Chapter 6 Signing and Certification – Secretarial Audit Compliance Management and Due Diligence ICSI Study Material is designed strictly as per the latest syllabus and exam pattern.
Signing and Certification – Secretarial Audit, Compliance Management and Due Diligence Study Material
Question 1.
2019 – June [1] (a) XYZ Ltd. has not filed Annual return for the financial year 2017-18. Write a note on the consequences of non-filing of Annual Return by the company in relation to a Director of the company, as per provisions laid under the Companies Act, 2013. (June 2019, 5 marks)
Answer:
Consequences on the Director of XYZ Ltd. for Non filing of Annual Return: As per section 92 of the Companies Act, 2013, XYZ Ltd. is required to file a copy of annual return with the Registrar, within sixty days from the date on which the annual general meeting of the company was held for the financial year 2017-18.
If any company fails to file its annual return under sub-section (4), before the expiry of the period specified therein, such company and its every officer who is in default shall be liable to a penalty of ten thousand rupees and in case of continuing failure, with further penalty of one hundred rupees for each day during which such failure continues, subject to a maximum of two lakh rupees in case of a company and fifty thousand rupees in case of an officer who is in default
If the company has not filed its financial statement or Annual Return for continuous period of three financial years, then every person who is or has been director of that company shall not be eligible for reappointment as Director of that company or appointed in any other company for a period of five years from the date on which the said company fails to do so. (Section 164(2).
Question 2.
2019 – Dec [1] (c) Who will pre-certify the followings e-forms? Explain the compliance for certification of followings e-forms by Practicing Professional.
(a) GNL-1
(b) DPT-3
(c) MGT-14
(d) AOC 4
(e) DIR 3 & DIR 3-KYC. (5 marks, Dec 2019)
Answer:
The Rule 8 sub rule-12 (a&b) of Companies (The Registration Offices & Fees), Rules 2014 provides that the following e-forms filed by companies, other than one person companies and small companies, under sub-rule (1) of rule 9, shall be pre-certified in the following manner, namely:
(a) GNL-I (Form for filing an application seeking approval from Registrar of Companies in e-form GNL-1 for different purposes under Companies Act, 2013) optional precertification by the Chartered Accountant or the Company Secretary or as the case may be the Cost Accountant, in whole-time practice.
(b) DPT – 3 (Return of deposits) certification by Auditors of the company as attachment and signed by the Authorised person of the company and shall be filed by company on or before the 30th day of June of every year.
(c) MGT-14 pre-certification by the Chartered Accountant or the Company Secretary or as the case may be the Cost Accountant, in whole-time practice; shall be filed with Registrar within thirty days of the passing of resolution Pursuant to Section 94(1), 117(1) of the Companies Act, 2013.
(d) AOC-4 (For filing financial statement and other documents with the Registrar) certification by the Chartered Accountant or the Company Secretary or as the case may be by the Cost Accountant, in whole time practice.
(e) E-form DIR-3 shall be signed and submitted electronically by the applicant using his or her own Digital signature certificate and shall be verified digitally by a company secretary in full time employment of the company or by the managing director or director or CEO or CFO of the company in which the applicant is intended to be appointed as director in an existing company.
E-form DIR-3 KYC: Every individual who holds a Director Identification Number (DIN) as on 31st March of a financial year as per these rules shall, submit e-form DIR-3-KYC for the said financial year to the Central Government on or before 30th September of immediate next financial year. The DIN holder and a professional (CA/CS/CMA) certifying the form are the two signatories in form DIR-3 KYC.
Question 3.
Describe Professional Misconduct in relation to members of the ICSI under First Schedule to the Company Secretaries Act, 1980? (Dec 2019, 5 marks)
Answer:
Professional misconduct in relation to members of the Institute generally (First Schedule to the Company Secretaries Act, 1980)
PART I: Professional misconduct in relation to Company Secretaries in Practice.
A Company Secretary in Practice shall be deemed to be guilty of professional misconduct, if he:
1. Allows any person to practice in his name as a Company Secretary unless such person is also a Company Secretary in practice and is in partnership with or employed by him;
2. pays or allows or agrees to pay or allow, directly or indirectly, any share, commission or brokerage in the fees or profits of his professional business, to any person other than member of the Institute or a partner or a retired partner or the legal representative of a deceased partner, or a member of any other professional body or with such other persons having such qualifications as may be prescribed for the purpose of rendering such professional services from time to time in or outside India.
