How termination of CODS shall effect Disqualification of Directors
How termination of CODS shall effect Disqualification of Directors
Short Summary:
As MCA issued the list of approx 309,614 Director
who has been disqualified under section 164(2) and whose DIN has been blocked
by the MCA. Due to this action many representations made from industry,
defaulting companies and their directors seeking an opportunity for the
defaulting companies to become compliant and normalize operations.
With a view to give them opportunity the CG has introduced
a scheme namely “Condonation of delay scheme 2018” [CODS-2018].”The scheme was effective w.e.f. 01st January,
2018 to 01st May, 2018.
Many Companies have taken the benefit of scheme by
completion of pending Annual Forms with ROC along with CODS form. “However, still lot of
Companies are there in MCA records, which have still not completed the pending
Annual Filings.”
As the scheme is expire on 01st May, 2018. A
question arises in the mind of professionals and Corporates i.e. How to remove the disqualification of Directors of the Companies, which
has not completed the Annual filings under CODS scheme and not taken the
benefits of CODS Scheme?”
Few Questions:
While discussing above question, many other questions
came into mind i.e.
1.
Whether CODS shall be available to Companies, which
has filed petition for restoration of Companies before NCLT on or before 01st
May, 2018?
2.
Whether CODS shall be available to Companies, which
has filed writ petition for Strike off of Companies before High Court on or
before 01st May, 2018?
3.
What shall be the course of action for the
Companies which have not taken the benefit of CODS scheme?
Other Food for Thoughts:
A. Whether DIN of
Director shall be deactivating again?
B. Consequences if a
person not complied with CODS, however used his DIN for resignations and
appointments in another companies during CODS Period?
Effect
of Closure of CODS Scheme
A.
Deactivation of DIN
As per paragraph no. 4 point (i) of CODS: DIN of disqualified director shall be activating
only for the period when scheme shall be effective. (i.e. 01st January, 2018 to 01st
May, 2018)
As per paragraph no. 4 point (iv) of CODS:
The Din of Directors have not filed overdue documents and the e-form
CODS and are still found to be disqualified on conclusion of scheme, “shall be liable to deactivated on expiry of the scheme”.
However, in other word it can be said that:
“Directors who has not
complied with the CODS shall remain disqualified u/s 164,
therefore his DIN
shall be deactivated again”
B.
Effect on Directorships:
After expiry of Scheme director who has not
complied with Scheme shall be disqualified again as mentioned above. Therefore,
i. He shall not be
eligible to get appointment as Director in other Companies (for 5 years). (Section
164)
ii. He shall not be
eligible to re-appoint in that Company. (Section 164)
iii. His office from other
companies shall be Vacant automatically. (Section 167)
iv. Such persons are not
eligible to incorporate new Companies.
v. Following other
effects:
·
Shall not be eligible to sing the Documents on behalf of Company in capacity
of Director,
·
Shall not eligible to attend Board Meeting
·
His name shall be removed from the register of Directors.
Penalty for the Directors for Non Compliance
Ø Any person who contravenes the provisions of sec 164:
There
are no specific penal provisions stated for the occurrence of default, but same
as be stated under section 172 of the Act, company and every officer who is in
default of chapter IX shall be punishable with fine of Rs. 50000 to 5 Lacs
Ø Contravention on continue as director even after attainment of
disqualification
He shall be punishable with the
imprisonment for a term upto 1 year or with fine of Rs. 1 lac to Rs. 5 Lacs or
with both
C.
Action to be taken by ROC:
As per paragraph no. 7 of CODS:
The ROC shall take all necessary actions under CA 1956/ 2013 against the
Companies who have not availed the CODS and continue in default in filing. Therefore, actions that can be taken by ROC
can be followings:
I.
Show cause notice:
Registrar of Companies can issue show cause notices u/s 92/ 99/ 129/ 137
to the Directors of such defaulting Companies for contravention of provision of
Section 92, 96 and 137 of Act respectively.
