Challenges faced by the CS in filing annual returns

It is a well-known fact that the ‘annual filing fever’ takes hold of all CS (Company Secretary) offices during October and November after corporations hold their AGMs and due dates for filing are triggered. audited financial statements and annual statement. However, this year the filing has reached a “feverish” pace and tone thanks to the late release of electronic forms under the new 2013 Companies Act and also to repeated revisions to it. This has posed several challenges to CS offices, as well as companies struggling to understand and complete information correctly. Let’s look at some of the challenges related to the preparation and electronic filing of the Annual Declaration (AR) of a public company for the fiscal year 2014-15:

1. There is an extract from AR in MGT9 that is part of the Board Report (new requirement of the 2013 Companies Act) and then there is MGT7, which is the full AR in electronic version. MGT7 was released only in late September 2015 and continued to evolve as the ‘amoeba’ until it reached its current ‘avatar’ on November 17, 2015. Needless to say, the information that the CSs collected for MGT9 previously is not exactly the same as in MGT7. Wondering how MGT9 qualifies as an ‘AR extract in MGT7’? There was certainly enough time since 2014 to align the two and save companies and professionals from interpreting and gathering information on the same topic multiple times and from multiple perspectives! In the hope that this will be resolved by the 2015-16 fiscal year annual filing.

2. Companies resent that CSs backtracking over and over again asking them to classify their percentage business activity in 2 different codes: IAS2008 for annual performance (MGT7 and MGT9) and NCPS (National Classification of Products and Services) or ITC. -HS (Indian Trade Classification – Harmonized System) for AOC4 classification (presentation of audited financial statements). This information is not available on the audited finances and their schedules. Most companies cannot find the correct classification and therefore it is just the ‘almost there’ or ‘closest’ code. Once the broad-level sorting is complete in MGT7, the autocomplete description that appears reflects unrelated activity that makes CSs nervous, resulting in a gtalk / WhatsApp / ‘ask around’ activity. telephone. Lack of clarity is the biggest obstacle that leads to different interpretations. We cannot risk being wrong since the CSs are signing the form or certifying as in the case of MGT8 (for a certain category of companies).

3. In the initial version of MGT7, the details of the share capital distribution were in the Promoter and Public category. Since public participation is normally relevant for public limited companies, many professionals did not comply with the share capital belonging to non-promoters in the case of unlisted limited companies. There was confusion as to whether it was correct to fill it in the “public” category or not. After countless representations, inquiries, webinars, FAQs, etc., this has now been clarified by modifying the form to read ‘Share Capital Breakdown – Promoter and Non-Promoter Participation’.

4. Similarly, Loan in MGT9 clearly meant “including increased interest but not due”, whereas in the initial version of MGT7, it simply said Loan. This has now been expanded to read as ‘Loan that includes higher interest but does not owe’, which lines up both forms. As it stands, information at this depth – of greatest interest, augmented but not due, etc. It is not available for the CSs of the financial statements and we need to go back to the client to request the same, delaying the whole process. Simply put, unless the CS is fully prepared with a complete checklist, it is not possible to prepare the AR. The tragedy is that there was little time for us to create a sticky checklist, as the electronic form itself has evolved. Many times a form filled out today would not be good for tomorrow simply because there was a review. A huge waste of time and energy to redo it.

5. Another area is equity participation, which in the first version was classified as Indian and foreign. The question arose as to whether it includes preferred share capital. Now it is switched to Equity and Preference, but there is no place to show the division of Indian and foreign equity participation by legal persons. Correcting one anomaly has resulted in another requiring a new fix in MGT7!

6. What is the significance of the number of meetings to which a director is entitled? Does it also include alternate directors? What meetings are they entitled to attend? Seemingly simple information but that can be interpreted in various ways.

7. Disclosure of remuneration of Directors and KMP – different position taken by different professionals. While some say this does not need to be disclosed for unlisted companies, some are of the opinion that whether or not they are publicly traded if a company has MD / WTD / Manager etc. details of compensation must be disclosed. Many companies are picky when it comes to disclosing details of management compensation, but they do not understand that this information is available in any case in the audited Balance Sheet Program, albeit to a lesser degree of disclosure.

8. Compliance and punishments under other laws: how can we know this? Difficult to determine because, in general, the scope of work of a PCS (Acting Company Secretary) does not extend to other laws and this is a new requirement. There is also no information on such non-compliance and penalties in the financial statements. How can we sign that the information is correct unless we verify? These are just a few gray areas and challenges that a CS faces in filing this year’s Annual Return. Penalties for CSs are important for filling in the wrong information. Therefore, the following steps may be helpful:

– Study the electronic form completely and prepare a checklist of the required information and start only when the complete data is available. At least for next season’s presentation, better clarity may be available.

– Send the completed form to the client for confirmation.

– Whenever necessary, insist on a letter of representation from management. Currently, various disclosures are subject to interpretation and companies do not share certain information based on advice received from other experts or internal decisions.

– Verify all the original records before signing the form, considering that the CS is being declared for this purpose as well as the correctness and completeness. For certification in MGT8, in any case, a mini audit must be performed.