Recently The Ministry of Corporate Affairs (MCA) has imposed a penalty of Rs. 8.92 lakhs on a private limited company and its directors for failure to timely appoint a whole-time Company Secretary, as required under Section 203 of the Companies Act, 2013.
Despite crossing the paid-up capital threshold that mandates such an appointment, the company delayed compliance for several months. The adjudicating authority found the explanation unsatisfactory and enforced penalties under Section 203(5), which prescribes significant fines for both the company and its officers in default.
Key Takeaway:
- It was observed that violation period was falling in pre and post the Companies (Amendment) Act, 2019, w.r.e.f. 2-11-2018, where the MCA has substituted the word penalty in place of fine. In the scenario, the authorities to approach to make default good are different viz. Regional Director / NCLT for compounding of offences under section 441 of the Companies Act and Registrar of Companies for adjudication of penalties under section 454 of the Companies Act 2013. In the present matter, the Registrar of Companies made it clear that offences for which violation period falling prior to the effective amendment date viz. 2-11-2018 need to be compounded with the appropriate compounding authority and imposed penalty by adjudicating the matter for violation period falling after the effective amendment date viz. 2-11-2018.
- The Companies (Amendment) Act, 2019, replaced the regime of criminal fines for several procedural and technical defaults with civil penalties, making compliance enforcement faster and less punitive, while still ensuring accountability.
- 16 sections were amended to shift punishment for non-compliance from “fine” (criminal offence, prosecuted in courts) to “penalty” (civil liability, adjudicated by MCA-appointed officers). This move was aimed at decriminalizing technical and procedural lapses and unclogging courts and NCLT.
- Prompt appointment of key managerial personnel is not just a statutory formality—delays can result in substantial financial penalties and regulatory scrutiny. Companies should regularly monitor compliance thresholds and act proactively to avoid such consequences.