Form for filing Annual Return by OPCs and Small Company [Form MGT-7A]

Introduction:

With this modern era, there has been rapid growth in the corporate world. Everybody now wants to enter the corporate world. The entrepreneur wants to opt for a company form of organization, to enter into the corporate world. Companies can be formed according to the requirements and their operations. As per The Companies Act, 2013, the company was incorporated under The Companies Act, 2013 or under any other previous company law. 

The clear meaning of the company can be understood by the definition given by Chief Justice Marshall, “a corporation is an artificial being, invisible, intangible, existing only in contemplation of the law. Being a mere creation of law, it possesses only the properties which the Charter of its creation confers upon it, either expressly or as incidental to its very existence.”[1]

Thus, it can be concluded that the companies can only fall under Companies Act only when it is registered under it.  The company becomes a corporate body when it is registered under the law. The company has some characteristics which make it a corporate body, such as separate legal entity, incorporated association, artificial person, limited liability, Separate property, transferability of shares, perpetual succession, common seal. Out of all these features, separate legal entities and limited liability are important. The liability of the company depends on its type. Companies Act, 2013 provides for a variety of companies that can be registered under the same. Two common types of companies register under Companies Act are:

1. Privates Companies
   1. One Person Company
   1. Small Company
2. Public Companies

As per Section 2(68) of Companies (Amendment) Act, 2015, a private company is a company that holds minimum paid up share capital, as prescribed, and abide by the conditions stated in Article of the company: 

1. Restrict the right to transfer its shares, if any;
2. Restricting the number of members to 200, not including the persons who are employed in the company and persons who were members when previously employed in the company or are still the member even after the employment ceased off;
   when two or more people hold one or more shares in a company jointly, they shall be treated as a single member. 
3. Prohibits the public to subscribe for any securities in the company. 

The Companies Act, 2013 laid the concept of one person company. Section 2(62) defines one person company as a company with only one person as to its member. The legal and financial liability in such a company is restricted to the company and with one shareholder. Such a company can be formed for any lawful purpose by one person and can be registered under the Act by subscribing his name to a memorandum of the company. 

The memorandum must also contain the name of the person who in the event of death of the subscriber or his incapacity to contract becomes a member of the company. The subscriber has to give written consent in the name of the other person competent. 

As per Section 2(85) of the Companies (Amendment) Act, 2017, a small company refer to a company other than a public company, –

• Paid up capital does not exceed 2 crore rupees;
• Turnover does not exceed 2 crores, as per profit and loss account. 

It does not include:

• A holding or subsidiary company;
• Non-profit association registered under Section 8 of the Companies Act, 2013;
• A company or body corporate governed by a special Act. 

Thus, it can be said that a small company or one person company cannot be formed for non-economic objectives, whereas a public company as the name suggests is a company of the public. As per Section 2(71), a public company is a company that is not a private company and has a minimum paid up capital as prescribed. A subsidiary of a company that is not private is deemed to be a public company even when such subsidiary company continues to be a private company in its articles. Initially, all the companies were required to prepare their annual return under Section 92 in Form No. MGT-7 but later in 2020, the Ministry of Corporate Affairs specified that all companies have to file annual returns in MGT-7 except one person company and small company. One person company and the small company shall file their annual return from the financial year 2020-2021 in Form MGT-7A.

Annual Return  

Every company has to prepare annual returns in MGT 7, under Section 92(1) of The Companies Act, 2013. Particulars of which include:

• Its registered office, principal business activities, particulars of its holding, subsidiary, and associate companies;
• Its indebtedness;
• Its shares, debentures, and other securities and shareholding patterns;
• Details of the members and debenture-holders, including any changes since the previous financial year. 
• Details of the directors or officers, and details of the appeal and penalty or punishment regarding it;
• Details of the investors including their names, addresses, countries of incorporation, registration, and percentage of shareholding held by them;
• Details of its promoters, directors, key managerial personnel including any change since previous financial year; board of its various committees along with attendance details, remuneration of directors and key managerial personnel, any kind of penalty or punishment imposed on the company.
• Other attachments, if required.[2]

In the case of all the companies except, one person company, the annual return must be signed by a director or company secretary, in case of no company secretary, then it has to be signed by the practising company secretary. In the case of a one person company, the annual return has to be signed by the company secretary, when there is no company secretary it has to be signed by the directors, as per MGT 7A.

New Rule MGT 7A

After the Companies (Management and Administration) Amendment Rules, 2021, under Finance bill, 2021. The new rule is quite similar to MGT 7 but bought some major changes which include:

1. Details of directors and key managerial personnel:

The requirement of details of directors, boards of directors, and key managerial personnel has now been omitted. 

2. Remunerations of key managerial personnel have been omitted:

Since the provision related to the key managerial personnel does not apply in the case of one person company and small company, henceforth there is no need to mention it in the annual report.

3. It is up to the discretion of the company as to whether the listing of directors is necessary;
4. There is no need to mention the date of the annual general meeting or other board meeting details;
5. It is unnecessary to state the details of shares/debentures transfer;
6. Details of subsidiary/associate/holding have been omitted.

Thus, the annual report has to be prepared under MGT 7A which includes small companies and one person company whereas MGT 7 includes all other companies, pertaining to the financial year 2020-21.

Rule 11(1)

This rule is read with Section 92(1) of The Companies Act, 2013. It says small and one person companies have to submit an annual report at the end of the financial year under Section 92(1) in MGT 7A. All other companies other than one person company and small company have to prepare an annual return in MGT 7.

In case a company has paid up share capital of 10crore or more or holds turnover of 50 crore rupees or more, has to get it certified by Company Secretary in practice. The certificate has to be in the manner prescribed under MGT 8.[3]

Purpose of MGT 7A

It was necessary to amend the MGT 7 due to its vagueness. The purpose of the MGT 7A is to reduce the burden on small and one person’s companies and to smoothen the procedure of the form filling. 

Fees

Every company while furnishing the details of MGT 7A has to submit certain fees with the annual return. The fees may vary depending upon the share capital of the company. It has to be certified by the company secretary, in case there is no company secretary, the directors of the company will sign.

In case when the share capital is less than 1,00,000, the fee is 200 rupees. In Instances where the share capital lies between 1,00,000 to 4,99,999, the fee is 30000 rupees. The company has to submit the fees of 400 rupees when the share capital lies between 5,00,000-24,99,999. A company has to pay fees of 500 rupees when the share capital lies between 25,00,000-9,99,999. When the company has a share capital of 1 crore or more, 600 rupees have to be paid as fees. In case when the company fails to file an annual return or balance sheet or financial statement on time, then they have to pay additional fees as a penalty, which might include a penalty of 100 rupees per day.[4]

Conclusion

Thus, one person company or small company has been benefited from this amendment. They are given the care they deserve like new-born. Reducing the burden and giving incentives, special benefits to letting them grow in the market and contribute to the economy. Preparing separate provisions for annual return is an essential step towards the growth and expansion of the same.

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References:

[1] Dr. G. K. Kapoor, Dr. Sanjay Dhamjia, Company Law and Practices, Taxmann, 24^th Edition, Page: 10

[2] https://www.mca.gov.in/Ministry/pdf/CompaniesAct2013.pdf

[3] https://ca2013.com/rule-11-companies-management-and-administration-rules-2014/

[4] https://blog.saginfotech.com/mgt-7a-form-filing-due-dates-penalties