NOVEMBER 2010

ARTICLE

Common Mistakes in Annual Filings under Company Law

- V. Ahalada Rao, Director B5Consulting Pvt. Ltd.
- Khushboo Joshi, Secretarial Executive.
Introduction:
After completion of hectic schedule for Income Tax filings, it is high time to annual
filings under company law, all the compliance officers gear up to meet up the
timelines of annual filings, it is bound that due to work pressure it is so happens that
a human brain tend to commit mistakes/errors. Thus, hereunder are portrayed few
common mistakes which happen and can be avoided while the company is going in

for annual filings. These mistakes usually ensue in private companies or closely held
companies.
Annual Fillings are those fillings which are required to be done in each calendar year
with the Registrar of Companies, irrespective of whether the Company is carrying on
any business or not or the company has conducted its AnnualGeneral Meeting
(AGM) or not.

Gist of Annual flings under Company Law:

S.No.

Document

Section under
Companies Act

Time limit

Balance-Sheet

SEC.220

within Thirty days from the day AGM

Form 23AC to be filed by all Companies

Profit & Loss Account

SEC.220

within Thirty days from the day AGM

Form 23ACA to be filed by all Companies

Annual Return

SEC.159/160

within sixty days from the day AGM

Form 20B to be filed by Companies having

share capital

Annual Return

SEC.159/160

within sixty days from the day AGM

Form 21A to be filed by companies without

share capital

Compliance Certificate

SEC.383A

within Thirty days from the day AGM

Form 66 to be filed by Companies having paid

up capital of Rs.10

(i) less than one hundred crore

rupees

Generic Gaffes:
CATOGERY A: where the company has conducted AGM
(i)

e-Form

Relating to Balance sheet: Under Section 220 of companies Act, 1956,

balance sheet figures have to be entered in e Form 23AC, few common
mistakes while filling up, they have been recognized as follows:

Balance Sheet Abstracts:

Mistake: Not appending of Balance Sheet abstract to the e form 23AC and
rather appending it to e form 20B
Legal Position: According to Section 220, After the balance-sheet and
the profit and loss account have been laid before a company at an annual
general meeting as aforesaid, there shall be filed with the Registrar within
thirty days from the date on which the balance-sheet and the profit and
loss account were so laid or where the annual general meeting of a
company for any year has not been held, there shall be filed with the
Registrar within thirty days from the latest day on or before which that
meeting should have been held. According to Schedule VI(Part IV) of
Companies Act, 1956 and vide notification No.G.S,R 388(E) dated
15-5-95, Balance Sheet abstracts and company's general business profile
has to specified in the format enumerated thereto.
Apt position: Though the form is being accepted on the portal without
balance sheet abstracts as attachment, it is violation of the Act. Therefore
Balance Sheet abstracts as an attachment is mandatory.

To the nearest hundreds,

thousands or lakhs, or
decimals thereof.
(ii) one hundred crore rupees
To the nearest thousands,
or more but less than one
lakhs or millions, or
thousand crore rupees
decimals thereof.
(iii) one thousand crore rupees
To the nearest thousands,
or more
lakhs, millions or crores, or
decimals thereof.
Apt Position: Balance sheet figures shall be presented depending on the
turnover of the company and shall be rounded off accordingly.
However the figures relating to annual return in e form 23AC shall be
presented in Rs. and not thousands.

Balance sheet dates:

Mistake: Date of directors report is former and auditors report date is later
than that of the directors' report.
Legal Position: The date of auditors report and the directors' report shall
either be the same or the date of the auditors report shall precede directors'
report date.
Apt situation: First: Auditors Report date (or as a addendum to Directors
Report)
Secondly: Directors' Report date
Lastly: Notice of AGM date

Stamp duty on Proxy Form:

Presentation:

Mistake: Printing of Proxy Form with ''Affix Revenue Stamp of Re.1/-

Mistake: presentation of amounts in thousands

Legal Position: According to Section 3 and schedule I, entry 52 of Indian

Stamp Act, 1899:

Legal position: According to schedule VI of the Companies Act, 1956

depending upon the turnover of the company, the figures appearing in the
financial statements shall be rounded off as below:
Turnover Rounding off

PROXY empowering any person to vote at any one election of the

member sat any one meeting of (a) members of an incorporated company
or other body corporate whose stock or funds is or are divided into
shares and transferable, (b) a local authority, or (c) proprietors, members

CORRUPTION IS NATURE'S WAY OF RESTORING OUR FAITH IN DEMOCRACY.

NOVEMBER 2010

ARTICLE

or contributors to the funds of any institution, the liability of payment of

Stamp Duty on such Proxy Form extends to Fifteen Paisa only.
Apt Position: Print proxy form with "Affix Revenue Stamp of 15 Paisa"
or print the form with "Affix Revenue Stamp" irrespective of the fact that
revenue stamp of 15 Paisa denomination is no longer in existence.

