The Annual Return of a company is a detailed document that gives a picture of the company’s share capital, debts, and liabilities, details about the directors and shareholders, corporate governance disclosures, etc. The annual return is a change in the investment value over the course of a financial year of the company.
The returns obtained on the investment accumulated over a year and calculated as a percentage of the initial amount that was invested is called the Annual Return. When the return is positive, it is a gain on the initial investment. Alternatively, if it is negative, it would be considered a loss on the investment. The risk involved in the investment determines the Rate of Return.The Annual Return is a document that comprises various components like the company’s share capital, debts, directors, shareholders, etc. The Companies Act, 2013, stipulates that the companies prepare and file the Annual Returns with the Registrar of Companies (RoC) on a yearly basis. Failing to file the Annual Returns would attract high penalties.The annual return must be verified and signed by the Director and Company Secretary of the Company by affixing their Digital Signatures. If a Company Secretary is not hired by the company, the signature can be obtained from a practicing Company Secretary. The Annual Returns of One Person Companies (OPC) or small companies can be undersigned by the Director only. The Annual Return is mandated to be filed by every company through Form. No MGT-7, comprising the various details of the company.
Details Covered by the Annual Return
The following details about the company must be furnished through the Annual Returns:
- The registered office of the company and the principal activity it is concerned with and details pertaining to other subsidiaries and associate companies
- The shares, debentures, securities, and shareholding pattern of the company
- Liabilities of the company
- Details related to the members of the company and debenture holders and changes if any, from the closing of the previous financial year
- Information related to the promoters, Directors, and key personnel and changes therein since the last financial year
- Information pertaining to the meetings held by the members and various other committee meetings along with the attendance details of the members
- Details mentioning the remuneration of Directors, and other personnel in the company occupying key positions
- Details regarding the penalties imposed on the company, or the Directors, officers, and details related to the compounding of such offenses
- Matters pertaining to certification of compliances and disclosures as stipulated in the Companies Act, 2013
- Information about the shares held by Foreign National or by Foreign Institutional investors along with their names, addresses, and countries of incorporation, registration of the company.
The company shall maintain the record of accounts for 8 years from the date of filing the company with the Registrar.
Signatory Authority of the Annual Return
The signature of the Director or Company Secretary of the organization shall be affixed on the Annual Return. If there is no company secretary employed in the company, the annual return can be signed by any company secretary in practice. As stipulated in the Companies Act, 2013, the annual return of a company should be certified by a company secretary in practice. The companies listed below are mandated to get their annual returns certified by a company secretary:
- Listed Companies
- Companies possessing a paid-up share capital of ₹10 crores or more
- Companies that have a turnover of ₹50 crore or more
The certificate for the same will be issued in Form MGT-8. It states that the facts revealed by the annual returns of the company are true and it is as per the guidelines stipulated in the Act. The companies have to file the annual returns and the related documents for 8 years preceding the respective financial year.
Annual Return Contents
I. Company Information
- Details of Registration
- Registration number of the company
- Corporate Identity Number (CIN)
- Foreign company registration number/Global Location Number (GLN)
- Category and sub-category of the company
- Names of stock exchanges where shares are listed
- AGM status: Date or due date if held, reason if not held
- Particulars of the Company’s Registered Office
- Company name
- Complete address
- Telephone, fax numbers
- Email address, website (if any)
- Police station name in jurisdiction
- Correspondence and principal business place addresses
- Registrar and Transfer agents’ name and address
- Principal Business Activities Pursued by the Company
- Specification of activities contributing to 10% or more of turnover
- Particulars of Holding, Subsidiary, and Associate Companies
- Name and address of each company
- Corporate identity number/Global location number
- Nature of relationship (holding, subsidiary, or associate)
- Percentage holding and applicable section
- Particulars of Shares, Debentures, and other Securities
- Capital structure details
- Changes in authorized, issued, subscribed, paid-up shares
- Stock split/consolidation during the year
- Number of shares, nominal value, and total capital
- Fully convertible, partly convertible, and non-convertible debentures
- Details of other securities
- Securities premium account details and changes
II. Financial Details
- Turnover and Net Worth
- Details of turnover
- Net worth of the company
- Shareholding Pattern
- Details of shareholding pattern
- Indebtedness
- Information on company indebtedness
III. Stakeholder Information
- Details of Members, Debenture Holders, and Securities Holders
- Member, debenture holder, and securities holder details
- Details of Share/Debenture Transfers
- Transfers during the financial year
- Promoters, Directors, and Key Managerial Personnel
- Particulars of promoters, directors, and KMPs
IV. Meeting and Governance Details
- Meetings and Committees
- Details of meetings for members, class of members, board, committees
- Remuneration
- Remuneration details of directors and KMPs
- Penalties, Punishment, and Compounding
- Details of penalties, punishment, compounding on company, directors, officers
- Certifications and Disclosures
- Matters pertaining to certification of compliances and disclosure
V. Other Disclosures
- Foreign Institutional Investor (FII)
- Details of shares held by or on behalf of FII
- Other Pertinent Disclosures
- Any additional relevant disclosures
With this comprehensive breakdown, we can delve into a detailed examination of the specified contents.
Protocol with Respect to Filing of Annual Returns
A copy of the annual return must be duly furnished with the Registrar of Companies (RoC) within sixty days from the date of the Annual General Meeting (AGM) of the company. If the AGM was not held, then the date on which it should have been held is taken into consideration and the filing is done within 60 days from such date. The reasons for skipping the meeting must also be stated to the RoC along with the filing of the annual returns.
Repercussions of not Filing the Annual Returns
If a company fails to file the annual returns, an additional fee of ₹100 per day of delay after the due date is added. Furthermore, if the company fails to do the filing for a period of 2 years and has not taken efforts to revive the status of dormancy, the Registrar may direct for closure of the company. Also, if the filing is not done for a consecutive period of 3 years the directors of the company will be disqualified and when the period is for 5 consecutive years, the directors will not be eligible to be appointed or re-appointed as directors for any company.
Therefore, the most prudent thing to do is to keep up with the specified timelines as indicated in the Companies Act, 2013 when it comes to the filing of annual returns, as failing to do that will land the business with grave consequences. This might even lead to the director getting imprisoned for a term of six months or can be levied a fine of an amount not lesser than fifty thousand rupees which might extend up to five lakh rupees or both. If the company chooses not to file the return due to the lack of business, then the company should apply for striking off without filing the returns in form STK-2 to avoid the disqualification of the director or to avert possible legal actions.
Frequently Asked Questions
What information is included in an annual return?
An annual return typically includes financial statements, company details, shareholder information, and director details.
Who signed the annual return of a company?
The annual return of a company is usually signed by the company's director and the company secretary.
Who is required to file an annual return?
Every company, regardless of its size or type, is required to file an annual return.
What is the responsibility of PCS in certification of annual return?
Practicing Company Secretary (PCS) is responsible for certifying the accuracy of the annual return.
What is the certification of annual return by the company secretary?
Certification of the annual return by the company secretary ensures compliance with legal requirements and accuracy of the information.
Is extracting the annual return mandatory?
Yes, an extract of the annual return is mandatory and is known as MGT-9.
What is the importance of MGT 7?
MGT-7 is important for disclosing financial and non-financial information about a company.
Who needs to file MGT-8?
Companies that have a paid-up share capital of ₹10 crore or more or turnover of ₹50 crore or more need to file MGT-8, which is a report on the compliance of the company's secretarial standards.
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