WILL THE FOREIGN NON RESIDENT DIRECTORS ALSO BE PUNISHED FOR NON-DISCLOSURE OF SECRETARIAL STANDARDS COMPLIANCE IN BOARD'S REPORT UNDER SECTION 118(11) OF THE COMPANIES ACT, 2013?

 WILL THE FOREIGN NON RESIDENT DIRECTORS ALSO BE PUNISHED FOR NON-DISCLOSURE OF SECRETARIAL STANDARDS COMPLIANCE IN BOARD'S REPORT UNDER SECTION 118(11) OF THE COMPANIES ACT, 2013?

NON-DISCLOSURE OF SECRETARIAL STANDARDS COMPLIANCE IN BOARD'S REPORT BY CHONGQING JIELI INDIA PRIVATE LIMITED ATTRACTED PENALTY UNDER SECTION 118(11) OF THE COMPANIES ACT, 2013

FACTS OF THE CASE

The law also requires that the Board’s Report explicitly state whether the company has complied with these Secretarial Standards.

In the case of Chongqing Jieli India Private Limited, the omission of this disclosure in its Board’s Report amounted to non-compliance. As a result, the company attracted penalty under Section 118(11).

KEY HIGHLIGHTS OF THE CASE:

• The company failed to include a statement in its Board's Report confirming   compliance with Secretarial Standard-1 (Board Meetings) and Secretarial Standard-2 (General Meetings).

• The omission constituted a violation of Section 118(10) of the Companies Act,   2013, read with the applicable Secretarial Standards.

• During the adjudication proceedings, the company admitted the default and requested the Adjudicating Officer to take a lenient view by imposing the minimum prescribed penalty.

• The ROC observed that compliance with Secretarial Standards and the corresponding disclosure in the Board's Report is a statutory requirement, and failure to make such disclosure attracts penalty under Section 118(11) of the Companies Act, 2013.

  PENALTY LEVIED ON NON-RESIDENT DIRECTORS

Penalties levied on non-resident directors of Chongqing Jieli India Private Limited

Mr. Zeng Ping – ₹5,000

✔️ Mr. Zhang Yi – ₹5,000 Who are non-resident diectors of Chongqing Jieli India Private Limited fined for not NON-DISCLOSURE OF SECRETARIAL STANDARDS COMPLIANCE IN BOARD'S REPORT - the impact on NON resident directors

IMPACT ON NON‑RESIDENT DIRECTORS

EQUAL LIABILITY

The Companies Act, 2013 does not distinguish between resident and non‑resident directors when it comes to compliance obligations.

Any director who is part of the Board is considered “officer in default” if statutory requirements are not met.

PERSONAL PENALTY EXPOSURE

Even though they may not be physically present in India, non‑resident directors are still liable for lapses in statutory disclosures.

Section 118(11) imposes a fixed penalty of ₹5,000 per officer in default, which applies uniformly.

GOVERNANCE RISK

Repeated lapses can damage the directors’ reputation and may affect their eligibility for future directorships in Indian companies.

It signals to regulators that the Board is not exercising adequate oversight.

PRACTICAL TAKEAWAY

·       Disclosure is mandatory even if compliance exists in practice.

·       Penalty is automatic if disclosure is missing, regardless of intent.

·       Best practice: Create a Board’s Report compliance template that includes this clause every year.

 

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