(ii)
(iii)
(iv)

Legal Position: According to Companies (Disclosure of Particulars

in the Report of Board of Directors) Rules, 1988, Clause C, every
company has to disclose in its report as follows:

Signing :

Foreign exchange earnings and outgo :

Mistake : signing of directors' report only by one director and not signing
by managing director where there is one.

(f)

Legal Position: According to the provisions of Section 217 of Companies

Act, 1956 relating to signing of Directors' Report shall be adhered to strictly,
the provisions relating to signing of directors' report it as follows:

activities relating to exports; initiatives taken to increase exports ;

development of new export markets for products and services ; and
export plans ;

(g)

total foreign exchange used and earned.

- It shall be signed by chairman if he is authorized in that behalf by the

board else
- It shall be signed by TWO directors of the company one of whom shall
be a managing director where there is one
Apt Position: Directors' Report shall be signed by chairman if he is
authorized else by TWO directors of the company one of whom shall be
a managing director where there is one or if it is signed by one Director he/
she should be chairman of the company.

Earnings outgo:
Mistake: Non disclosure of minute foreign outgo, for Example: travelling
expenses, similarly non disclosure of receipts by the company. Example: receipts by way of gift.

(ii) Relating to Directors' Report: Under Section 217 of companies Act, 1956, a
Directors' Report has to be primed by the Board which contents important
information relating to company and disclosures for presentation before the
shareholders, some common mistakes are observed relating to Directors'
Report and are described below:

additional investments and proposals.

impact of the measures
total energy consumption

Conversation of energy:

Apt Position: Directors' Report should display all foreign exchange

outgo and receipts irrespective of the fact that it is not revenue.
(ii) Relating to Annual Return: Under Section 159/160 of companies Act, 1956,
an annual report has to be primed by the company which contents information
relating to company's registration details, Capital structure of the company,
shareholders' details, Debenture holders' details and directors details for
submission with ROC within 60 days of completion of the AGM through e form
20B, some common mistakes are observed relating to Auditors' Report and are
described below:

Mistake: There is a misconception that this head under directors' report is

only applicable to manufacturing units and thus mentioning under this head
as ''Not Applicable" is a mistake by corporates.

Mistake:

Legal Position: According to Sec.217 (1) (e) of Companies Act, 1956,

There shall be attached to every balance sheet laid before a company in
general meeting, a report by its Board of directors, with respect to the
conversation of energy, technology absorption, foreign exchange
earnings outgo in relation to the company.

energy conservation measures taken ;

(b)

additional investments and proposals, if any, being implemented for

reduction of consumption of energy ;

(c)

impact of the measures at (a) and (b) above for reduction of energy
consumption and consequent impact on the cost of production of
goods ;

(d)

total energy consumption and energy consumption per unit of production as per Form A of the Annexure in respect of industries
specified in the Schedule which mentions industries like Textile,
Fertilizer, Aluminium, Steel, Refineries, Petro-chemicals and chemicals, Cement, Dairy and food processing, Cold storage plant, Electric arc furnaces, Chlor alkali, Edible oil, Engineering, Glass, Jute,
Paper, Refractory and pottery, Tea, Tyre, Sugar, Drugs and pharmaceuticals.

Apt Position: The companies for which there is no information available

to be displayed, it has to be mentioned as ''No significant information
available'' rather than mentioning ''Not Applicable''. Thus, the companies'
which do not fall under Schedule which is mentioned under clause (d)
need not give information relating to that aspect else all the companies are
mandatorily required to give information pertaining to Clause (a),(b) and(c)
which are given hereunder:
(i)

energy conservation

(i)

Amount of secured loan which reflects in current Annual Return is

exclusive of interest amount added on to the loan amount as on the
date of Balance Sheet.

(ii)

Submission of annual return followed by AGM does not reflect the

increased authorized capital where the approval was done in AGM.

(iii) if a company has planned for preferential allotment and passed the
resolution approving the same and not reflecting it in annual return is
incorrect.

According to Companies (Disclosure of Particulars in the Report of

Board of Directors) Rules, 1988, Clause A, every company has to
disclose in its report as follows:
(a)

Amount of Secured Loans in Annual Return:

(iv) Non inclusion of Directors name in current year Annual Return

appointed under Section 297 of Companies Act, 1956 in the AGM.
Legal Position: According to Schedule V of Companies Act, 1956, the
Secured Loan amount reflected in current Annual Return shall be the
amount which shall be inclusive of interest outstanding/accrued but not
due for payment as on the date of current annual return and not on the date
of Balance Sheet. Similarly details regarding the increased authorized
capital, issued capital and also newly appointed Director on the Board
shall be reflected in current years' annual return since the annual return
details shall be the one as on the date of Annual Return and not of the date
of Balance Sheet.
Apt Position: Presentation of Secured Loan amount in Annual Return
shall be inclusive of interest outstanding/accrued but not due for payment
as on the date of annual return and shall also reflect the increased
authorized and issued capital along with the new director details.