Explanation. – In this item, “partner” includes a person residing outside India with whom a Company Secretary in practice has entered into partnership which is not in contravention of item (4) of this Part;
3. accepts or agrees to accept any part of the profits of the professional work of a person who is not a member of the Institute:
Provided that nothing herein contained shall be construed as prohibiting a member from entering into profit sharing or other similar arrangements, including receiving any share commission or brokerage in the fees, with a member of such professional body or other person having qualifications, as is referred to in item (2) of this part;
4. enters into partnership, in or outside India, with any person other than a Company Secretary in practice or such other person who is a member of any other professional body having such qualifications as may be prescribed, including a resident who but for his residence abroad would be entitled to be registered as a member under clause (e) of sub – section (1) of Section 4 or whose qualifications are recognized by the Central Government or the Council for the purpose of permitting such partnerships;
5. secures, either through the services of a person who is not an employee of such company secretary or who is not his partner or by means which are not open to a Company Secretary, any professional business: Provided that nothing herein contained shall be construed as prohibiting any arrangement permitted in terms of items (2), (3) and (4) of this Part;
6. solicits clients or professional work, either directly or indirectly, by circular, advertisement, personal communication or interview or by any other means:
Provided that nothing herein contained shall be construed as preventing or prohibiting
(i) any company secretary from applying or requesting for or inviting or securing professional work from another company secretary in practice; or
(ii) a member from responding to tenders or enquiries issued by various users of professional services or organizations from time to time and securing professional work as a consequence;
7. advertises his professional attainments or services, or uses any designation or expressions other than Company Secretary on professional documents, visiting cards, letterheads or sign boards, unless it be a degree of a University established by law in India or recognized by the Central Government or a title indicating membership of the Institute of Company Secretaries of India or of any other institution that has been recognized by the Central Government or may be recognized by the Council:
Provided that a member in practice may advertise through a write up setting out the services provided by him or his firm and particulars of his firm subject to such guidelines as may be issued by the Council;
8. accepts a position as a Company Secretary in practice previously held by another Company Secretary in practice without first communicating with him in writing;
9. charges or offers to charge, accepts or offers to accept, in respect of any professional employment, fees which are based on a percentage of profits or which are contingent upon the findings, or result of such employment, except as permitted under any regulation made under this Act;
10. engages in any business or occupation other than the profession of Company Secretary unless permitted by the Council so to engage: Provided that nothing contained herein shall disentitle a Company Secretary from being a director of a company except as provided in the Companies Act, 2013;
11. allows a person not being a member of the Institute in practice, or a member not being his partner to sign on his behalf or on behalf of his firm, anything which he is required to certify as a Company Secretary, or any other statements relating thereto.
PART II – Professional misconduct in relation to members of the Institute in service
A member of the Institute (other than a member in practice) shall be deemed to be guilty of professional misconduct, if he, being an employee of any company, firm or person.
- pays or allows or agrees to pay, directly or indirectly, to any person any share in the emoluments of the employment undertaken by him;
- accepts or agrees to accept any part of fees, profits or gains from a lawyer, a Company Secretary or broker engaged by such company, firm or person or agent or customer of such company, firm or person by way of commission or gratification.
PART III – Professional misconduct in relation to members of the Institute generally
A member of the Institute, whether in practice or not, shall be deemed to be guilt of professional misconduct, if he
- not being a Fellow of the Institute, acts as a Fellow of the Institute;
- does not supply the information called for, or does not comply with the requirements asked for, by the Institute, Council or any of its Committees, Director (Discipline), Board of Discipline, Disciplinary Committee, Quality Review Board or the Appellate Authority;
- while inviting professional work from another Company Secretary or while responding to tenders or enquiries or while advertising through a ‘ write up, or anything as provided for in items (6) and (7) of Part I of this Schedule, gives information knowing it to be false.
PART IV – Other misconduct in relation to members of the Institute generally
A member of the Institute, whether in practice or not, shall be deemed to be guilty of other misconduct, if
- he is held guilty by any civil or criminal court for an offence which is punishable with imprisonment for a term not exceeding six months;
- in the opinion of the Council, he brings disrepute to the profession or the institute as a result of his action whether or not related to his professional work.
