Filing the annual return of a company and understanding its annual compliance is important. This article will help you to understand everything about it.
According to the Companies Act 2013, every registered company is supposed to file an annual report before the start of the next financial year. all the companies need to file the annual return to the ROC stated under section 92 of the Companies Act. This annual return needs to be filed within sixty days after the AGM’s conclusion. Section 2(68) states that private companies are the companies that have less share capital. Private companies have different restrictions namely limited hare transfer and a limited number of members. Every company has to abide by certain annual compliances. These compliances start from the financial year of the company. In this blog we’ll discuss about how to file annual return.
What Is the Annual Return of a Company?
In simple words, the annual return of a company is the return on an actual investment over a while. It is generally expressed as a time-weighted percentage calculated on the annual basis.
The annual return of a company is a well-formatted document comprising the details of the company’s indebtedness, capital, shareholders, directors, and other stakeholders’ shares. In other words, the annual return is the profit or loss.
Contents of the Annual Return of a Company
An annual return is a piece of document that consists of some important details. The contents of an annual return to be filed by a company include the following:
- Information about the company’s principal business activities, its registered office, and its holding, subsidiary, and affiliated companies.
- Information regarding the pattern of ownership of shares, debentures, and other securities.
Specifics regarding debt. - Information about its members and holders of debentures, as well as any changes since the end of the previous fiscal year.
- Information about the promoters, directors, and key managerial personnel, as well as any changes since the end of the previous fiscal year.
- Information about who was present at each member or class meeting, as well as the Board and its various committees and meetings.
- In the case of a limited liability company, directors’ and key managerial personnel’s compensation must be disclosed;
- Information about the company, its directors, and its officers’ punishments, as well as information about how the offenses got worse and how they were appealed.
- Specifics regarding certification of compliance, as well as any required disclosures.
Information about the shares held by or on behalf of Foreign Institutional Investors, including their names, addresses, countries of incorporation, registration, and shareholding percentage. - Other details that may be prescribed and signed by a director and the company secretary, or, in the absence of a company secretary, a company secretary in practice.
This is to be filed within 60 days from the hearing of the Annual General Meeting. Hence, it is full of important company documents without which it is incomplete.
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The Procedure of Filing the Annual Return of a Company
The general procedure to file annual return report is simple. The steps to file annual return report for a company are stated below:
Board Meeting
A board meeting needs to be conducted. For researching, appointing an auditor is a must. The auditor will research properly and then will prepare the company’s financial statements as per the Companies Act, schedule III. The company secretary or the director has the responsibility to prepare the board report as well as the Annual report.
Approval of the Draft
A second board meeting needs to be conducted to revise the drafts of the financial statements given by the auditor. The annual return so prepared should be supervised by the company directors.
Authorization
The annual general meeting for the authorization of the required declarations of the particular company. The finalized financial statements are considered to be the ultimate one and are approved by all the stakeholders of the company as well as the shareholders.
Due Date
The filling of the annual return should be done before its due date. The due date is counted sixty days after the annual general meeting of the particular company.
Penalty For Not Filing Annual Return
Filing the annual return for a company is an unavoidable process, failing which leads to grave consequences. If any company fails to file its annual returns within due time, then they are penalized. They are required to pay an additional amount amounting to Rs 100 per day for each form that is filed after the due date. Furthermore, in case the company fails to file its annual returns consecutively for two financial years and has not even drafted an application within the given period, the registrar is bound to take strong action against them. He has the power to address a permanent closure notice to the company.
Filing NIL Annual Return
The rule of filing annual reports before the beginning of the financial year is unavoidable for all registered companies. There are many companies that have become non-functional are don’t surpass any transaction either. Even this type of company is bound to file an annual report. However, the only loophole here is the company has the option to apply for the dormant status of the company.
Conclusion
Annual return filing is an important aspect for every company. All the company stakeholders should abide by the rules set by the Companies Act, 2013. Moreover, it is very important for every entrepreneur to stay aware of their responsibilities and duties and should file the annual return before the due date. A few documents are required for filing the annual report, namely account documents showing the company’s profit and loss, balance sheets, previous annual return files, and lastly the cost audit reports of the particular company. If you are someone who is new to the compliance & filing processes, Vakilsearch can provide you with the best accounting and business compliance services and help you manage your return filing process with ease.
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