EVEN MINUTE ISSUE CAN RESULT IN COMPLIANCE ISSUE FOR A COMPANY – A WAKEUP CALL TO ALL COMPANY SECRETARIES

 EVEN MINUTE ISSUE CAN RESULT IN COMPLIANCE ISSUE FOR A COMPANY – A WAKEUP CALL TO ALL COMPANY SECRETARIES  

FAILURE TO MENTION IN THE MINUTES  THAT RESOUTION WAS PASSED UNANIMOUSLY  ATTRACTS A PENALTY OF Rs 5 LACS.

SASTASUNDAR HEALTHBUDDY LIMITED VS ROC, CALCUTTA

Section 203(3) of Companies Act 2013 requires that if MD of a company is to be appointed as MD of another company, Board resolution of existing company is required to be passed with the consent of all directors present at the meeting.

In this case, company passed Board resolution and no dissent of any director was recorded in the minutes.

However, the word ‘unanimously’ was not specifically mentioned in the minutes.

ROC still treated it as non-compliance of Sec.203 and levied penalty of Rs.6.50 lakhs (Rs.5 lakhs on company and Rs.50,000 each on 3 directors).

BOMBAY HIGH COURT SET ASIDE AN ARBITRAL TRIBUNAL’S DIRECTIONS IMPOSING PERSONAL LIABILITY ON THE SOLE SHAREHOLDER OF A ONE PERSON COMPANY (OPC).

 BOMBAY HIGH COURT SET ASIDE AN ARBITRAL TRIBUNAL’S DIRECTIONS IMPOSING PERSONAL LIABILITY ON THE SOLE SHAREHOLDER OF A ONE PERSON COMPANY (OPC). 

SARAVANA PRASAD V. ENDEMOL INDIA PVT. LTD., 

FACTS OF THE CASE  

The Bombay High Court in Saravana Prasad v. Endemol India Pvt. Ltd., where it set aside an arbitral tribunal’s interim directions that had imposed personal liability on the sole shareholder and director of a One Person Company (OPC), Mr. Saravana Prasad, while upholding the same measures against the OPC itself, Innovative Film Academy Pvt. Ltd. 

KEY HIGHLIGHTS OF THE JUDGMENT 

1. SEPARATE LEGAL IDENTITY OF OPCS AFFIRMED 

The Court underscored that a One Person Company is a distinct legal entity under the Companies Act, 2013. The sole shareholder and director cannot be treated as the company itself—notably, the corporate veil cannot be pierced without specific and compelling reasons like fraud or misuse. 

In other words , the verdict of Solomon vs Solomon once again reiterated.  

2. INTERIM MEASURES LIMITED TO THE OPC 

While the arbitral tribunal’s order directed both the OPC and Mr. Prasad to deposit approximately ₹10.40 crores in a fixed deposit and disclose personal and corporate financial details, the High Court held that these directions were legally sustainable only against the company, not the shareholder 

3. NO BASIS FOR PERSONAL LIABILITY 

The judgment emphasized that there was no contractual basis, personal guarantee, or evidence of fraud or misuse to warrant personal liability being imposed on Mr. Prasad. His role as sole shareholder and director alone could not override the legal protections afforded under the OPC structure. 

BROADER IMPLICATIONS 

• Protection of Entrepreneurs: This ruling reinforces that OPC proprietors are shielded from triggering personal liability, provided they don’t commit wrongdoing or explicitly assume such liabilities via guarantees. 

• Importance for Creditors: It sends a clear message to creditors to secure personal guarantees or collateral if they aim to recover dues from OPCs’ founders. 

R V SECKAR , FCS , LLB 79047 19295 

SECTION 89(6) OF THE COMPANIES ACT, 2013 PENALTY FOR DELAY IN MGT‑6 FILING

 SECTION 89(6) OF THE COMPANIES ACT, 2013 PENALTY FOR DELAY IN MGT‑6 FILING 

WHICH COMPANY HAS TO FILE FORM MGT-6 

Form MGT-6 is an important document under Section 89 of the Companies Act, 2013, that must be filed with the registrar to disclose the persons who are listed as shareholders in the registered members list but have no beneficial interest in shares. This section requires all such companies to file Form MGT-6. 

NON-BENEFICIAL OWNERSHIP OF SHARES. 

The Companies Act requires such companies to file Form MGT-6 within 30 days from the date they received a declaration from a registered member about the non-beneficial ownership of shares.  

SECTION 89(7) OF THE COMPANIES ACT 

Under section 89(7) of the Companies Act, if a company does not file the form within the required time, it and the responsible officer will be liable to pay a penalty. 

FOLLOWING IS THE TABLE SHOWING PENALTY FOR DELAY IN FILING FORM MGT-6  

This highlights compliance is paramount objective of a company. By complying various provisions, company and its directors can avoid unnecessary penalties.  

R V SECKAR , FCS , LLB 79047 19295