Compounding Matters Under Companies Act

Section 441 of the Companies Act, 2013 deals with Compounding of offence. Compounding of offences is a settlement mechanism, by which, the defaulter is given an option to pay money in lieu of his prosecution, thereby avoiding a prolonged litigation. The legal meaning of compounding of offence is “Doing good the default/non-compliance.

The offences under the Companies Act, 2013 which cannot be compounded are:

1. An offence which is punishable with imprisonment only.
2. An offence which is punishable with imprisonment and also with fine

Jurisdiction to handle cases for the compounding:

Where the maximum amount of fine which may be imposed for such offence does not exceed twenty-five lakh rupees, then the application for compounding shall be filed with the Regional Director or any officer authorised by the Central Government.

Where the maximum amount of fine which may be imposed for such offence exceed twenty-five lakh rupees, then the application for compounding shall be filed with the NCLT.

Procedure to compound an offence under Companies Act, 2013

1. Holding of Board Meeting to pass a resolution for filing of application with authority for compounding of offence and authorize director of the Company and for preparation and signing of documents including application. Company will authorize any professional for follow up the matter with authority
2. The Board will calculate the amount of the penalty as per the relevant section.
3. Company will prepare the application of compounding as per NCLT Rules.
4. Application for compounding shall be submitted in E-form GNL-1. This form will be forwarded by ROC to NCLT/Regional Director as applicable.
5. The Concerned authority shall call for personal hearing. The hearing can be attended by Director/secretary/ officer of Company or by authorized representative like advocate or a practicing CS/ CA/ CMA.

Documents required for compounding of offences

1. Board Resolution.
2. Application for compounding of offence, with the reason for default.
3. Undertaking and affidavits
4. Other related documents in relation to offence/ default made.

Taxcellent will help in drafting application and compounding the offence following the prescribed procedure and attend personal hearings on behalf of the Company with best CA Services.