Question 4.
A very pertinent question which arises for consideration is the extent of detailed verification that has to be resorted to before certifying the Annual Return. Being a Company Secretary, list the guiding principles which can be adopted while deciding about the extent of checking of Annual Return. (Dec 2020, 5 marks)
Answer:
1. The need for every detailed checking, is greatly reduced if a CS confirms that there are adequate measures of internal control and checks and balances built into the systems and procedures of the organization. For instance, the procedure for registration of share transfers could be so designed that the mistakes and errors committed at one stage are automatically detected and corrected by another, before the whole process is complete. The system could also provide for automatic cross- verification- particularly in cases where the process is computerized.
2. The principle of materiality is another important concept. The sample chosen for detailed checking should be representative of the whole, or the ‘population’, in statistical parlance.
To take the example of share transfers again, instances of transfer of large blocks of shares could be chosen for detailed scrutiny. Or, the ‘busy’ period for transfer of shares in the year could be identified and selected for sample checking.
3. ‘High risk’ areas could be identified and subjected to more extensive scrutiny than others. For Instance, in the case of shares on which tnere are restrictions on transfer statutory or otherwise, a more extensive examination is warranted.
In conclusion, it may be pointed out that the ultimate responsibility of the document certified will rest with the professional. While the extent of checking is a matter of personal judgment. He should safeguard himself against any possible charge of negligence in respect of inaccurate or incomplete statements, certified by him.
Question 5.
During the Secretarial Audit, a Company Secretary in practice has to check the various compliances cf the Law. Explain the following compliance requirement relating to the Private companies under Companies Act, 2013:
(i) Certification of annual return
(ii) Appointment of auditor (Dec 2021, 5 marks)
Answer:
1. Certification of Annual Return
As per Section 92 read with Rule 11 (2) of Companies (Management and Administration) Rules, 2014, Form MGT-8 is required for certification of Annual Return.
The annual return filed by a listed company or a company having paid up share capital of ₹ 10 Crores or more or turnover of ₹ 50 crores or more shall be certified by a Company Secretary in Practice stating that the annual return discloses the facts correctly and adequately and that the company has complied with all the provisions of the Companies Act, 2013.
2. Appointment of Auditor
As per Section 139(1) read with Rule 4(2) of the Companies (Audit and Auditors) Rules, 2014, Auditor shall be appointed for 5 years in the AGM. Before appointment the company shall obtain written consent from the auditor and eligibility certificate. The company shall inform the auditor concerned of his or its appointment, and also file a notice of such appointment with the Registrar within fifteen (15) days of the meeting in which the auditor is appointed in E-form ADT-1.
In case of Specified IFSC Private Company- the notice of auditor’s appointment shall be filed with the Registrar within 30 days of the meeting in which the auditor is appointed.
As per Section 139 (8)(i) of the Companies Act, 2013-In case of any causal vacancy occurred in the office of auditor shall be filled by the Board of Directors within thirty days, but if such casual vacancy is as a result of the resignation of an auditor, such appointment shall also be approved by the company at a general meeting convened within three months of the recommendation of the Board and,he shall hold the office till the conclusion of the next annual general meeting.
Question 6.
Softech Services Private Ltd. has failed to file its Annual Return for the financial Year 2018-19. Discuss the consequences of non-filing the Annual Return for the Company. (Dec 2021, 5 marks)
Answer:
Consequences of non-filing the annual return
(a) Penalty for default: If the company has not filed its Annual Return from the date by which it should have been filed with fee and additional fees, every officer who is in default shall be liable to a penalty of ten thousand rupees and in case of continuing failure, with further penalty of one hundred rupees for each day during which such failure continues, subject to a maximum of two lakh rupees in case of company and fifty thousand rupees in case of officer who is in default. [Section 92(5) of the Companies Act, 2013]
(b) Winding up: If the Company has defaulted in filing Annual Returns for the immediately preceding five consecutive financial years, the Company may be wound up by the Tribunal. [Section 271 (d) of the Companies Act, 2013]
(c) Inactive Status; If the Company has not filed its Annual Return for last two financial years, it will be termed as “inactive company” [Section 455(1) of the Companies Act, 2013]
(d) Dormant Status; If the Company has not filed its Annual Return for two financial years consecutively, the Registrar shall issue notice to the Company and enter its name in the Register of Dormant Companies. [Section 455(4) of the Companies Act, 2013]
Question 7.
