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Compounding of Offence for not holding Annual General Meeting(AGM)
Compounding of offence means a mechanism wherein the defaulter company settles default by paying the money in lie of prosecution avoiding prolonged litigation. Compounding of offence is not defined under the Companies Act, 2013 but the general meaning for Compounding of offence is “Doing Good the default or Non Compliance”. There are many sections in companies act 2013 where compounding of offence can be opted.Compounding of Offence for not holding Annual General Meeting (AGM) is also possible.
Basically there are two types of Offences as below:
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Compoundable offence:
Compoundable offence means where the complainant who has filed the case enter into a promise and agrees to charges with an intention of settlement. They are of less serious nature.
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Non Compoundable offence:
Non compoundable offence means the offence which are of serious nature and cannot be compounded with a settlement.
Thus under the Companies Act, 2013 there are few matters wherein compounding of offence can be availed in order to settle the default.
What is Annual General Meeting?
Annual General Meeting means a meeting which is held once in every year by every Company registered under Companies Act, 2013 except One Person Company (OPC). As per section 96 of the Companies Act 2013, every company shall hold Annual General Meeting (AGM) once in year.
Due date of Annual General Meeting
There are basically three situations for holding Annual General Meeting (AGM) of the Company.
| Sr No | Situation | Due Date for AGM |
| 1 | 1st Annual General Meeting (AGM) | Within 9 months from the date of closure of financial year end. |
| 2 | For Existing Company | Within 6 months from the date of Closure of Financial year end. |
| 3 | Income Tax Return when filed even if the company is registered on or after 1st January of that financial year.
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Within 6 months from the date of Closure of Financial year end. |
Extension of Annual General Meeting (AGM)
Yes, extension can be applied for Annual General meeting (AGM) for any company except OPC with the Registrar of Companies.
Extension for Annual General Meeting shall be allowed in case of following special reasons bifurcated into valid reason and not valid reason.
- Non Availability of Annual Accounts – Not a Valid Reason for Extension of AGM Case law of Bijoy Kumar Karnani V. Assistant Registrar of Companies, Calcutta High Court.
- Deficiency in the Quorum of the Annual General Meeting- Not A Valid Reason.
- Company is planning to go into liquidation, and all employees along with Accounts department have left the Company- A Valid Reason
- Not able to held ANNUAL GENERAL MEETING due to Natural Calamity- A Valid Reason
- Confiscation of Books of accounts by Income tax department, Serious and Fraud Investigation cell, or any other government official- A Valid Reason
- Sudden resignation of the Statutory Auditor from the Company without providing the audited balance sheet- A Valid Reason (depending from case to case)
- Falling of director below the numbers prescribed by the Act- A Valid Reason
- Such other special reason if such reason are valid and justified.
Some reasons where extension cannot be granted
As per the provisions of the Companies Act, 2013 there are some reasons whereby no extension can be granted-
- If the chairman of the meeting in which accounts are to be approved is not available.
- Non availability of accounts due to non compliance of Audit by the Auditor.
Compounding of Offence for not holding Annual General Meeting (AGM)
If the Annual General Meeting is not held within the due date as mentioned above without applying for extension of AGM with the Registrar of Companies then the company will have to apply for compounding of offence with the National Company Law Tribunal (NCLT). Section 441 of the Companies Act, 2013 deals with the compounding of offence.
The offences which are punishable with fines and penalties can only be compounded either by Regional Director (hereinafter called “RD”) or by the National Company Law Tribunal (NCLT).
Situations For compounding of offence-
Situation 1: Fine less than 5 lakhs
Where the fine is less than 5 lakhs, such offences can be compounded by the Regional Director or any other officer as may be prescribed by the central government.
Situation 2: Fine more than 5 lakhs
Where the fine is more than 5 lakhs, such offence can be compounded only by the National Company Law Tribunal (NCLT)
Compounding of Offence for not holding Annual General Meeting (AGM)
Section 403 read with Rule 12 of Companies (Registration Offices and Fees) Rules, 2014, deals with compounding of offence for not holding Annual General Meeting.
