secretary is also liable for disciplinary actions by Disciplinary Committee of the ICSI under various provisions of Company Secretaries Act, 1980.