Describe the points to be covered in the form MGT- 8 and which required to be certified. (Dec 2021, 5 marks)
Answer:
While certifying the Form No. MGT 8, the practicing company secretary provide certification relating the following points:
(a) the Annual Return discloses the facts as at the close of the financial year correctly and adequately; and
(b) the Company has complied with the provisions of the Act & Rules made there under during the financial year in respect of:
- Its status under the Act;
- Maintenance of registers/records & making entries therein within the time prescribed therefore;
- Filing of forms and returns as stated in the Annual Return, with the Registrar of Companies, Regional Director, Central Government, the Tribunal, Court or other authorities within/beyond the prescribed time;
- Calling/ convening/ holding meetings of Board of directors or its committees if any, ana the meetings of the members of the company on due dates as stated in the annual return in respect of which meetings, proper notices were given and the proceedings including the circular resolutions and resolutions passed by postal ballot, if any, have been properly recorded in the Minute Book/ registers maintained for the purpose and the same have been signed;
- Closure of Register of Members / Security holders, as the case may be.
- Advances/loans to its directors and/or persons or firms or companies referred in section 185 of the Act;
- Contracts/arrangements with related parties as specified in section 188 of the Act;
- Issue or allotment or transfer or transmission or buy back of securities/ redemption of preference shares or debentures/ alteration or reduction of share capital/ conversion of shares/ securities and issue of security certificates in all instances;
- Keeping in abeyance the rights to dividend, rights shares and bonus shares pending registration of transfer in compliance with the provisions of the Act;
- Declaration/ payment of dividend; transfer of unpaid/ unclaimed dividend/ other amounts as applicable to the IEPF in accordance with section 125 of the Act;
- Signing of audited financial statement and report of directors is as per section 134 of the Act;
- Constitution/ appointment/ re-appointments/ retirement/ filling up casual vacancies/ disclosures of the Directors, Key Managerial Personnel and the remuneration paid to them;
- Appointment/ reappointment/ filling up casual vacancies of auditors as per the provisions of section 139 of the Act;
- Approvals required to be taken from the Central Government, Tribunal, Regional Director, Registrar, Court or such other authorities under the various provisions of the Act;
- Acceptance/ renewal/ repayment of deposits;
- Borrowings from its director, members, public financial institutions, banks and others and creation /modification /satisfaction of charges in that respect, wherever applicable;
- Loans and investments or guarantees given or providing of securities to other bodies corporate or persons falling under the provisions of section 186 of the Act;
- Alteration of the provisions of the memorandum and / or articles of association of the company.
Question 8.
Pioneer Fisheries Ltd. has borrowed an amount of ₹ 50 crore from a financial institution. The annual general meeting of the company was held on 1st September, 2015. Examining the provisions of the Companies Act, 2013, state as,to who will sign and certify the annual return while filing the same with the Registrar of Companies after the annual I general meeting. (June 2016, 4 marks)
Answer:
1. Section 92: As per Section 92 of the Act, every company shall prepare a return in E-form MGT 7 containing the required particulars as they stood on the close of the financial year and signed by a director and the Company Secretary, or where there is no Company Secretary, by a Company Secretary in practice.
2. Certificate of Annual Return: The annual return, filed by a listed company or, by a company having paid-up capital of ten crore rupees or more or turnover of fifty crore rupees or more, shall be certified by a Company Secretary in practice (Form No. MGT 8), stating that the annual return discloses the facts correctly and adequately and that the company has complied with all the provisions of this Act.
3. Certify the annual return: Here, it may be noted that borrowed amount is not any criteria for deciding about the authority/eligibility of the person to sign and certify the annual return.
4. Conclusion: Thus, in the absence of information about whether the company falls under the listing or paid up share capital or Turnover category discussed above, it would not be wise to pronounce whether its annual return shall be signed and certified by a practicing Company Secretary or not.
