Non-compliance under Company Act 2013

 

Offenses under the Companies

Failure to keep the proper financial statement

• Imprisonment up to one year or fine Rs.50,000 to 5 lakh or with both – MD, WTD CFA Officer, or any other person charged by the Board with the duty of complying with the requirements

Default regarding financial statement and Board’s report

• Fine 50,000 rupees to 25 lakh rupees – on company
• imprisonment up to three years or with fine 50,000 rupees to 5 lakh rupees, or with both – every officer of the company who is in default

Failure of auditor to inform the Central Government regarding fraud against the company by officers or employees

• Fine Rs.1 lakh to Rs.25 lakh.

Failure of a company to comply with the provisions of sections 139 to 146 about auditors

• Fine Rs.25,000 to Rs.5 lakh on the company every officer of the company who is in default punishable up to one year or with fine 10,000 rupees to 1 lakh rupees, or with both.

Default in complying with the provisions relating to directors duties

• Fine Rs.1 lakh to Rs.5 lakh on directors.

Functioning as a director after vacation of office

• Imprisonment up to one year or fine Rs.1 lakh to Rs.5 lakh or with both.

Contravention relating to appointment and qualifications of directors

• Fine Rs.`50,000 to Rs.5 lakh.

Default in complying relating to Committees like Nomination and Remuneration and Stakeholders Relationship Committee

• Fine Rs.1 lakh to Rs.5 lakh on company and
• imprisonment up to one year or with fine 25,000 rupees to 1 lakh rupees, or with both – every officer of the company

Failure to disclose of director’s interest

• Imprisonment up to one year or fine Rs.50,000 to Rs.1 lakh or with both.

Participation in a Board meeting by the interested director

• Imprisonment up to one year or fine Rs.50,000 to Rs.1 lakh or with both.

Contravention relating to loans, guarantee or security

• Fine Rs.5 lakh to Rs.25 lakh – on company or on other officers in default and the director or the other person to whom any loan is advanced or guarantee or security is given or provided in connection with any loan taken by him or the other person shall be punishable with imprisonment up to six months or with fine 5 lakh rupees to 25 lakh rupees, or with both.

Related party transaction in case of other company and listed company

• In case of a listed company – be punishable with imprisonment up to one year or with fine 25,000 rupees to 5 lakh rupees, or with both
• In case of any other company – be punishable with fine 25,000 rupees to 5 lakh rupees.

Contravention relating to loans and investment

• Fine Rs.25,000 to Rs.5 lakh – on company
• 25,000 to Rs.1 lakh – an officer in default

Contravention relating to the investment of company held in its name

• fine 25,000 rupees to 25 lakh rupees – on company
• imprisonment up to six months or with fine 25,000 rupees to 1 lakh rupees, or with both – every officer of the company

Forward dealing in the securities of the company by Key Managerial personnel or director

• Imprisonment up to two years or fine Rs.1 lakh to Rs.5 lakh or with both – for a director or Key Managerial Personnel

Contravention relating to Insider trading of securities by Key Managerial personnel or director

• Imprisonment up to five years or fine Rs.5 lakh to Rs. 25 crore or 3 times of the profit made on insider trading whichever is higher or with both.

relating to Insider trading

• Fine Rs.1 lakh to Rs.5 lakh on the company and every officer of the company and company secretary in practice.

Relating to securities by Key Managerial

• In such case Fine up to Rs.1 lakh and a further fine up to Rs.500 for each day company and every officer of the company.

Removal of funds, transfer or disposal of funds, assets, or properties of the company in contravention of the order of the Tribunal

• fine 1 lakh rupees to 25 lakh rupees – on company and
• imprisonment up to three years or with fine 50,000 rupees to 5 lakh rupees, or with both – every officer of the company who is in default

Contravention of any of the provisions by the transfer and transferee company in case of merger or amalgamation

• Fine Rs.1 lakh to Rs. 25 lakh – on company
• imprisonment up to one year or with fine which shall not be less than1 lakh rupees to 3 lakh rupees, or with both – every officer of such transferor or transferee company who is in default

Contravention of the order made by the Tribunal relating to alterations in memorandum or articles

• In such case Fine Rs.1 lakh to Rs.25 lakh – on company
• 25,000 to Rs.1 lakh – on officers.

