The Central Government has prescribed an abridged form of annual return for One Person Company (OPC) and small company” by amending the provisions of Companies (Management and Administration) Rules, 2014 which shall come into force from 05th March, 2021. 1. Rule 11(1) of the Companies (Management and Administration) Rules, 2014 Prior to this amendment, every company shall prepare its annual return in Form No. MGT.7. However, after this amendment every Company shall file its annual return in Form no- MGT-7 except OPC and Small Company. OPC and small companies shall file annual returns from the Financial Year 2020-21 onwards in Form No-MGT-7A. 2. Rule 12 of the Companies (Management and Administration) Rules, 2014 Prior to this amendment, the extract of the annual return to be attached with the Board’s Report shall be in Form No. MGT.9. Provided that a company shall not be required to attach the extract of the annual return with the Board’s report in Form No. MGT.9, in case the web link of such annual return has been disclosed in the Board’s report in accordance with sub-section (3) of section 92 of the Companies Act, 2013. A copy of the annual return shall be filed with the Registrar with such fee as may be specified for the purpose. However, after the amendment a copy of the annual return shall be filed with the Registrar with such fees as may be specified for this purpose. The requirement of attaching the extract of the annual return with the Board’s Report shall be in Form No. MGT.9. has been omitted in Rule 12 of the said rules. 3. Rule 20, after proviso in sub rule (2) of the Companies (Management and Administration) Rules, 2014 Prior to this amendment there was only Explanation I which said “for the purpose of this sub-rule, “Nidhi” means a company which has been incorporated as a Nidhi with the object of cultivating the habit of thrift and savings amongst its members, receiving deposits from and lending to, its members only, for their mutual benefit, and which complies with such rules as are prescribed by the Central Government for regulation of such class of companies.” However, after this amendment Explanation-II has been inserted which defines the following expressions Agency, Cut-off date, Cybersecurity, Electronic voting system, Remote e-voting, Secured system and Voting by electronic means. Therefore, with effect from March 5, 2021 every company, except OPC and small company, shall file its annual return in Form No- MGT-7 whereas OPC and small company shall file their annual return from FY 2020-21 in Form no- MGT-7A.

WHAT IS SMALL COMPANY

Small company means a company other than a public company,—

1. paid-up share capital of which does not exceed fifty lakh rupees or such higher amount as may be prescribed which shall not be more than ten crore rupees; and

2. turnover of which as per profit and loss account for the immediately preceding financial year] does not exceed two crore rupees or such higher amount as may be prescribed which shall not be more than one hundred crore rupees:

Provided that nothing in this clause shall apply to—

A. a holding company or a subsidiary company;

B. a company registered under section 8; or

C. a company or body corporate governed by any special Act;

As per the new Rule 2(1)(t) of the Companies (Specification of Definitions Details) Rule, 2014, the prescribed paid-up capital is INR 2 crore and turnover of INR 20 crore for the small company.

We have to check above criteria on year to year basis.

The following companies can never be a small company

♦ Public company;

♦ Holding or subsidiary Company;

♦ Not For Profit Company;

♦ Company or Body Corporate governed by the special act example company governed by IRDA;

♦ A private company whose paid-up capital is more than INR 2 cr, or the turnover exceeds INR 20 cr in the immediately preceding financial year.

A small company can have an associate company and joint venture.

WHAT IS OPC

One Person Company means a company which has only one person as a member.

There are some significant amendments in the provisions governing the incorporation and management of the OPC, with effect from 1st April 2021 through the Companies (Incorporation) Second Amendment Rules, 2021.

Earlier only Resident Indian Citizens can incorporate OPC. Now Non-Resident Indian Citizens can also incorporate OPC.

However, the person having foreign citizenship cannot incorporate OPC.

Earlier only Resident Indian Citizens can be the nominee in OPC. Now Non-Resident Indian Citizens can also be the nominee of the OPC.

However, the person having foreign citizenship cannot become a nominee in the OPC.

Further, Rule 7 of the Companies (Incorporation) Rules, 2021, has been omitted by the Companies (Incorporation) Second Amendment Rules, 2021, with effect from 1st April 2021.

So, the company can voluntarily convert itself into any other kind of company without any limitation. However, before this amendment, OPC cannot voluntarily convert itself into any other kind of company; unless two years expire from the date of incorporation.

OPC can now remain OPC without converting itself into any other kind of company irrespective of Paid-up Capital or Turnover.

Earlier, If OPC increase paid-up share capital beyond fifty lakh INR or its average annual turnover during the relevant period exceeds two crore INR, it cannot remain OPC.

DIFFERENCE BETWEEN MGT-7 AND MGT-7A

As per the second proviso to Section 92(1), MGT-7A is the abridged form of MGT-7. On a plain reading of the MGT-7A, I found no difference between both forms. However, there are some minor differences between both forms. MGT-7A does not require details such as holding and subsidiary company, number of committee meetings etc.

As per the first proviso to section 92(1), there is no need to affix the signature of PCS on the Annual Return for small companies and OPCs, so there is no space provided for the same.

REQUIREMENT OF MGT-8

As per the provisions of Section 92 and rules made thereunder, MGT-8 need to be attached with MGT-7 by; every listed company and every public or private company having paid-up share capital of more than INR 10 crore or more or turnover of INR 50 crore or more.

REQUIREMENT OF ATTACHING MGT-9 WITH BOARD REPORT

To understand this, we have to read section 92 with rule 12 of the Companies (Management and Administration) Rules, 2014 and section 134 (3). Both sections and rule provide, company need to upload annual return on the company’s website if any. Requirement of attaching extract of annual return as specified under rule 12 of the Companies (Management and Administration) Rules, 2014 is omitted with the introduction of the Companies (Management and Administration) Amendments Rules, 2014.

FILLING OF THE ANNUAL RETURN

Every company should file an Annual Return within 60 days from the date of AGM or the due date of AGM.

PENALTY IN CASE OF DEFAULT

If the company fails to file the Annual Return within the stipulated time, in case of one-time default, INR 10000, and in case of continuous default, INR 100 per day subject to the maximum of INR 2,00,000.