Compounding of certain offences under the Companies Act, 2013

Compounding of Certain Offences

Under the Companies Act, 2013

Relevant Section, Rules, and Forms

Section 441 of the Companies Act, 2013

Rules 7, 8 and 12 of Companies (Registration Offices and Fees) Rules, 2016 and

Rule 88 of National Company Law Tribunal Rules, 2016

Forms: GNL-1, INC-28, NCLT-9, RD-1

Provisions relating to Compounding.

1. In spite of anything contained in CrPC, 1973, any offence except offence punishable with imprisonment or with imprisonment and fine, under the Companies Act, 2013 may be either before or after institution of any prosecution, be compounded:

• By Regional Director or Officer authorised by Central Government (in case where maximum amount of fine which may be imposed for such offence does not exceed 25 lakhs rupees.) or
• By Tribunal (in all other cases.)

2. Compounding cannot be done during the period of investigation.
3. Any offence compounded, the similar offence cannot be compounded again for 3 years, and after 3 years second or subsequent offence will be deemed to be a first offence.
4. Application for compounding will be made to ROC who shall forward the same with his comments to Tribunal or RD or authorised officer as the case may be.
5. After offence is compounded, intimation of same shall be given by company to ROC within 7 days from date on which offence is compounded.
6. Where an offence is compounded, no prosecution shall be initiated in relation to such offence.
7. If compounding is made after institution of prosecution, compounding shall be brought to notice of court in which prosecution is pending by ROC and offender shall be discharged.

Procedure of compounding.

 By National Company Law Tribunal

1. Call Board meeting
2. Prepare following documents:

• Application in format (NCLT-9).
• List of directors.
• List of shareholders.
• Copy of show cause notice.
• Copy of reply given for show cause notice.
• Latest audited financial statements.

3. Convene board meeting to pass following resolutions for:

• Considering and taking note of offence committed and fine for such offence.
• Authorizing a director to make good the default.
• Authorizing a director to file application with NCLT.
• Authorizing a director to digitally sign the forms.
• Authorizing a director to sign affidavit verifying the application and declaration on behalf of company.
• Appoint a professional to appear before NCLT.

4. Complete the formalities regarding minutes of board meeting.
5. Arrange following documents:

• List of directors.
• List of shareholders.
• MOA and AOA.
• Copy of show cause notice.
• Copy of reply against show cause notice.
• Latest audited financial statements.
• Memorandum of appearance.
• Other relevant documents.

6. Prepare an application and affidavit on stamp paper and get signature of authorised director and officer in default on application.
7. File GNL-1 for compounding of an offence with ROC.
8. ROC after being satisfied shall forward the application along with its comments to NCLT.
9. NCLT shall fix a hearing and after hearing of both the parties and after having satisfied himself shall pass necessary order as it thinks fit.
10. File form INC-28 along with certified true copy of order for compounding with ROC, within time specified in order.

BY Regional Director

1. Call Board Meeting
2. Prepare following documents:

• Application in format as given in Form RD-1
• List of directors.
• List of shareholders.
• Copy of show cause notice.
• Copy of reply given for show cause notice.
• Latest audited financial statements.

3. Convey board meeting to pass following resolutions for:

• Considering and taking note of offence committed and fine for such offence.
• Authorizing a director to make good the default.
• Authorizing a director to file an application with RD.
• Authorizing a director to sign affidavit verifying the application.
• Authorizing a director to digitally sign the forms.
• Appointing a professional to appear before RD.

4. Complete the formalities regarding minutes of board meeting.
5. Arrange following documents:

• List of directors
• List of shareholders
• MOA and AOA
• Copy of show cause notice
• Copy of reply against show cause notice
• Latest audited financial statements
• Memorandum of appearance
• Other relevant documents

6. Prepare an application and affidavit on stamp paper and get signature of authorised director and officer in default on application.
7. File form RD-1 for compounding of an offence with ROC.
8. Simultaneously file Form GNL-1 with ROC.
9. ROC after being satisfied shall forward the application along with its comments to RD.
10. RD shall fix a hearing and after hearing of both the parties and after having satisfied himself shall pass necessary order as it thinks fit.
11. File form INC-28 along with certified true copy of order for compounding with ROC, within time specified in order.