Introduction

The term "Annual Return" refers to the returns on an investment that are computed as a percentage of the initial investment over the period of a year. A gain on the initial investment occurs when the return is positive. It would also be regarded as a loss on the investment if it were negative. The rate of return is determined by the amount of risk associated with the investment. The annual return is annual compliance for a Private Limited Company and a document that includes a number of different components, including the share capital, debts, directors, shareholders, etc. of the company. A company has to file form MGT-7 in order to file a yearly annual return.

According to the Companies Act, 2013, businesses must file an annual return and other Private Limited Company compliance to the Registrar of Companies (RoC). The companies would face penalties for failing to file annual returns.

Components of an annual return

The following components of an annual return are furnished in the form MGT-7:

• Information about the company's core business, its registered office, and its numerous subsidiaries and affiliate companies.

• The pattern of the company's stock in terms of shares, debentures, securities, and other holdings.

• Information about the promoters, directors, and other important employees, as well as any changes during the closure of the previous financial year.

• Information on the meetings held by the members and other committee meetings, along with the record of attendance of the members.

• Details about the company’s members and debenture holders, as well as any change since the end of the previous financial year.

• Liabilities of the Private Limited Company.

• Information about the compensation of the company's directors and other senior employees.

• Information about the fines imposed on the company, its directors, or its officers, along with the information about the compounding of such offenses.

• Matters concerning the certification of compliance and disclosure required under the Companies Act, 2013.  

• Information about the shares held by foreign nationals or institutions, as well as their names, locations, and countries of incorporation and registration of the company.

Who is the signing authority for the annual return?

The annual return must contain the signature of the director of the company or company secretary of the company. If the Private Limited Company does not have a company secretary, the annual return that is from MGT-7 can be duly signed by any company secretary in practice.  According to the Companies Act, 2013, the annual return compliance for a Private Limited Company must be certified by a company secretary in practice.

The corresponding certificate will be issued in Form MGT-8. It claims that the information included in the company's annual returns is true and has complied with the rules specified in the Companies Act, 2013.

When to file an annual return?

A copy of the annual return must be file with the Registrar of Companies (ROC) within sixty days of the date of the annual general meeting (AGM). If the AGM was supposed to be held on a specific date but it wasn't held, then the date specified must be taken into consideration and filing should be completed within 60 days of such date. Along with the filing of form MGT- 7 compliance for Private Limited Company, an explanation for not holding the meeting must also be sent to ROC.

Consequences of not filing annual return

It a Private Limited Company fails to file the form MGT-7 (annual return) within the due date then an additional fee of INR 100 per day for the delay is required to pay. Further, if the company fails to file an annual return for a period of 2 years or 2 consecutive times and has not taken efforts to revive the status of the company, the Registrar might direct the closure of the company. Also, if the company fails to submit MGT-7 for a consecutive period of 3 years or 3 consecutive times, then the directors of the company will be disqualified. When the company does not file an annual return for a consecutive period of 5 years, then the directors will not be eligible for appointment or reappointment as directors for any company.

Conclusion

The Companies Act, 2013 specifies certain dates for filing an annual return, so it is advisable to comply with them because failing to do so might lead to serious consequences for the company. As a result, a director will be imprisoned for six months or fined up to INR 5 lakh or both. It is advised to the company to file all required compliance for Private Limited Company on time.