ASSETS NOT HELD IN COMPANY’S NAME – COSTLY COMPLIANCE FAILURE ROC GOA vs MEGA STRUCTURES REALESTATE LIMITED

 ASSETS NOT HELD IN COMPANY’S NAME – COSTLY COMPLIANCE FAILURE

ROC GOA vs MEGA STRUCTURES REALESTATE LIMITED

FACTS OF THE CASE

• The company acquired a proprietary business (M/s Reliance Construction) by issuing shares worth ₹2.02 crore to its Managing Director.
• However, even after acquisition:
• Properties remained in the name of the Managing Director, not the company.
• This non-compliance continued for multiple years (FY 2017–18 to FY 2021–22).

LEGAL PROVISION INVOLVED

Section 187 of the Companies Act, 2013

·      Mandates that all investments and assets of a company must be held in its own name

·      Section 187(4)provides for penalty in case of default

CONTINUOUS DEFAULT UNDER SECTION 187

·      The company failed to transfer ownership of acquired assets into its own name

·      This is a continuous default under Section 187

·      Auditor’s reports repeatedly flagged the issue

PENALTY IMPOSED

ROC Goa imposed penalties under Section 454 read with Section 187(4):

·      Company: ₹5,00,000

·      Managing Director (Officer in default): ₹50,000

KEY LEGAL PRINCIPLE

This case reinforces a critical compliance rule:

A company cannot “beneficially own” assets while legal ownership remains with directors or others.

Even if:

·      Consideration is paid (e.g., shares issued), and

·      Assets are reflected in books

·      Legal title must be in the company’s name

·      Auditor qualifications can trigger ROC action

KEY TAKEAWAYS

·      Post-acquisition compliance is critical

·      Continuous default increases exposure

·      Weak governance can lead to avoidable penalties

# YOUR COMPLIANCE PARTNER R V SECKAR, FCS, LLB 79047 19295,