Amendment made by Companies (Amendment) Act, 2017
Revised Section 92(1):
“Every company shall prepare a return (hereinafter referred to as the annual return) in the prescribed form containing the particulars as they stood on the close of the financial year regarding:
(a) its registered office, principal business activities, particulars of its holding, subsidiary and associate companies;
(b) its shares, debentures and other securities and shareholding pattern;
(c) its members and debenture-holders along with changes therein since the close of-the previous financial year;
(d) its promoters, directors, key managerial personnel along with changes therein since the close of the previous financial year;
(e) meetings of members or a class thereof, Board and its various committees along with attendance details;
(f) remuneration of directors and key managerial personnel;
(g) penalty or punishment imposed on the company, its directors or officers and details of compounding of offences and appeals made against such penalty or punishment;
(h) matters relating to certification of compliances, disclosures as may be prescribed;
(i) details, as may be prescribed, in respect of shares held by or on behalf of the Foreign Institutional Investors; and
(j) such other matters as may be prescribed, and signed by a director and the company secretary, or where there is no company secretary, by a company secretary in practice:
Provided that in relation to One Person Company, small company and such other class or classes of companies as may be prescribed, the annual return shall be signed by the company secretary, or where there is no company secretary, by the director of the company.
Provided further that the Central Government may prescribe abridged form of annual return for One Person Company, small company and such other class or classes of companies as may be prescribed.”
Question 9.
Fabulous Ltd. is in the process of finalisation of its annual return. It is a listed company with paid-up capital ₹ 1 crore. The company seeks your advice on the following:
(1) Who will sign the return on behalf of the company?
(2) What are the requirements of certification of annual return by a practising Company Secretary. (June 2018, 4 marks)
Answer:
1. As per Section 92 of the Companies Act, 2013, every company shall prepare its annual return containing the required particulars as they stood on the close of the financial year and shall be signed by a director and the Company Secretary, or where there is no Company Secretary, by a Company Secretary in practice.
Whereas in case of One erson Company and small company, the annual return shall be signed by the Company Secretary, or where there is no Company Secretary, by the director of the company.
2. Every listed company, or a company with paid up share capital of 10 crore or more or a company with turnover of ₹ 50 crore or more, shall be required to get a certificate by the Practicing Company Secretary (PCS) stating the facts that the requirements of the Companies Act, 2013 and rules thereto have been complied with and Annual Return discloses the facts correctly and adequately.
Question 10.
You have been engaged as a Practicing Company Secretary by XYZ Limited, an unlisted company having a turnover of ₹ 75 crore, for certification of annual return of the company for the year 2018-19. The annual return is signed by the Chief Executive Officer of the Company. State the provisions of the Companies Act, 2013 and the Rules made there under as to signing and certification of annual return. Is it mandatory to file the annual return if the annual general meeting is not held in a particular year? (Dec 2019, 5 marks)
Answer:
As per Section 92 (1) of the Companies Act, 2013 read with Rule 11 of the Companies (Management and Administration) Rules, 2014, as amended, every company shall prepare its annual return in Form No. MGT-7 as they stood on the close of the financial year. The Annual Return is required to be signed by a director and the Company Secretary, or where there is no Company Secretary, by a Company Secretary in practice.
As provided in Rule 11 (2), the Annual Return, filed by a listed company or a company having paid up share capital of ₹ 10 crore or more or turnover of ₹ 50 crore or more, shall be certified by a Company Secretary in Practice and the certificate shall be in Form No. MGT-8.
In the given case, the annual return is signed by the Chief Executive Officer of the Company, which is not in accordance with the legal provisions mentioned above.
As provided in Section 92(4) of the Act, the Annual Return shall be filed within 60 days from the date on which the annual general meeting is held. Where no annual general meeting is held in any year, the annual return shall be filed within 60 days from the date on which the annual general meeting should have been held together with a statement specifying the reasons for not holding the annual general meeting.
Question 11.
Vijay is the Company Secretary of Gemmy Ltd. which is having an annual turnover of ₹ 500 crore for last three financial years. As part of annual certifications, he asked Mohan, a Practicing Company Secretary (PCS) to sign the latest annual return. Vijay refused to sign the annual return as he thinks that it should be done by Mohan, PCS. What are the requirements for Annual Return Certification by a Company Secretary in Practice? Is Vijay justified in saying so? (Aug 2021, 5 marks)
Answer:
According to section 92(1) of the Companies Act, 2013,every company shall prepare an annual return in the prescribed form containing the particulars as they stood on the close of the financial year regarding the matters provided in this section and signed by a director and the company secretary, or where there is no company secretary, by a company secretary in practice.