Step 1: Default is mandatory
In case of Compounding of offence for not holding Annual General Meeting the first and foremost step is default.
Step 2: File form GNL-1
File form GNL-1 with the Registrar of Companies whereby the offence fine is less than Rs 5 lakhs.
Step 3: Forward to Regional Director
Upon receipt of form GNL-1 by the Company the ROC shall forward the same to the concerned Regional Director.
Step 4: Hearing of both the parties
Once the Regional Director approves the form, the next step is hearing of both the parties and settlement through fine.
Post Obligation for Compounding of Offence for not holding AGM
Wherein the offence has been compounded, either before or after the institution of any prosecution, an intimation shall be given to the Registrar of Companies within seven days from the date on which, the offence is so compounded. In case the offence has been compounded before the institution of any prosecution, no prosecution shall be filed either by ROC or by any shareholder or by any person authorized by the Central Government.
Annexure-I List Of Compoundable Offences
| Offences compoundable by Regional Director | Offences compoundable by the NCLT |
| 11(2)- Failure complying with requirements relating to Commencement of business. | 8(11)- default in complying with requirements relating to formation of companies with charitable objects etc. |
| 16(3)- Default in complying with directions issued under sub-section (1) relating to rectification of name of company | 40(5)- Default in complying with provisions of this section relation to securities to be dealt with in stock exchanges |
| 26(9)- Contravention of provisions relating to issue of a prospectus | 46(5)- Fraudulently issuing duplicate share certificates by a company |
| 53(3)- Violation of provisions relating to issue of shares at discount | 66(11)- Default in publishing order of confirmation of reduction of share capital by the Tribunal |
| 56(6)- Failure to comply with provision relating transfer and transmission of securities under sub- section (1) to (5) | 67(5)- Default in provisions relating to purchase by company or loans by company for purchase of its own shares |
| 59(5)- Default in complying with order of Tribunal relating to rectification of register of members | 74(3)- Failure to repay the deposit or part thereof or any interest thereon within time specified or such further time as may be allowed by the Tribunal |
| 64(2)- Default in filing a notice related to alteration, increase or redemption of share capital along with altered memorandum with the Registrar | 117(2)- Failure in filing with the Registrar copy of notice or agreement within stipulated time |
| 67(5)- Contravening provisions relating to purchase by company or loans by company for purchase of its own shares | 124(7)- Default in transfer of amount of accumulated profits to unpaid dividend account and violating other provisions of section 124 |
| 68(11)- Failure in complying with provisions of this section or any regulation made by the Securities and Exchange Board relating | 143(15)- Failure of auditor to intimate to Central Government regarding fraud against the company by officers or employees |
| 86- Contravention of any provision relating to Registration of Charges (Chapter VI) | 185(2)- Contravention of provisions of sub- section 1 relating to loans, guarantee or security |
| 88(5)-Failure to maintain register of members/debenture-holders/other security holders as prescribed | 245(7)- Committing default in complying with order of Tribunal under this section. |
| 89(5)-Failure to file declaration not holding beneficial interest in any share | 314(8)- Default in complying with provisions of this Section except sub-section (5). |
| 89(7)-Failure to file return relating to beneficial interest in any share before expiry of the time specified US 403(1)(i) proviso | 316(2) – Failure to send quarterly report on winding up and call meeting by company liquidator. |
| 92(6)- If a company secretary in practice certifies annual return otherwise than in conformity with the requirements of this section or the rules made there under | |
| 99-Default in holding a meeting of company as u/s 96, I97, I98 or in complying with any directions of the Tribunal | |
| 102(5)- Default in complying with provisions of this section relating to statement to be annexed to notice. | |
| 105(3)- If default is made in complying with sub-section (2) relating to proxies | |
