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 Failure to File Financial Statements with the Registrar of Companies

If you own a business, you know that following regulations is an important element of running a successful company. Filing your financial accounts with the Registrar of Companies (ROC) is one of the most critical procedures. But did you know that failure to file financial statements with the registrar of companies might have major ramifications? The ROC may issue a notice, impose a penalty, or even bar the business’s directors from serving on the board of any other firm. Non-compliance may even result in the firm being taken off the register of corporations, effectively ending its existence as a legal entity. That is why it is critical to understand the consequences of failing to file your financial statements on time. Let’s have a look in detail.

failure to file financial statements with the registrar of companies

What Is the Penalty for the Non-filing of Company’s Annual Return?

MGT-7 Annual Return for ROC Filing:

Form MGT-7 is one of the most important compliances businesses must meet when filing annual ROCs. According to Section 92(4) of the Companies Act of 2013, every company must file a copy of its annual returns with a modest fee with the Registrar of Companies within sixty days of the Annual General Meeting.

Penalties for failing to file Form MGT-7 within the specified time frame:

The penalty for failing to file Form MGT-7 within the required time limit of sixty days is Rs. 100 per day from the due date till the default continues. If the company fails to file the ROC Filing, the penalties and punishments for non-filing apply to both the company and the directors. A penalty of Rs. 50,000 is imposed on the company and the officers who were at fault. If the yearly return is not filed again, a fine of Rs. 100 per day is levied, with a maximum penalty of Rs. 5,00,000.

What Is the Penalty for Late Filing of Roc?

AOC-4 Financial Statements for ROC Filing:

Section 137 of the Companies Act 2013 requires each company to file a copy of its financial statements via Form AOC-4 with the Registrar of Companies within thirty days from the date of the Annual General Meeting. All essential documentation, as well as any consolidated financial statements, must be included in the financial statement form. It is a key stage in the annual ROC filing.

Penalties for failing to file Form AOC-4 within the specified time frame:

Filing Form AOC-4 is an important stage in the Annual ROC filing process. If the report is not filed within a month of the AGM, the firm, its members, and directors face penalties. A fine of Rs. 100 per day is to be paid. The company’s Chief Financial Officer and Managing Director (if any), and in their absence, any other director who the board has charged with being in charge of complying with the provisions of the section related to Form AOC-4 and in their absence, all directors in the company are responsible for paying a penalty of Rs. 1,00,000. If the ROC file is still incomplete, a penalty of Rs. 100 per day is applied, not to exceed Rs. 5,00,000 in total.

What Happens If Roc Filing Is Not Done?

Companies with several company registration types in India must submit an annual ROC. The company and the company’s directors could suffer serious consequences if the ROC filing is delayed or not completed at all. These results include

Regarding the Company: For failing to submit the yearly ROC, The Registrar of Companies will presume that a company is closed or dormant if it has not filed regularly for two years. ROC will probably issue the company a notice asking them to explain why they didn’t file, and if they don’t reply then business can be dismissed.

Regarding the directors: Directors who fail to file Forms MGT-7 and AOC-4 for three consecutive fiscal years are disqualified from reappointment as directors in the same company or any other company for the next five years. Similarly, suppose a company does not file its annual returns for three consecutive fiscal years. In that case, its directors are disqualified from serving in any other company for five years.

Solution:

If a company has business transactions and wants to expand its business, it should file all returns on time to be compliant, and if, for some reason, the company cannot file returns on time, it can file its returns with an additional fee of Rs. 100 per day, even after receiving notice from the registrar, it can file its returns after filing a representation of notice to the registrar.

And, if the company was unable to file its returns because it did not have any business or could not even begin its business, the company should apply for striking off the company without filing any returns in form STK-2 before receiving a notice from the registrar to avoid disqualification of directors and other legal action from the ROC.

What Happens If the Company Has Defaulted in Filing with the Registrar?

Here are some more detailed points regarding what happens if a company defaults in filing with the registrar:

  • The Registrar of Companies may notify the firm requesting an explanation for failing to comply.
  • The registrar may levy a penalty if the company does not provide a satisfactory explanation. The penalty varies according to the nature of the default and the length of the delay.
  • The penalty could range from a fine to the firm’s directors being barred from serving on the board of any other company.
  • The length of the delay decides the penalty amount and grows with the duration of the default.
  • Non-compliance may also result in the company being struck off the register of companies in specific situations. This means the company is no longer considered a legal entity and cannot conduct business.
  • The Registrar of Companies can commence striking a company from the Registrar of Companies, which normally entails a public notice and a waiting period for any objections to be lodged.
  • If the company fails to comply with the registrar’s notification and file with the registrar, legal action may be taken, resulting in fines, penalties, or other repercussions.

To sum up, companies that fail to file necessary documents with the Registrar of Companies risk facing penalties and legal action. The registrar may issue a notice and impose a penalty ranging from a fine to director disqualification. In severe cases, non-compliance can result in the company being struck off the register, leading to its dissolution as a legal entity.

FAQs: Failure to File Financial Statements with the Registrar of Companies

Is ROC filing mandatory?

ROC reporting is required for all Indian companies incorporated under the Companies Act. Businesses must submit their financial statements and annual reports to the Registrar of Companies (ROC) every year.

What will happen if the company has defaulted in filing with the registrar its financial statement or annual returns for the immediately preceding?

Penalties and legal action may be imposed if a firm fails to file its financial statements or annual returns with the Registrar of Companies. The registrar may notify the company requesting an explanation for the non-compliance. Suppose the registrar is not satisfied with the answer. In that case, he may impose a penalty on the business ranging from a fine to excluding the company’s directors from serving on the board of any other company. Non-compliance may also result in the firm being taken off the register of corporations, effectively ending its existence as a legal entity in some situations. Businesses must comply with the ROC’s rules and file all required paperwork and returns on time to avoid penalties and legal action.

Conclusion

To summarise, failure to file financial statements with the registrar of companies might have serious ramifications for your organisation. You could face fines, disqualification as a director, or possibly the dissolution of your firm. Staying on top of your filing responsibilities and following the Companies Act is critical. If you’re unsure where to begin, get expert assistance. Remember that adopting these standards ensures your company’s long-term success and survival.

Do you want to read more similar articles but don’t know where to begin? Instafiling’s specialists and advisers will walk you through the procedure. 

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