Under section 92(2) of the Companies Act, 2013 read with rule 11(2) of the Companies (Management and Administration) Rules, 2014, the Annual Return of a listed company or of a company having a paid up share capital of ₹ 10 crore or more or turnover of ₹ 50 crore or more shall be certified by a Company Secretary in whole time practice in the Form No. MGT-8.
Annual Return certification by Company Secretary in practice is required by:
- Every listed company
- Every company having paid-up capital of ₹ 10 crore or more
- Every company having turnover of ₹ 50 crore or more
While signing and certification of the annual return, it is advisable to have different Professionals for Signing and Certification as maker and checker concept for the independent verification of the Annual Return. These two different signing mechanisms include one for the purpose of signing under section 92(1) and the other for certification under section 92(2) of the Comoanies Act, 2013.
However, where a company is having a Company Secretary then signing of the annual return as per section 92(1) shall be done by the Company Secretary in employment only, but not by the Company Secretary in Practice.
Therefore, by virtue of section 92(1) of Companies Act, 2013, the annual return is required to be signed by Vijay, Company Secretary of Gemmy Limited along with any one of its Director and Vijay is not justified on refusal to sign the annual return. However, by virtue of section 92(2) of the Companies Act, 2013 read with rule 11 (2) of the Companies (Management and Administration) Rules, 2014, the Annual Return of this company shall be certified by a Company Secretary in whole time practice in the Form No. MGT-8 and such Certificate from the PCS shall be annexed to the Annual Return.
Question 12.
Den Ltd. had a paid up share capital of ₹ 275 crore in the previous year 2021 -22.
Explain how a Practicing Company Secretary can prepare himself for such a big assignment before undertaking the work relating to pre-certification so that the chances of incorrect certification will not be there. (June 2022, 5 marks)
Question 13.
Write short note on Certification of Annual Return.
Answer:
Certification of Annual Return:
Certification of Annual Return under sub-section (2) of Section 92 of the Act read with rule 11 (2) of the Companies (Management and Administration) Rules, 2014, the Annual Return of a listed company or of a company having a paid up share capital of ₹ 10 Crores or more or turnover of ₹ 50 Crores or more shall be certified by a Company Secretary in Practice in the Form No. MGT- 8. The certificate Shall state that the annual return discloses the facts correctly and adequately and that the Company has complied with all the provisions of this Act.
In terms of sub-section (6) of Section 92, if a Company Secretary in Practice certifies the annual return otherwise than in conformity with the requirements of Section 92 or the rules made thereunder, he shall be liable to a penalty of two lakh rupees.
Question 14.
Describe the contents and signing of Annual Return.
Answer:
Annual Return:
- As per Section 92 of the Companies Act, 2013, every company is required to prepare the Annual Return in Form No. MGT-7 containing the particulars as they stood on the close of the financial year.
- Annual Return is to be filed with the Registrar within 60 days from the date on which Annual General Meeting (AGM) is actually held or from the last day on which AGM should have been held.
- As provided in sub-Section(2) of Section 384, the provisions of Section 92 regarding filing of annual return apply to a foreign company subject to such exceptions, modifications and adoptions as may be provided for in the Rules.
- Rule 7 of the Companies (Registration of Foreign Companies) Rules, 2014 provides that every foreign company shall prepare and file, within a period of sixty days from the last day of its financial year, to the Registrar annual return in Form FC-4 along with fee, containing the particulars as they stood on the close of the financial year.
Contents of Annual Return:
Annual Return shall contain the following particulars in consonance with the Section 92(1) of the Act:
- its registered office, principal business activities, particulars of its holding, subsidiary and associate companies;
- its shares, debentures and other securities and shareholding pattern;
- its members and debenture-holders along with changes therein since the close of the previous financial year;
- its promoters, directors, key managerial personnel along with changes therein since the close of the previous financial year;
- meetings of members or a class thereof, Board and its various committees along with attendance details;
- remuneration of directors and key managerial personnel;
- penalty or punishment imposed on the company, its directors or officers and details of compounding of offences and appeals made against such penalty or punishment;
- matters relating to certification of compliances, disclosures as may be prescribed;
- details, as may be prescribed, in respect of shares held by or on behalf of the Foreign Institutional Investors and such other matters as may be prescribed.
