MCA notifies abridged annual return for small companies after 4 years
Carries out corrective changes in MGT Rules
By CS Aisha Begum Ansari, Assistant Manager, Vinod Kothari & Company
Introduction
Four years after proposing amendment in Section 92 (1) of Companies Act, 2013 (‘Act’), Ministry of Corporate Affairs (MCA) notified the amendment in Companies (Amendment) Act, 2017[1] with effect from March 5, 2021.
The aforesaid amendment provided for following under Section 92 (1) & (3):
- Empowering Central Government to prescribe an abridged form of annual return for One Person Company (OPC) and Small Companies[2];
- Deletion of requirement to furnish details of indebtedness in the annual return;
- Deletion of requirement to furnish details indicating names, addresses, countries of incorporation, registration and percentage of shareholding of Foreign Institutional Investors;
- Doing away with the requirement of annexing extract of annual return to the Board’s report and mandating companies to place a copy of annual return on their website and provide the link of the same in the Board’ report.
While the amendment in relation to point 4. above was already notified with effect from August 28, 2020; MCA notified amendment in Companies (Management and Administration) Rules, 2014[3] (‘MGT Rules’) giving companies the option to annex extract of annual return in case of inability to place a copy of annual return on the website. Section 92 (3) of the Act post amendment did not provide any specific power to prescribe rules, however, MCA had amended Rule 12 of MGT Rules.
Further, in 2016 while amending MGT rules[4] in relation to voting by electronic means, MCA inadvertently deleted the explanations provided in sub-2 of Rule 20 that defined terms viz, agency, cut-off date, remote e-voting etc.
Corrective amendments in MGT Rules
MCA, on 5th March, 2021[5] notified amendments in MGT Rules to carry out corrective changes and to insert format of abridged annual return subsequent to notification of amendment in Section 92 (1) of the Act. The synopsis of the amendments are as mentioned below:
Insertion of abridged annual return in Form MGT-7A and revision of Form MGT-7
Rule 11(1) of MGT Rules have been substituted prescribing separate format of annual return for OPC and small companies which shall be filed in Form No. MGT-7A from the financial year 2020-21 onwards. Other companies to continue to file annual return in Form MGT-7.
MCA has also revised the format of Form MGT-7 for filing the annual return by companies other than OPC and small companies.
Form MGT-7 v/s Revised Form MGT-7
| Sr. No. | Para & Field No. | Information required in revised Form MGT-7 which was not required under erstwhile Form MGT-7
(For Companies other than OPC & Small Companies) |
| 1. | Para IV Field (i) (d) | 1. Bifurcation of shares held in demat and physical form.
2. Requirement of mentioning ISIN of equity shares of the Company; |
| 2. | Para IV Field (iv) | Following rows are deleted:
1. Secured Loans (including interest outstanding/accrued but not due for payment) excluding deposits; 2. Unsecured Loans (including interest outstanding/accrued but not due for payment) excluding deposits; 3. Deposit. |
| 3. | Certification part | Following new certification are required to be confirmed, (seems relevant only for private companies).
1. The company has not, since the date of the closure of the last financial year with reference to which the last return was submitted or in the case of a first return since the date of incorporation of the company, issued any invitation to the public to subscribe for any securities of the company. 2. Where the annual return discloses the fact that the number of members, (except in case of one person company), of the company exceeds two hundred, the excess consists wholly of persons who under second proviso to clause (ii) of sub-section (68) of section 2 of the Act are not to be included in reckoning the number of two hundred. |
Revised Form MGT-7 and Form MGT-7A
| Sr. No | Para & Field No. | Information required to be provided in Form MGT-7A which was not required under Form MGT-7
(For OPC & Small Companies) |
| 1. | Para I Field vi | Whether Form is filed for OPC or Small Co. [New Insertion]
|
| 2. | Para III | Particulars of associate companies including joint ventures. (not applicable for OPC) [Substituted by deleting holding and subsidiary Companies] |
| 3. | Para IV (ii) | Details of shares/Debentures Transfer since closure date of last financial year (or in the case of the first return at any time since the incorporation of the Company) (not applicable for OPC-Newly Inserted) |
| 4. | Para IV (iv) | Securities (other than shares and debentures) (not applicable to OPC-Newly Inserted) |
| 5. | Para VIII Field A | Members/Class/Requisitioned/CLB/NCLT/Court Convened Meetings (not applicable to OPC-Newly Inserted) |
| 6. | Para VIII Field B | Board Meetings (not applicable for OPC-Newly Inserted) |
| 7. | Para VIII Field C | Attendance of Directors (not applicable for OPC-Newly Inserted) |
| 8. | New attachment | List of Directors [Newly Inserted] |
| 9. | Certification part | Following new certification are required to be confirmed.
