Corporate Update | Penalty for Not Appointing a Whole-Time Company Secretary After Crossing the Threshold
Background:
The Registrar of Companies, NCT of Delhi & Haryana, acting as the Adjudicating Officer, has issued a penalty order under Section 203 of the Companies Act, 2013 (“the Act”) against United Technologies Corporation India Private Limited ("the Company") and its officers. This action follows an application by the Company for adjudication of penalties related to a default in appointing a whole-time Company Secretary as required by Section 203 of the Act.
Facts of the Case:
The Company's paid-up capital increased to INR 10,56,99,990 effective 28 July 2022, triggering the requirement to appoint a whole-time Company Secretary under Section 203(1) of the Companies Act, 2013, read with Rule 8A of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. However, the Company appointed a whole-time Company Secretary only on October 30, 2023, resulting in a default period of 458 days (from July 28, 2022, to October 29, 2023). The delay being attributed to a lack of suitable candidates for the position. In view of the same the Company filed an application for adjudication before the Registrar of Companies, NCT of Delhi and Haryana.
Relevant Provisions:
Adjudication of Penalty:
The Adjudicating Officer, upon due consideration, determined that the paid-up share capital of the Company exceeded ?10 crores with effect from 28 July 2022. Consequently, the Company became statutorily obligated to appoint a Whole-Time Company Secretary in accordance with the provisions of Section 203 of the Act.
Furthermore, the Adjudicating Officer held that the Company remained in continuous default for a period of 458 days for failing to comply with the aforesaid statutory requirement. In view of the said non-compliance, penalties were imposed upon the Company as well as its officers in default, pursuant to the provisions of Section 203(5) of the Act.
Penalties Imposed:
MHCO Comment:
This penalty order highlights the importance of timely compliance with the provisions of the Companies Act, 2013, regarding the appointment of key managerial personnel. Companies must ensure adherence to these requirements to avoid penalties and maintain regulatory compliance. Such penalties are extremely important to ensure corporate governance and to ensure due compliance with the provisions of the companies act and its accompanying rules.
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