Private Limited Company

What Can Be The Consequences Of Not Filing Annual Return On Time?

calendar01 May, 2023
timeReading Time: 4 Minutes
What Can Be The Consequences Of Not Filing Annual Return On Time?

The consequences of not filing annual return can vary depending on the country and the type of organization involved. In many cases, failure to file an annual return can result in penalties, fines or can attract legal actions against the organization or its directors. In this article we shall about the consequences of not filing annual return on time.

Each year a company shall file their book of accounts and annual returns of the company with the MCA. A company shall commits to an offence if they does not file the annual return each year as per the provisions of Companies Act, 2013[1]. Thus it is mandatory for a company to file for the annual returns within 60 days after the Annual General Meeting and also file for the financial statement by 30 days.

  • In general case, as per the Companies Act, the government fee for filing which is required to file with the Registrar is Rs 200.
  • In case of private limited company, Form MGT-7 and Form AOC-4 is needed to be filed every year and the government fees required for filing is Rs 400 (in regular case without any delay). In case of failure of filing the annual return on time by the company, penalty will be charged as mentioned.

Different Forms That Need To Be Filed For Annual Returns

Under the Companies Act, there are different forms that need to be filed for filing annual returns of a company, depending on the type and size of the company. Below are the forms that are generally required to be filed:

  1. Form MGT-7: This form is required to be filed by all companies, except for One Person Companies (OPCs) and Small Companies. It contains information such as the financial statements of the company, details of the directors and shareholders, and other company-related information.
  2. Form AOC-4: This form is required to be filed by all companies, except for OPCs and Small Companies. It contains the financial statements of the company, including the Balance Sheet, Profit and Loss Account, and other financial information.
  3. Form MGT-7A: This form is required to be filed by OPCs (One Person Companies) and Small Companies. It contains information such as the financial statements of the company, details of the directors and shareholders, and other company-related information.
  4. Form AOC-4CFS: This form is required to be filed by all companies that have consolidated financial statements. It contains the consolidated financial statements of the company, including the Balance Sheet, Profit and Loss Account, and other financial information.
  5. Form ADT-1: This form is required to be filed by all companies, except for OPCs and Small Companies. It contains information about the appointment of the auditors of the company.

Consequences of Not Filing Annual Return by the Company

Here are some possible consequences of not filing annual return:

  • Late Filing Penalties:

Late filing penalties can accrue when an organization fails to submit its annual return on time. These penalties can increase over time and can be quite significant.

Sl. No. Time of Delay Amount charged as Penalty
1. Sections (93, 139 and 157) if delayed by 15 days 1 times of the Normal fee
2. Sections (93, 139 and 157) if delay is between 15 days and 30 days 2 times of the Normal fee
3. If delay is more than 30 days and less than 60 days 4 times of the Normal fee
4. If delay is more than 60 days and less than 90 days 6 times of the Normal fee
5. If delay is more than 90 days and less than 180 days 10 times of the Normal fee
6. If delay is more than 180 days and less than 270 days 12 times of the Normal Fee
7. If the delay is above 270 days The second proviso to sub-section (1) of section 403 of the Act. (Penalty charged for Rs 100 per day after 270 days)
  • Loss of Good Standing:

Failing to file an annual return can result in a loss of good standing with regulatory bodies or governing bodies, which can have serious consequences for an organization. For example, it may affect the organization’s ability to access funding or receive regulatory approvals.

  • Legal Action:

In some cases, failure to file an annual return can result in legal action against the organization or its directors. For example, directors may be held personally liable for any losses incurred as a result of the organization’s failure to file.

  • Loss of Tax Exemptions:

Organizations that fail to file their annual return may also risk losing their tax-exempt status. This can result in significant financial consequences for the organization and its donors.

  • Difficulty In Accessing Funding:

Many funders require organizations to be in good standing and up-to-date with their annual filings before considering them for funding. Failure to file an annual return can, therefore, make it difficult for organizations to access funding.

  • Consequences Of Not Filing Annual Return – On Company

If a company hasn’t filed its annual return for a subsequent period of two years, it will be deemed to be an “inactive company,” and it will be presumed that the specific business has closed as a result. In such a case, the company’s bank account may be closed, and the registered agent may also send the company a notice and begin the process of removing the company from MCA records.

  • Consequences Of Not Filing Annual Return – On Directors

Failure to file annual returns can result in directors being held personally liable for the company’s debts and liabilities. In case of default in filing both the forms (MGT-7 & AOC-4) consecutively for three years, then the director shall be liable for disqualification to be re-appointed in the same company or may not be appointed as a director in some other company for the next five years, from the date the company fails to file with the compliance.

Conclusion

Overall, not filing an annual return can have serious consequences for an organization and its directors. It is therefore important to ensure that all annual returns are filed on time and in accordance with regulatory requirements.

Read Our Article: Penalty For Non Filing Of Annual Return With Roc Under Companies Act 2013

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