| 105(5)- If invitations to appoint as proxy a person or one of a number of persons specified in the invitations are issue. | |
| 121(3)-Failure to file Report on AGM | |
| 124(7)- Failure to transfer amount of accumulated profits to unpaid dividend account and violating other provisions of section 124 | |
| 137(3)-Failure to file financial statements with the Registrar. | |
| 140(3)-Non-Compliance by auditor of sub-section (2) relating to filing of resignation information | |
| 147(1)-Failure of company to comply with provisions of sections 139 to 146 with regard to auditors | |
| 157(2)-Failure to furnish DIN to Registrar | |
| 165(6)- Acting as a director of more than 20 companies | |
| 166(7)- Default in complying with provisions of this section | |
| 172- Contravention of then provisions of Chapter XI relating to appointment and qualifications of directors | |
| 178(8)- Default in complying with provisions of section 177 & of this section relating to Committees like Nomination, Remuneration and Stakeholders Relationship Committee. | |
| 188(5)(ii)- Related party transaction of other company. | |
| 186(13)- Contravention of provisions of this section relating to loans and investment | |
| 187(4)- Contravention of provisions of this section relating to investment of company held in its name | |
| 191(5)- Contravention of provisions of this section relating to payment to director for loss of office in connection with transfer of property | |
| 197(15)- Contravention of provisions of this section relating to managerial remuneration in case of absence or inadequacy of profits. | |
| 203(5)- Contravention of provisions of this section relating to appointment of Key Managerial personnel. | |
| 204(4)- Contravention of provisions of this section relating to Secretarial Audit for bigger companies. | |
| 206(7)- Failure to furnish any information during inspection or inquiry. | |
| 221(2)- Any removal, transfer or disposal of funds, assets, or properties of company in contravention of the order of Tribunal under sub-section (1). | |
| 222(2)- securities in any company are issued/ transferred/acted upon in contravention of an order of Tribunal under sub- section (1) | |
| 232(8)- Contravention of provisions by the transfer and transferee company in case of merger or amalgamation. | |
| 238(3)-Failure to register offer of Schemes involving transfer of shares. | |
| 242(8)- Contravention of order of Tribunal relating to alterations in memorandum or articles. | |
| 247(3)(Proviso)- Contravention of provisions of this section by the valuer. | |
| 249(2)- Filing of application in restricted cases for removal of name. | |
| 302(4)- default by official liquidator in forwarding a copy of order of dissolution of company by tribunal within the period specified in sub-section (3) | |
| 306(5)- Default in calling meeting of the creditors; to prepare a statement of the position of company’s affairs along with a list of creditors, estimated amount of claim and filing the resolution with Registrar. | |
| 307(2)- Default in publication of resolution to wind up voluntarily. | |
| 312(2)- Failure to give notice of appointment of Company Liquidator to Registrar. | |
| 314(5)-Failure to prepare quarter statement of accounts by company liquidator in voluntary winding up and file with Registrar under sub-section (5). | |
| 318(8)- Failure to complying with provisions of this section relating to final meeting and dissolution of company. | |
| 342(6)- Failure or neglect to give assistance required under sub-section (5) | |
| 344(2)- Failure to give statement that company is in liquidation. | |
| 348(6)- Contravention of provisions of information as to pending liquidation | |
| 356(2)- Failure to file certified copy of order of Tribunal relating to dissolution of company void with Registrar. | |
| 392- Contravention of provisions of Chapter XXII by a foreign company. | |
| 405(4)- Failure to furnish information or statistics etc. by companies required by Central Government No specific penalty or punishment is provided in the Act
Repeated default within 3 years |
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| 452(1)- Punishment for wrongful withholding of property | |
| 453- Improper use of words “limited” and “private limited” | |
| 454(8)- Failure to pay penalty imposed by adjudicating officer or Regional Director | |
| 464(3)- Being member of company formed exceeding certain numbers | |
| 469(3)- Contravention of Rules framed by Central Government |
