Companies Act, 2013 - Extract of annual return - Part Two - Dr S. Chandrasekaran - Article published in Business Advisor, dated January 25, 2015 http://www.magzter.com/IN/Shrinikethan/Business-Advisor/Business/

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Companies Act, 2013: Extract of annual
return - Part Two
Dr S. Chandrasekaran
The filing of annual return under the Companies Act,
1956 (old Act) as well as under the Companies Act,
2013 (new Act) is one of the two basic return filings by
every company annually. The annual return prescribed
under the new Act has been revised thoroughly, with
very extensive coverage such as remuneration of key
managerial personnel, particulars of meetings held,
penalties and compounding of offences, disclosures and
so on. Compiling of such an annual return requires
information not only from the sources of secretarial records but also from
other sources such as finance, legal etc. The certification by a practising
company secretary is another important factor and throws great
responsibility; and the fine is hefty.
Formats of annual return
The old Act had prescribed one particular format, whereas the new Act has
prescribed two formats of annual return. The main annual return is in
format MGT-7 and the second format is an extract of annual return which is
in MGT-9. The main annual return is to be filed within sixty days from the
date of annual general meeting or where no annual general meeting is held
in any year, then within sixty days from the date on which the annual
general meeting should have been held. The annual return, which if filed
without having held the annual general meeting, should carry a statement
specifying the reasons for not holding the annual general meeting. The
extract of annual return is a new feature which needs to be attached along
with the Board of directors‘ report.
Main annual return vs extract of annual return
One has to understand that preparation of an extract of annual return is
nothing but first prepare the full set of annual return and extract certain
information from the full set. The importance of annual return of a listing
company is greater than an unlisted company.
The information provided in the annual return such as shareholding
patterns, constitution of Board of directors, meetings, capital structure, and
disclosures are not only important for shareholders but also for general

2. Volume X Part 2 January 25, 2015 16 Business Advisor
public at large. The Board of directors of a listed company has to approve
the audited annual financial statements within a period of sixty days from
the closure of financial year. Generally, such companies also simultaneously
approve the directors‘ report, fix the date of annual general meeting in the
same Board meeting which approves the audited financial statements for so
many administrative reasons, financial implications and time management
of Board members. Now, it is the duty of the company secretary, more
particularly, of a listed company, to compile all such information on a war
footing and then only can he extract the annual return in MGT-9 to form
part of Board‘s report.
Change of period of particulars in annual return
The old Act requires that the particulars of annual return have to be on the
date of annual general meeting held or the date on which the annual general
meeting should have been held. The new Act has switched over to contain
the particulars of annual return as on the end of financial year. The
switchover may be convenient for all financial matters such as
indebtedness, remuneration to key managerial personnel etc.
Major differences between the two reports
Once the main annual return is compiled, then it is only required to extract
certain information from it. However, information such as:
a) Share capital;
b) Turnover and net worth;
c) Particulars of directors and key managerial personnel;
d) Certificates;
e) Disclosures
need not be required to be provided in the extract of annual return.
Similarly, the particulars of registration and other details are limited as
compared to the main annual return format MGT-7.
Would it be beneficial?
The workload of a company secretary has already increased manifold in
compiling the annual return. The new Act has retained the same time limit
of sixty days for filing the annual return from the date of annual general
meeting or where annual general meeting was not held then sixty days from
the last date on which annual general meeting should have been held. He,

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being in a tight corner for convening Board meeting, meetings of various
committees and also the annual general meeting, has some time gap to
compile the annual return after the annual general meeting is held.
The period of sixty days is provided only for such compilation; otherwise, it
can also be filed within thirty days along with the annual report.
Now, for drawing extract of annual return the company secretary has to
take steps simultaneously to compile the main annual return and then only,
he can extract the annual return to be part of directors‘ report.
The role and responsibility of a practising company secretary is further
made vulnerable. Companies would expect to simultaneously check the
main annual return so as to extract annual return for Board‘s report.
He has already a busy schedule in the verification of compliance of
applicable provisions of law for issuing a secretarial audit report which
would also figure in the agenda for Board meeting and on which the
directors have to consider and provide a statement.
Besides, both the extract of annual return in MGT-9 and the annual return
in MGT-7 would be available for public inspection at the office of the
Registrar of Companies; besides, the extract is available for shareholders in
the directors‘ report.
Two reports would be of no benefit to any of the stakeholders of a company
nor public at large. It is only an additional workload in the corporate
secretariat and that, too, at the crucial time of approval of annual accounts
within the mandatory time period of sixty days.
Companies Act only requires that the annual accounts have to be approved
by shareholders within a period of six months, with a notice period of
maximum twenty-five days for convening a shareholders meeting. This gives
much room for unlisted companies to plan and compile the entire data
systematically.
The Board can consider all such matters even at the fifth month after the
end of the financial year. Securities & Exchange Board of India has, through
listing agreement, prescribed a time limit of sixty days from the end of last
quarter of the financial year, and compiling the data of annual return along
with the financial statements would take lot of time and energy.
At the end, such an exercise would not be beneficial, and it is for the
Ministry of Corporate Affairs to simplify the process of annual return.
(Dr S. Chandrasekaran is Senior Partner, Chandrasekaran Associates, Delhi)