Not adoption of account in agm

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purshotam vyas (Querist)
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18 December 2013 Dear all,

In one of our group company there was change in management of company. But old management did not provide accounts for audit and filling so statutory audit could not be held.

Due to this company has not been filling 23AC & ACA to ROC since 5 year but has been filling 20B in timely.

We held our AGM and filled annual return to ROC but due to above problem and also court case we could not file balance sheet to ROC.

My question is:-
1) can AGM is valid if oridinary business not completed i.e. adoption of annual account
2) If AGM is valid then how we show in minute and not valid then what is way to come out from this ?
3) Due to this auditor is also not appointed in AGM held so what can we do for the same ?
4) now we receive current year audited balance sheet so is it ok to fille the same or first clear back years returns

Thanks in advance.

Ajay Mishra

Ajay Mishra (Expert)
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18 December 2013
Responsibility to ensure compliance with section 210 and penalty for non-compliance

Section 210(5) of the Act, provides that if any person, being a director of a company, fails to take all reasonable steps to comply with the provisions of this section, he shall, in respect of each offence, be
punishable with imprisonment for a term which may extend to six months, or with fine which may extend to ten thousand rupees, or with both. Provided that in any proceedings against a person as aforesaid, it shall be a defence to prove that a competent and reliable person was charged with the duty of seeing that the provisions of this section were complied with and was in a position to discharge that duty. Further provided that no person shall be sentenced to imprisonment for such offence unless it was committed willfully.

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Ajay Mishra

Ajay Mishra (Expert)
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18 December 2013
Non-adoption of the Balance sheet at the annual general meeting and filing of the same

If the annual general meeting of a company before which a balance sheet is laid as aforesaid does not adopt the balance sheet, or is adjourned without adopting the balance sheet or, if the annual general meeting of a company for any year has not been held, a statement of that fact and of the reasons therefore shall be annexed to the balance sheet and profit and loss account required to be filed with the Registrar electronically in e-Form 23AC and 3-Form 23ACA— Section 220(2).

If the Balance sheet is not laid before the annual general meeting but filed with the Registrar, it will not be taken on record

It has been clarified by the Department that the balance sheets and profit and loss accounts which are not laid before an Annual General Meeting of the company but submitted to Registrar of Companies, for filing under section 220 of the Act would not be taken on record. The question of launching prosecution in
such cases would be considered. [Vide Circular No. 4/74, dated 22-2-1974]

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Ajay Mishra

Ajay Mishra (Expert)
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18 December 2013
Penalty for non-compliance of section 220
If default is made in complying with section 220(1) and (2), the company, and every officer of the
company who is in default, shall be punishable with fine, which may extend to five hundred rupees for
every day during which the default continues. [Section 220(3)]
It has been held in the case of Ravindra Narayan v Registrar of Companies (1994) 2 SCL 281 (Raj),
that where there is a managing director of company, other directors cannot be held to be falling within the
expression 'officer who is in default' in section 5 and cannot be held liable for default in complying with
requirements of sub-sections (1) and (2) of section 220.
Where directors failed to file balance sheet and profit and loss accounts despite notice, it was decided
that any director of the company who is knowingly guilty of the default would be an 'officer in default'
under section 5 read with section 2(30). [Bachrenj Baid v State of West Bengal Case No. 809 (Kol) 92].
In the case of Alim Ahuja and Another v Registrar of Companies (2006) 129 Comp Cas 104 (Raj), the
Registrar of Companies sent notices to the directors calling upon them to show cause as to why action
should not be taken for their prosecution for contravention of section 159/160/162/220 and as to why they
should not be prosecuted under Section 210(5) of the Act, for the default in complying with section 210(3)
of the Act. On receipt of these notices, the petitioners filed application to High Court for grant of relief
under section 633 of the Act instead of showing cause to the ROC praying that they were not active
directors of the company and are being not connected with the management of the company.
The Court held that that the plaintiffs have voluntarily continued as directors of the company. The
Board of Directors has never resolved to exempt them from their responsibility and duty as directors to
comply with the provisions of the Act. It is hardly of any substance that petitioners are senior citizens. They
had accepted the directorship voluntarily and presumed to have known of their responsibility, obligation,
liability and duty under the Act.
It was further held that rather than approach to this Court at this stage they should have placed their
cases for consideration before the respondent but that has not been done. That apart the notices have been
given only for launching the prosecution against the petitioners and in their prosecution they can take all
these defences and where they are able to prove the same the Court may not punish them for violation of
provisions of the Act.

purshotam vyas

purshotam vyas (Querist)
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18 December 2013 Thanks Ajay sir,

Its ok sir that there are penal provision under section 210 & 220. But still i am not clear on following that:-

a) is our AGM (in which were showing in annual return since last 5 year) is valid even then account not laid by board, no appointment of auditor in this AGM ?

b) if auditor not appointed since 5 year then 23B is also pending since 5 year ?

c) this year we audited balance sheet - what should we do. Should we file this year balance sheet or pl a/c or first file last 5 year balance sheet or pl which are not with us ?

