Compounding Of Certain Offences Under Companies Act, 2013

An offence is an Act, of omission or Default, whether committed wilfully or due to negligence, ultimately lead the Company or its officer, to Fine, penalties and/or imprisonment, as specified under the Act.

Compounding of offence is a tool, whereby a person/entity committing default, admitted that he / it has committed an offence and seeks Compounding, by filing an application to the compounding authority.

The compounding authority may compound the offence and direct the defaulting party to deposit compounding fee as decided by it, on case to case basis. Once the said compounding fee is paid, the defaults will no more be treated as offence.

The provisions pertaining to compounding of offences are set forth under Section 441 of Companies Act, 2013.

Section 441 of the Act provides for compounding of following offences:

  1. Offence punishable with fine only, or
  2. Offence punishable with fine or imprisonment or both.

The following offences cannot be compounded under the Act:

  1. Offence punishable with imprisonment only.
  2. Offence punishable with both imprisonment and fine.

Compounding authorities under the Companies Act, 2013:

Under the Act, the compounding authority shall be either “Regional Director” or “National Company Law Tribunal”. Classification in between the Compounding Authority shall be based upon the Quantum of Fine involved in an offence.

  • An offence shall be compounded by Regional Director, where the maximum amount of fine which may be imposed for such offence does not exceed INR 25 Lacs.
  • All offences where the maximum amount of fine which may be imposed for such offence exceed INR 25 Lacs, shall be compounded by National Company Law Tribunal.

Procedure for compounding of offences:

  1. An application for compounding of offences has to made in Form GNL-1 to Registrar of Companies under jurisdiction, the Company is registered.
  2. Registrar shall forward the same, together with his comments thereon, to the Regional Director or NCLT depending upon the amount of fine which be imposed.
  3. The Tribunal or the Regional Director or any officer authorised by the Central Government, as the case may be, while dealing with a proposal for the compounding of an offence for a default in compliance with any provision of this Act which requires a company or its officer to file or register with, or deliver or send to, the Registrar any return, account or other document, may direct, by an order, if it or he thinks fit to do so, any officer or other employee of the company to file or register with, or on payment of the fee, and the additional fee, required to be paid under section 403, such return, account or other document within such time as may be specified in the order.

(Any officer or other employee of the company who fails to comply with any order made by the Tribunal or the Regional Director or any officer authorised by the Central Government shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding one lakh rupees, or with both)

The compounded amount shall not exceed the maximum amount of fine.

Barriers to Compounding of offences under Companies Act, 2013

  • Any offence covered under this Section 441 by any company or its officer shall not be compounded if the investigation against such company has been initiated or is pending under this Act.
  • No offence committed by a company or its officer within a period of three years from the date on which a similar offence committed by it or him was compounded under this section is again compoundable.
  • Offences punishable with imprisonment only or with both imprisonment and fine are not allowed to be compounded under this Act.

Benefits of compounding of offences under Companies Act, 2013

  • Avoiding losing the Dignity and Goodwill of the Company and its office.
  • Last resort to correct any unintentional Default and Non Compliance
  • Avoiding heavy Fines and Penalty.
  • Restarting the Business Activities of the Company.

J. K. Gupta & Associates, (Company Secretaries), having experience of more than 25 years, has till date successfully completed many compounding assignment of its clients. For Assignments of Compounding of offences under companies Act, 2013, Kindly Contact us.

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