Signing of Annual Return:
Under Section 92(1) of the Act, the Annual Return is required to be signed both by a director and the Company Secretary, or where there is no Company Secretary, by a Company Secretary in Practice.
The Annual Return of One Person Company and Small Company shall be signed by the Company Secretary or where there is no company secretary, by the director of the company. The Act authorises the Central Government. Space to write important points for revision
Question 15.
What are the points needs to be kept in mind with regard to Pre-Certification?
Answer:
It is duty of the Company Secretary in practice to check and verify thoroughly the correctness of the contents of the form before certifying it as correct. The members in practice are, accordingly, expected to exercise due care, diligence and skill, while performing the duty of pre-certification.
Pre-certification of forms is, therefore, not a routine or mechanical exercise but a serious task and involves work calling for sound application of mind in verifying the averments made in the respective forms after due consideration of the provisions of the Act read with the relevant rules.
Before undertaking the work relating to pre-certification of forms, a Company Secretary in practice should thoroughly read the requirements of the provisions of the Act, the Rules made there under and familiarize himself with the actual practices that are followed in this regard. He should also:
- Ensure that letter of engagement/Board Resolution authorizing the professional for the particular assignment by the company is obtained.
- Maintain a physical/scanned copy of all documents verified (subject to confidentiality requirement).
- Obtain the signature(s) of the authorised signatories on the e-forms in presence of the professional.
- Ensure that all relevant documents and attachments in the form are legible & visible.
Question 16.
What documents to be Obtained/ Verified before Certification of Annual Return by Company Secretary in Practice?
Answer:
Documents to be Obtained/ Verified before Certification of Annual Return by ‘
Company Secretary in Practice
- Memorandum and Articles of Association.
- Forms & receipts filed with the Registrar of Companies.
- Statutory Registers
- Record of Private Placement under PAS-5 (Section 42)
- Register of Members (Section 88)
- Shareholders-MGT-1
- Decuntureholder-MGT-2
- Register of Directors & their Shareholding (Section 170)
- Register of Key Managerial Personnel (Section 170)
- Register of Related Party Contracts under MBP 4 (Section 188)
- Register of Loan and Investment under SH-12 (Section 186)
- Register of Deposit- (Section 73 and 76 read with rule 14)
- Register of Charge under CHG-10.(Section 85)
- Register of Securities
- Register of Employee Stock Option under SH-6 (Section 62)
- Register of Buyback under SH-10 (Section 68)
- Register of Sweat Equity shares under SH-3 (Section 62)
- Minutes of the Meetings
- Board Meeting
- General Meeting
- Committee Meeting
- Creditors Meeting
- Debenture holders Meeting
- Court convened meetings for the purpose of Restructuring and Amalgamation
- Postal ballot minutes
- Notices and agenda papers for convening meetings of the Board and Committees there of
- Attendance Registers of all Meetings
- Copy of Latest Financial Statements along with the Boards Report and Auditors Reports.
- Copy of Notice of Annual General Meeting/ Extraordinary General Meetings/Postal Ballots/Court convened meetings/Creditors meetings and debenture holders meeting
- Shareholder List in Compact Disc (CD) in PDF Format, details of Share Transfers taken place between close of the previous financial year and close of the financial year to which Annual Return relates, Controls of the Data as on the Date of Annual General Meeting of the Company or the Beneficial Positions as on close of financial year downloaded from the records of the Depository participants by Registrar Transfer Agent (RTA) of the Company on record / book closure date prior to AGM.
- Certificate from RTA stating the number of shareholders as on the close of the financial year.
- Indebtedness Certificate signed by Company Secretary/ CFO/Statutory Auditors of the Company.
- Change of name of the company, change in the face value of the shares of the company, new ISIN No of the Company in respect of the allotment or as a result of any change in capital structure due to any corporate action taken by the Company during the Financial year.
- Board Resolution for any type of corporate actions taken by the Company.
- Corporate Action Forms filed by the Company with Depositories.
- Shareholding pattern and its break up
- Any orders received by the company, Director or officer from the High court or from any other regulatory body under any act.