1. The company has not, since the date of the closure of the last financial year with reference to which the last return was submitted or in the case of a first return since the date of incorporation of the company, issued any invitation to the public to subscribe for any securities of the company. 2. Where the annual return discloses the fact that the number of members, (except in case of one person company), of the company exceeds two hundred, the excess consists wholly of persons who under second proviso to clause (ii) of sub-section (68) of section 2 of the Act are not to be included in reckoning the number of two hundred (seems relevant only for small companies). |
| 10. | Information not required to be provided in Form MGT-7A which was required in Form MGT-7 | 1. Whether shares listed on recognized Stock Exchange(s);
2. CIN of the Registrar and Transfer Agent; 3. Details of stock split/consolidation during the year (for each class of shares); 4. Secured Loans (including interest outstanding/accrued but not due for payment) excluding deposits; 5. Unsecured Loans (including interest outstanding/accrued but not due for payment) excluding deposits; 6. Deposit; 7. Details of directors and key managerial personnel; 8. Committee Meetings; 9. Number of CEO, CFO and Company secretary whose remuneration details to be entered |
Deletion of extract of annual return
Realizing that amended Section 92(3) of the Act did not provide any prescriptive power to MCA, Rule 12 has been substituted to provide that Annual Return is required to be filed with the Registrar upon payment of specified fees. While, the requirement to file Annual Return with the Registrar along with timelines has been provided in Section 92 (4), Rule 12 still provides a generic statement.
So, the positions stands clarified that companies will be required to upload the annual return on the website, if any, and provide the link thereof in the Board’s report.
Explanations relating to e-voting restored
Rule 20 of MGT Rules deals with voting through electronic means wherein it mandates the companies whose equity shares are listed on recognized stock exchange and who have not less than 1000 members to provide the facility of e-voting to the members in the general meeting. It exempted Nidhi companies from the requirement of providing e-voting facility to its members.
The original text of Rule 20 explained the following terms:
- Agency
- Cut-off date
- Cyber security
- Electronic voting system
- Remote e-voting
- Secured system
- Voting by electronic means
The above terms were omitted vide Companies (Management and Administration) Amendment Rules, 2016[6]. MCA has restored the same with the present amendment. Accordingly, the cut-off date will be not earlier than seven days before the date of general meeting, which was previously specified in the Rules.
Conclusion
The present amendment brings clarity and settles all questions relating to annual return and e-voting. Annexing extract of annual return is past. Whole of the annual return in Form MGT-7 or Form MGT – 7A as applicable, is required to be uploaded on the website of the company and web-link of the same to be provided in the Board’s Report.
[1]http://ebook.mca.gov.in/notificationdetail.aspx?acturl=TTbtgoimZaEriqvC1uq63cVI1aUKrmySF7pn3LWSIhRnwlDT+xFtqSRh8eE9YDYmTZpXWl/g6A+Dx/OT8agtKUclWEhfgK03TlnWLOuiGw6K1VTDhD8p3mpQTiLgy2ewBHNyAHD0wK1NTYvNTxvKE72myo++ycxQaipOFSzBIY4coKGinwHEcAFWj2Fn6hr6
[2] “small company” means a company, other than a public company whose paid-up share capital does not exceed two crore rupees and turnover as per profit and loss account for the immediately preceding financial year does not exceed twenty crore rupees
[3]http://ebook.mca.gov.in/notificationdetail.aspx?acturl=6CoJDC4uKVUR7C9Fl4rZdatyDbeJTqg3z9mihm9CxHHzu82fmWlMKzy8jPS04vbR
[4]http://ebook.mca.gov.in/notificationdetail.aspx?acturl=6CoJDC4uKVUR7C9Fl4rZdatyDbeJTqg3DZ3eKuS27Ryli2KQpdUJBX7LNlkBrkXwnB0Mo6W4iI/tFsp4nH5DYuXMxD09O4auZIWA0g9jbZU=
[5] https://www.mca.gov.in/Ministry/pdf/CompaniesMgmtAdminAmndtRules_05032021.pdf
[6]http://ebook.mca.gov.in/notificationdetail.aspx?acturl=6CoJDC4uKVUR7C9Fl4rZdatyDbeJTqg3DZ3eKuS27Ryli2KQpdUJBX7LNlkBrkXwnB0Mo6W4iI/tFsp4nH5DYuXMxD09O4auZIWA0g9jbZU=
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Dear Sir,
Earlier there was no physical shares and demat shares classification in the field Equity Shares. My query is how to show the physical shares and demat shares count at the end of the year if there is any conversion from physical to demat shares.
New form MGT-7 does’t allow. How to put those figures.
Thanks.
Dear Sir,
You may show the conversion of shares from physical to demat under the heading ‘increase during the year (demat)’ and ‘decrease during the year (physical)’ by filling the details in ‘Others’ category. Automatically, the total no. of shares at the end of the year will reflect the correct figures. Further, you may also attach a clarification letter regarding the same.