Presentation:
Mistake: presentation of amounts in Lakhs/ Rupees
Legal position: According to Schedule V of Companies Act, 1956 the
Annual Return amounts are to be presented in thousands and not in Rs. or
Lakhs.
Apt Position: Presentation of Annual return figures in thousands.
However the figures relating to annual return in e form 20B shall be
presented in Rs. and not thousands.

CORRUPTION, THE MOST INFALLIBLE SYMPTOM OF CONSTITUTIONAL LIBERTY.

NOVEMBER 2010

ARTICLE

Signing:

indicates for complying with Annual filings even if the AGM of the company is not conducted.

Mistake: Annual Return is not signed by the company secretary in

employment where the company has as company secretary or manager
and is not signed by company secretary in whole time practice where
shares are listed on recognized stock exchange.
Legal Position: According to the provisions of Section 161(1) of
Companies Act, 1956:(1) The Copy of the annual return filed with the
Registrar under section 159 or 160, as the case may be, shall be signed
both by a director and by the manager or secretary of the company, or
where there is no manager or secretary by two directors of the company,
one of whom shall be the managing director where there is one.
Apt Position: the provisions relating to signing of Annual Return shall be
adhered to strictly, the provisions relating to signing of Annual Return is as
follows:
For unlisted/Private companies(i)

Where the company has a full time Company Secretary or a

manager appointed in accordance with Scc.269 of Companies Act,
1956, the Annual Return should be signed by the Company
Secretary of the company and by one director of the company.

(ii)

Where the company does not have a full time Company Secretary
or a manager appointed in accordance with Sec.269 of Companies
Act, 1956, the Annual Return should be signed by Two Directors of
the company one of whom shall be the Managing Director of the
company where there is one.

For listed companies(i)

Where the company has a full time Company Secretary or a

manager appointed in accordance with Scc.269 of Companies Act,
1956, the Annual Return should be signed by the Company
Secretary of the company and by one director of the company and
by a Practicing Company Secretary.

(ii)

Where the company does not have a full time Company Secretary
or a manager appointed in accordance with Scc.269 of Companies
Act, 1956, the Annual Return should be signed by Two Directors of
the company one of whom shall be the Managing Director of the
company where there is one and by a Practicing Company
Secretary.

Thus, the professionals like Chartered Accountants and Company Secretaries

shall take due care that such mistakes shall not be committed while complying
with annual filings.
CATOGERY B: where the company has not conducted AGM:
Mistake: Due to various reasons the company may not be in a position to
place the audited results in front of shareholders, thus, they do not conduct
AGM and therefore do not comply with Annual Filings.
Legal Position: According to the provisions of Section 220(3) and Section 159 of Companies Act, 1956 and the e forms for filing which clearly

Apt Position: The Company shall comply with the Annual Filings even
if the company has not audited its financial results or has not conducted its
AGM.
Irrespective of the fact that a company has conducted its AGM or not, it is
advised that the company shall do the Annual Filings. The company by showing
the reasons clearly as to not conducting the AGM can do its annual filings, by
doing so it will have the following advantages:
1.

It would be looked up to as a Law complying company

2.

In future it will not have to pay any additional fees.

3.

It can avoid prosecution against it for non compliance.

Some Proactive steps that can be taken by the company to avoid superfluous
compliances by planning it in advance:
1.

Declaration of dividend out of reserves: The Company instead of

transferring excess percentage of amount to reserves rather than what is
required by law, it might so happen that in a year a company could not
earn profit and wants to maintain a track of a dividend paying company. In
such a case the company is advised not to transfer excess percentage to
reserves but to maintain a surplus in profit and loss account else it will
have to follow Companies (Declaration of Dividend out of Reserves)
Rules, 1975.

2.

Statement of Advertisement: According to company's (Acceptance of

Deposits) Rules, 1975, the company cannot accept deposits for more than
25% of paid up capital and free reserves after giving an advertisement in
newspaper and such an advertisement shall be valid up to six months
from the date of closing of financial year or the date of AGM, whichever is
earlier, where the audited balance sheet of the is adopted. Thus, the
company can file a statement of Advertisement in advance so that the
validity period does not elapse. If the company in case do not accept any
deposits during the period a nil return of deposits can be filed with ROC on
or before 30th June.

Emerging issues: Usage of symbol

: the notification number F.NoF.No.03/17/
10-Cy dated 26th August, 2010 issued by the Department of Economic Affairs,
Ministry of Finance, Government of India, though clearly declares the usage of
in place of Rs. Re. a circular from Ministry of Company Affairs is called
symbol
for amending the Law for clarification purposes.
Conclusion:
The above discussed were few common mistakes committed while it comes to
annual filings. Thus, if the compliance officer takes a modest care while complying
with the provisions such unwanted mistakes can be avoided. These mistakes seem
to be tiny ones but might assemble one day to create unnecessary worries for the
company. Moreover it is also a duty of a compliance officer to plan in advance, after
keeping in view various provisions and compliances to be made as to how company can slice down its efforts towards complying with various provisions. Thus,
plan and then act.

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STILL, CORRUPTION AND OPPRESSION ARE FAR TOO COMMON THREATS TO THE DEMOCRATIC SOCIETY.