- Other Statutory Registers and Records
- List of Promoters
- Listing and Trading Approval(s) from Stock Exchanges, Credit Confirmation from Depositories namely NSDL and CDSL respectively/ confirmation from both depositories in respect of allotment of equity shares of the Company during the period between the previous AGM date and current AGM date. Intimation to Stock Exchanges, Confirmation from National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL) for change of the name of the company, change in the face value of equity shares, change in ISIN of the Company and the Scrip Code/ Symbol of the Company, etc.
Question 4.
Whether non-filing of Annual Return is a compoundable?
Answer:
Offence in respect of default in filing Annual Return is compoundable (section 441), in accordance with the procedure laid down in the Code of Criminal Procedure, 1973 for compounding of offences. If any company fails to file its annual return under sub-section (4), before the expiry of the period specified therein, such company and its every officer who is in default shall be liable to a penalty of ten thousand rupees and in case of continuing failure, with further penalty of one hundred rupees for each day during which such failure continues, subject to a maximum of two lakh rupees in case of a company and fifty thousand rupees in case of an officer who is in default (Section 92).
Question 5.
What are the professional misconducts in relation to members of the institute in service as per First Schedule?
Answer:
A member of the Institute (other than a member in practice) shall be deemed to be guilty of professional misconduct, if he, being an employee of any company, firm or person:
1. pays or allows or agrees to pay. directly or indirectly, to any person any share in the emoluments of the employment undertaken by him;
2. accepts or agrees to accept any part of fees, profits or gains from a lawyer, a Company Secretary or broker engaged by such company, firm or person or agent or customer of such company, firm or person by way of commission or gratification.
Signing and Certification Notes
Pre-certification:
Pre-certification means certification of correctness of any document by a professional including Company Secretary in Practice, before the same is filed with the Registrar in terms of the requirements of the Companies Act, 2013 (hereinafter referred to as “the Act”). Pre-certification was introduced to avoid registration delays and eventually evolved to check correctness of documents filed by professionals.
Common Errors in E-Filing:
- Digital signature is not registered / expired.
- Payment of Challan not done before the expiry date;
- Duplicate Payments has been made.
- Excess size of the form.
- Approval status of e-forms is not verified.
- Status of Resubmission of e – forms
- Use of outdated version of Form;
- Incorrect particulars in the e-Form;
- Using older versions of Adobe and Java.
Practicing Company Secretary should maintain the register for the all attestation /certification services, which includes:
- Signing of Annual Return (MGT-7)
- Certification of Annual Return (MGT-8)
- Issue of Secretarial Audit Report (MR-3)
- Certification of E forms of MCA under Companies Act, 2013 7 LLP Act, 2008
- Issue of certificate of Securities Transfers in compliance with the Listing Agreement with Stock Exchanges.
- Certificate of reconciliation of capital, updation of Register of Members, etc. as per the Securities and Exchange Board of India’s Circular D&CC/FITTC/Cir-16/2002 dated December 31,2002.
- Conduct of Internal Audit of Operations of the Depository Participants.
- Corporate Governance Certification under SEB! (LODR) Regulations, 2015
- Information relation to E forms certified and signed.
- Register of various reports issued.
Annual Return Signing Requirement:
- Small company and one Person Company
To be signed by- Company Secretary or where no Company Secretary by Director. - Others
To be signed by- Director and Company Secretary or where there is no Company Secretary, by a Company Secretary in practice’
Peer review includes the following services by the company secretaries in practice
Peer review includes the following services by the company secretaries in practice:
- Certification/ Signing of Annual Return pursuant to Section 92 of the Companies Act, 2013.
- Issuance of Secretarial Audit Report in terms of Section 204 of the Companies Act, 2013
- Issuance of Certificate of Securities Transfers in Compliance with the LOOR with Stock Exchanges.
- Certificate of reconciliation of capital, updation of Register of Members,
etc. as per the Securities and Exchange Board of India’s Circular D & CC/Cir-1 6/2002 dated December 31, 2002. - Conduct of Internal Audit of Operations of the Depository Parttcipants.
- Compliance Certification under LODR.
- Attestation services of Form AOC 4, MGT 7, DIR 12, SH7 and PAS 3 filed with the ROC.
- Such other services as decided by the Council of ICSI under the scope of peer review from time to time.