Committing any default in complying with the order of the Tribunal

• Fine Rs.5 lakh to Rs.25 lakh – on company
• imprisonment up to three years and with a fine of twenty-five thousand rupees to one lakh rupees – every officer of the company who is in default

Contravention of the provisions of this section by the valuer

• imprisonment up to one year and with a fine of 1 lakh rupees to 5 lakh rupees – Valuer

Filing of the application in restricted cases for removal of name

• In such case  Fine up to Rs.1 lakh.

Failure to extend full cooperation to the company liquidator

A person shall be punishable with imprisonment which may extend to six months or with a fine that may extend to 50,000 rupees, or with both.

Committing default by an official liquidator in forwarding a copy of the order of dissolution of company by Tribunal within the period specified

• Fine up to Rs.5,000 for each day of default – on company liquidator.

Failure to give assistance required under subsection (5)

• In such case Fine Rs.25,000 to Rs.1 lakh.

Failure to state that the company is in liquidation

• punishable with Fine Rs.50,000 to Rs.3 lakh – Company, every officer, Company Liquidator, and any receiver or manager who wilfully authorizes or permits.

Contravention of information as to pending liquidation

• Fine up to Rs.5,000 for each day of default – Company liquidator

Wilful default by the company liquidator

• punishable with up to six months or with a fine up to fifty thousand rupees, or with both – Person acts in contravention of any rule

Failure to file certified copy of the order of Tribunal relating to declaring the dissolution of company

• In such case Fine up to Rs.10,000 for each day of default continues – for the Company liquidator or the person on whose application the order was passed.

Contravention of the provisions by a foreign company

• Impose fine of Rs.1 lakh to Rs.3 lakh and a further fine up to Rs.50,000 for each day of default for every day after the first during which the contravention continues – on company
• punishable with up to six months or with fine twenty-five thousand rupees to five lakh rupees, or with both – every officer of the foreign company

Failure to furnish information or statistics, etc. by the companies required by the Central Government

• Up to twenty-five thousand rupees – on company
• punishable with up to six months or with a fine of twenty-five thousand rupees to three lakh rupees, or with both – every officer of the company who is in default

Failure related to the order made by Tribunal / Regional Director about Compounding of offenses

• Imprisonment up to six months or fine up to Rs.1 lakh or with both.

Where there is no specific penalty is provided in the Act

• Fine up to Rs.10,000 and a further fine up to Rs.1,000 for each day of default in case of contravention continues.

Repeated default within 3 years

• Twice the amount of fine in addition to any imprisonment provided for that offense.

Punishment for wrongful withholding of property

• Fine Rs.1 lakh but maybe extend to Rs.5 lakh – on officer or employee of the company.

Improper use of the words “limited” and “private limited” by the company

• In such case Fine Rs.500 to Rs.2,000 for each day of default.

Failure to pay the penalty to the adjudicating officer or Regional Director

• punishable with fine which shall not be less than twenty-five thousand rupees to five lakh rupees – on Company does not pay the penalty within ninety days from the receipt of the order
• imprisonment up to six months or with fine twenty-five thousand rupees to one lakh rupees, or with both – on the officer of a company who is in default does not pay the penalty within ninety days from the receipt of the order

Being a member of a company formed exceeding certain numbers as prescribed

• Fine up to Rs.1 lakh and liabilities incurred in such business.

Contravention of the Rules framed by Central Government

• In such case Fine up to Rs.5,000 and a further fine up to Rs.500 for each day of default in case of contravention continues.

FAQ ON NON-COMPLIANCE OF COMPANIES ACT 2013

Q1- what is the maximum limit of the amount the regional director can impose for any compoundable offense?

Ans.- the regional director can impose a penalty of a maximum of Rs. 25 lakh for any compoundable offense.

Q2- what is the maximum limit of the amount the national company law tribunal can impose for any compoundable offense?

Ans.- national company law tribunal can impose a penalty for any compoundable offense exceeding Rs. 25 lakhs.

Q3- is any prior approval of the special court before compounding any offense by the national company law tribunal is required?

Ans.- no, after Companies (Amendment) Act, 2019 prior approval of Special court before compounding any offense by national company law tribunal is not required.

Q4- what type of offenses are compounded?

Ans.- a) Only offenses punishable under companies act with fine only can be compounded.

b) Offences punishable with fine or imprisonment or fine or imprisonment or both are Compoundable.

c) The Offences punishable with imprisonment only are not Compoundable.

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