Landing on the moon, Neil Armstrong said ‘That’s one small step for man, one giant leap for mankind’. On a similar vein, Amardeep Singh Bhatia, Jt. Secretary to the Government of India may as well have remarked, ‘One small notification issued, one giant leap for enforcing the company law.’
By notification dated June 13, 2017, all exemptions, modifications and adaptations provided in the company law to private limited companies, Section 8 –not for profit companies and the Government companies stand automatically withdrawn if they fail to file their financial statement under section 137 or their annual return under section 92 of the Companies Act.
For the year 2015-16, the latest year for which annual return and financial statements were to be filed, over 3 lakh active companies have not filed it with the MCA. The cost of this failure was tough to quantify, as the process of identifying these companies and penalizing them with an amount ranging from Rs.1 lakh to Rs.10 lakhs was not only quite long but also uncertain if they will be penalized at all. With this single notification issued, all these companies stand to lose significant exemptions they have by virtue of being a private limited company or a section 8-not for profit company or a government company.