Again thanks & waiting your comment sir...

purshotam vyas

purshotam vyas (Querist)
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19 December 2013 Good morning everybody,

Can anyone please assist in above point....

Thanks

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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04 August 2024 Your situation involves several compliance issues related to the Annual General Meeting (AGM), auditor appointments, and filing of financial statements. Here's how to address each aspect:

### **a) Validity of AGM and Board Resolutions**

1. **Validity of AGM Without Accounts Laid:**
- **AGM Requirements:** According to the Companies Act, 2013, the AGM is required to be held every year and the financial statements must be laid before the shareholders in the AGM. If the financial statements were not laid before the board or the shareholders, the AGM would not be considered valid for that year in terms of compliance.
- **Non-Compliance Impact:** If accounts were not laid before the board or shareholders, the resolutions passed in that AGM might be invalid, and the AGM would not fulfill its legal requirements.

2. **Appointment of Auditor:**
- **Legal Requirement:** The appointment of an auditor is mandatory at the first AGM of the company and thereafter at every AGM. If no auditor was appointed in the AGM for the past five years, it means the company has been non-compliant with Section 139 of the Companies Act, 2013.

### **b) Pending Form 23B**

1. **Form 23B:**
- **Filing Requirement:** Form 23B was used to communicate the appointment of the auditor. Since the introduction of the Companies Act, 2013, Form 23B has been replaced by Form ADT-1. However, if your company has not appointed an auditor for the past five years, Form 23B or Form ADT-1 would not have been filed for those years.
- **Rectification:** You need to rectify the situation by appointing an auditor and filing the appropriate forms with the Registrar of Companies (RoC).

### **c) Filing Financial Statements**

1. **Current Year Financial Statements:**
- **File Current Year Statements:** For the current year, you should prepare and file the audited financial statements (Balance Sheet, Profit and Loss Account) along with the Director’s Report and Annual Return.

2. **Previous Years’ Financial Statements:**
- **Compliance:** For the years where the financial statements were not filed, you need to file the pending financial statements along with an explanation for the delay. You may need to provide the audited financial statements for the previous years as well.
- **Form MGT-7:** For each year, you should file Form MGT-7 (Annual Return) with the RoC.

### **Steps to Take:**

1. **Appoint an Auditor:**
- **Immediate Action:** Appoint an auditor for the current year and file Form ADT-1 with the RoC. This will be necessary for compliance going forward.

2. **File Pending Financial Statements:**
- **Prepare Statements:** Prepare and audit the financial statements for the previous years if they have not been done.
- **File Statements:** File the audited financial statements for all pending years with the RoC. Ensure that you also file the annual returns for these years.
- **Reconcile Discrepancies:** Provide an explanation for the delay in filing and any discrepancies in the filings.

3. **File Current Year Statements:**
- **Prepare and File:** Prepare the current year’s financial statements, get them audited, and file them along with the Annual Return for the current financial year.

4. **Address Non-Compliance:**
- **Rectify Compliance Issues:** Address any non-compliance issues and ensure that all statutory requirements are met going forward.

### **Summary:**

- **AGM Validity:** AGMs where financial statements were not laid before the board or shareholders are not valid for compliance purposes.
- **Auditor Appointment:** Appoint an auditor immediately and file Form ADT-1. Previous auditor appointment forms (Form 23B) are outdated; ADT-1 should be used.
- **Filing Statements:** File the audited financial statements for the previous years as well as the current year’s statements. Ensure that all annual returns are filed accordingly.

For accurate and detailed guidance, especially if you are dealing with multiple years of non-compliance, consulting with a company secretary or a legal professional who specializes in corporate compliance is highly recommended. They can assist you in preparing the necessary documents, addressing non-compliance, and ensuring that your filings are up-to-date.