Small Company Penalised for Errors in Reporting Authorised Share Capital in AOC-4

Understanding the Case: ROC Penalty on Incorrect Reporting

The Registrar of Companies (ROC) imposed penalties on a small company for inaccurately reporting its authorised share capital and omitting transaction details in its AOC-4 financial filings. This violation highlights the critical need for precision in statutory filings under the Companies Act, 2013.

According to the adjudication order, the company failed to update its authorised share capital correctly in Form AOC-4, which is mandatory for filing annual financial statements. Despite qualifying as a small company, penalties were levied under Section 454, but reduced per Section 446B, which offers leniency for smaller entities with paid-up capital below Rs. 4 crore and turnover under Rs. 40 crore.

The penalty amounted to Rs. 1,00,000 on the company and Rs. 25,000 each on the officers in default. This case underscores that even technical errors can trigger enforcement actions, emphasizing timely compliance with disclosure norms.

Legal Framework: Key Provisions on Share Capital Reporting and AOC-4

Section 64(1) of the Companies Act, 2013 mandates companies to notify the ROC of any alteration in share capital, such as increases under Section 61, via Form SH-7 within 30 days. Failure to file SH-7 violates Section 64(2), attracting penalties.[1][7][9]

Form AOC-4, filed within 30 days of the AGM (180 days for OPCs), requires accurate financial statements including balance sheet, profit & loss, cash flow, and details like authorised share capital.[2][4][6] Attachments include auditor’s report, board’s report, and statement of changes in equity. Certification by a CA/CS is needed except for small companies and OPCs.[2][12]

Inaccurate reporting in AOC-4, especially post-SH-7 alterations without updates, leads to discrepancies detectable during ROC scrutiny, as seen in NDH-4 rejections or routine checks.[1][11]

Penalties under Section 64(2) and Adjudication

• Company: Up to Rs. 5 lakh, reduced to Rs. 2 lakh for small companies.
• Officers: Up to Rs. 1 lakh each.
• Daily delay fines: Rs. 500-1,000, capped variably.[5][7]

Section 446B halves penalties for small companies, applied here to mitigate the Rs. 1 lakh company penalty and Rs. 25,000 per officer.[11]

Implications for Companies: Avoiding Pitfalls in Compliance

This penalty serves as a cautionary tale for companies, particularly small ones, to maintain consistency between SH-7 filings and AOC-4 disclosures. Technical glitches on MCA portals are not valid excuses, as authorities prioritize statutory duties.[1]

Common errors include mismatched authorised capital post-increase without SH-7, or omitting related party transactions and equity changes in AOC-4 segments IV-VI.[2][4] Delays in filings compound penalties, with fees based on nominal share capital.[4][10]

Best Practices for Compliance

• Board resolution for capital changes, followed by immediate SH-7 filing.
• Cross-verify AOC-4 data with MCA records before submission.
• Engage professionals for certification and audits.
• Monitor MCA portal for updates and file proactively.[12]

Non-compliance risks not just fines but reputational damage and appeal processes, payable within 90 days with rectification orders.[1][11]

Steps to Rectify and Prevent Future Violations

Post-penalty, companies must pay within timelines, file condonation applications if needed, and update records. Prevention involves internal audits, compliance calendars, and training for officers on Sections 64, 129, 134, and 137.[3][6]

For AOC-4, ensure all attachments like AOC-1 for subsidiaries, CSR reports, and secretarial audits are complete. XBRL filing applies to larger entities.[10] Small companies benefit from reduced scrutiny but must not overlook basics.

In conclusion, accuracy in authorised share capital reporting is non-negotiable. Proactive compliance safeguards against ROC actions, ensuring smooth operations under the Companies Act.