Even ROC has issued show
cause notice to many companies under above
mentioned sections.
Note: ROC can issue show cause notice in many other
sections also like 164, 166, 167 etc.
II.
Compounding of Offence u/s 441:
As per provisions
of Companies Act, 2013, if company fails to file Annual form within the
additional time prescribed under Section 403 (i.e. 270 days) then company has
to file application with NCLT for compounding of offence u/s 137 and 92.
III.
Additional Filing Fees:As per Companies Amendment Act,
2017
No Upper Cap - Additional
Fees:
In the Companies (Amendment) Act, 2017 It is approved that
if any company fails to comply with the provisions of Section 92 & 137 the
Companies Act, 2013 i.e. filing of e-form MGT-7 and AOC-4 with in period of 60
days and 30 days of date of Annual General Meeting “Then as per amendment act the
Company can file such form subject to additional fees of Rs. 100/- per day.
Calculation
of Time Period and Additional Fees:
S. No.
|
Normal Fees (Calculation for the Company having capital of Rs.
100,000/-)
|
Period of Default
|
Additional Fees as per Companies Act, 2013
|
Additional Fees as per Companies Amendment) Bill, 2017
|
A.
|
Rs. 300
|
30
|
600
|
3000
|
B.
|
31
|
1200
|
3100
|
|
C.
|
60
|
1200
|
6000
|
|
D.
|
61
|
1800
|
6100
|
|
E.
|
90
|
1800
|
9000
|
|
F.
|
91
|
3000
|
9100
|
|
G.
|
180
|
3000
|
18000
|
|
H.
|
181
|
3600
|
18100
|
|
I.
|
300
|
3600
|
30000
|
|
J.
|
301
|
3600
|
30100
|
Major Effect:
One
can be opine that once the this section notified, there shall be huge
additional fees for non-filing of Annual Forms and such fees shall be increase
by each day. “There is no upper cap in additional
Fees”
1.
Whether CODS shall be available to Companies, which has filed petition for
restoration of Companies before NCLT on or before 01st May, 2018?
As per paragraph no. 4 point (v) of CODS:
In case
of struck off Companies u/s 248 and which have filed application for revival “upto
the date of scheme (i.e. 01st May, 2018) in such situation DIN of
Directors shall be re-activated on NCLT order.
After
reading above paragraph, one can opine that if a company has filed application
u/s 252 for revival of Company before 01st May, 2018 in such case
his DIN shall be reactivate after order of NCLT (even if passed after 01st
May, 2018)
Note:
However,
CODS form is not available on MCA website. Therefore, this shall be still question
whether CODS shall be available or not.
2. Whether CODS shall be
available to Companies, which has filed writ petition for Strike off of Companies
before High Court on or before 01st May, 2018?
CODS
shall not be available to the companies, who have filed write petition with
high court even before or after 01st May, 2018. Even in its orders
Hon’ble high court has given the instruction to companies to file overdue documents
and CODS on or before 01st May, 2018.
(Author
– CS Divesh Goyal, GOYAL DIVESH & ASSOCIATES Company Secretary in Practice
from Delhi and can be contacted at csdiveshgoyal@gmail.com). Disclaimer: The entire
contents of this document have been prepared on the basis of relevant
provisions and as per the information existing at the time of the preparation.
Although care has been taken to ensure the accuracy, completeness and
reliability of the information provided, I assume no responsibility therefore.
Users of this information are expected to refer to the relevant existing
provisions of applicable Laws. The user of the information agrees that the
information is not a professional advice and is subject to change without
notice. I assume no responsibility for the consequences of use of such
information. IN NO EVENT SHALL I SHALL BE LIABLE FOR ANY DIRECT, INDIRECT,
SPECIAL OR INCIDENTAL DAMAGE RESULTING FROM, ARISING OUT OF OR IN CONNECTION
WITH THE USE OF THE INFORMATION
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