Limitations of Articled Assistant

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Querist : Anonymous

Querist : Anonymous (Querist)

30 November 2010 Sir/Ma'am:
Can CA Articled assistant be the director of a Compnany?

Aditya Maheshwari

Aditya Maheshwari (Expert)
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30 November 2010 Yes he can be but prior approval from ICAI is required in form 112. however he can be non executive director only.

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Querist : Anonymous

Querist : Anonymous (Querist)

30 November 2010 Thank u sir for the prompt reply.

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Querist : Anonymous

Querist : Anonymous (Querist)

30 November 2010 Thank u sir for the prompt reply.
Please explain the consequences of not filing Form 112 being executive/non-executive director.

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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02 August 2024 Form 112 is a crucial document under the Companies Act, 2013 and related rules, which requires directors of a company to disclose their other directorships, including those in other companies or firms. The consequences of not filing Form 112 can vary depending on whether the individual is an executive or non-executive director. Here's a detailed explanation of the consequences:

### **1. **Consequences of Not Filing Form 112**

**1.1 General Penalties for Non-Compliance:**
- **Financial Penalties:**
- Under the Companies Act, 2013, if a director fails to disclose their other directorships or interests, the company and the director may face financial penalties. For instance, the director can be fined under Section 184(3) of the Act.
- The penalty for non-filing or incorrect filing of Form 112 can range from ₹1,000 to ₹1,00,000, depending on the nature and extent of non-compliance.

**1.2 Reputational Impact:**
- **Personal Reputational Damage:**
- Directors who fail to file Form 112 or provide incorrect information may face reputational damage, which can affect their professional credibility and future directorship opportunities.
- **Company Reputational Damage:**
- The company's compliance status might be viewed negatively by stakeholders, affecting its overall image.

**1.3 Legal and Regulatory Consequences:**
- **Regulatory Actions:**
- Non-compliance with disclosure requirements might lead to actions from regulatory bodies such as the Ministry of Corporate Affairs (MCA). This could include scrutiny and additional compliance checks.
- **Ineligibility for Certain Positions:**
- In case of non-filing or incorrect filing, the director might be deemed ineligible for holding certain positions or directorships in the future.

### **2. Specific Consequences for Executive vs. Non-Executive Directors**

**2.1 Executive Directors:**
- **Operational Impact:**
- Executive directors are typically involved in the day-to-day operations of the company. Their non-compliance can directly impact the company's operational and legal standing.
- **Contractual Obligations:**
- Executive directors often have detailed contractual obligations, including compliance with corporate governance standards. Non-filing of Form 112 might breach these contractual terms.

**2.2 Non-Executive Directors:**
- **Advisory Role Impact:**
- Non-executive directors, who usually provide oversight and strategic advice, might face similar legal and reputational consequences, but their impact on day-to-day operations is less direct.
- **Regulatory Penalties:**
- Non-executive directors might face penalties or restrictions similar to executive directors, though their role in compliance may be less intensive.

### **3. Additional Considerations**

**3.1 Director's Liability:**
- Directors are generally required to act in good faith and with due diligence. Non-compliance with filing requirements might be viewed as a lapse in fulfilling these duties, potentially exposing them to legal liabilities.

**3.2 Corporate Governance:**
- Proper filing of Form 112 is part of maintaining good corporate governance. Failure to adhere to these requirements undermines the principles of transparency and accountability.

### **4. Rectification and Compliance**

**4.1 Filing Late:**
- Directors can file Form 112 late, but it may attract penalties. It’s advisable to rectify the non-compliance as soon as possible to minimize legal and financial consequences.

**4.2 Documentation and Communication:**
- Maintain clear records of directorships and communicate any changes promptly to ensure compliance with the Companies Act.

### **Summary**

The failure to file Form 112 can lead to financial penalties, reputational damage, and legal consequences for both the individual director and the company. Whether an executive or non-executive director, the impact of non-compliance can affect both personal and organizational standing. It is essential to ensure timely and accurate filing to adhere to regulatory requirements and maintain good corporate governance.

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