Checklist for Certification of Annual Return

Every company, irrespective of its type like private limited company or one person company or section 8 company must file company annual return with the MCA before the 29^th of November. A company's annual return contains the essential details of a company with respect to the previous financial year. The document must be certified by a Chartered Accountant in practice. In this article, we look at a checklist that can be used by Chartered Accountants while certifying an annual return. Refer to the following articles for more information about annual return filing for a company:

Before filing annual return please also ensure whether the company's audit report must provide certain information as required under CARO 2016.

Verification of Status

If the particular firm is a private company, the authority must verify whether:

The company has a paid capital amounting to Rs 1 lakh or more.
The company has a share capital of Rs 5 lakhs or more.

Further, checks should be made on the MCA portal to ensure that appointment of Auditor was completed by the Directors within 30 days of incorporation.

Situation of the Registered Office

The Chartered Accountant must verify whether the notice of situation or notice of change in the situation of registered office has been filed in Form INC22 within a period of 30 days of the date of incorporation or change. In case of filing SPICe incorporation form, there is no requirement for filing INC22. Furthermore, he must verify the following, subject to applicability:

If there is a change of location of the registered office within the confines of a state, he/she must check if Form INC 23 has been filed with the Regional Director along with the copy of special resolution passed by the company.
If the registered office is shifted to another state, he/she must check whether Form INC 23 has been filed with the Central Government along with the prescribed fees essential documents.

Documents to File Form INC 23

Copy of the company's Memorandum of Association and Articles of Association
Copy of Board resolution and Power of Attorney
Copy of the Notice of General Meeting
Copy of Special Resolution
Affidavit verifying the application
List of creditors and debenture-holders
Document pertaining to payment of application fees

Register of Members and Debenture Holders

The Chartered Accountant must verify whether:

Separate registers are being maintained for each class of shares in Form MGT 1, as prescribed under Rule 3 of the Companies (Management and Administrative) Rules, 2014.
Registers of debenture holders or any other security holders are being maintained as per Form MGT 2 prescribed under Companies (Management and Administrative) Rules, 2014.
All the registers are being maintained at the company’s registered office. If it is maintained at some other place wherein one-tenth of the total members entered in the register of members reside, a special resolution has been passed.
Maintenance of index number by the company, if there are a minimum of 50 members.
The entries in the registers index included therein are authenticated by the company secretary of the entity or any other person authorized by the Board for this purpose, and the date of the board resolution is mentioned.
Changes are incorporated within seven days of such change.
Entries in the register are authenticated by the Secretary or any other person authorized by the Board for the purposes of sealing and signing share certificates.
Declaration made to a company has been noted in its Registrar of members within 30 days from the receipt of declaration.

Return of Allotment

The Chartered Accountant must verify whether:

The company has made any allotment of its shares. If they have made, the return of allotment was filed in Form PAS 3 specifying the number and nominal account of the shares comprised in the allotment; along with the names addresses, occupations of the allottees and the payment of any amount.
Shares were issued for a consideration that doesn’t include cash. If it is so, the original contract of issue of shares and its copy was filed with the return.

Exemptions on Filing Return of Allotment

The return of allotment need not be filed if the allotment was of forfeited shares or the allotment was made to the subscriber to the Memorandum and Articles of association.
The return of allotment need not be filed where debentures are allotted.

Register of Renewed and Duplicate Certificates

TheChartered Accountant must verify whether:

The register has been maintained in Form SH -2 with the prescribed particulars such as the name of the person to whom the certificate has been issued, the number and date of issue of share certificate, and the likes of it.
The consent of the board has been obtained before issuance of the duplicate share certificate in lieu of certificate that are lost or destroyed.
All entries in the registrar have been authenticated by the secretary or any other person authorized by the Board of Directors.

Format for issuing share certificate.

Register of Transfers

The Chartered Accountant must verify whether:

The company has maintained separate register of transfers for different classes of shares/debentures, and entered the particulars pertaining to the registration of shares/debentures.
Transfer number as per the date of transfer and date of approval has been entered in the Share Transfer deed.
The company has maintained a separate file of documents like Powers of Attorney, Probate, Letters of Administration and/or Succession Certificate, Resolution of companies or other bodies corporate authorizing any particular person to sign on its behalf that are registered with the company.
Details of nomination forms have been noted.

Register of Securities Bought Back

The Chartered Accountant must verify if registers of securities bought back has been maintained in Form SH-10 for entering the particulars such as:

The consideration paid for securities bought back.
The date of cancellation of securities.
The date of extinguishing or physically destroying the securities.

In addition to this, he/she must also verify whether the entries in the register are authenticated secretary or authorized person.

Directors and Key Managerial Personnel

The authority must ensure that the company has maintained the register of directors and key managerial personnel, including their shareholdings at its registered office. The document must contain the particulars prescribed under rule 17 of Companies (Appointment of Qualification of Directors) Rules, 2014.

Women Director

The regulations of the Act specifically state that listed companies or any other public company having or exceeding a paid-up share capital of Rs 100 crores; or a turnover of Rs 300 crores must have at-least one women director among its ranks. The concerned authority must check the organization's compliance with respect to this mandate.

Independent Director

With respect to an independent director, the authority must verify whether:

The company meets the standards of appointing the appropriate number of directors.
An independent director doesn’t hold his/her office for a term exceeding five consecutive years on the Board of a company.
His/her appointment contains the term of appointment; the board’s expectation on the appointed director; the fiduciary duties that accompany such an appointment along with the pertinent liabilities; Provision for Directors and Officers (D and O) insurance, if any; The code of business ethics that the director must adhere with; the do’s and don’ts, the remuneration specifying the periodic fees, reimbursement of expenses for participation in the meetings and profit related commission.
The terms and conditions of the role are posted on the company’s official website.
He/she has been issued with a declaration at the first meeting of the board that meets the criteria of independence.
At-least one of the company’s directors is an Indian resident.

Consent to Act as Director

The authority must confirm whether the director has consented to the role in writing in Form DIR-2, and the company has filed the same with the Registrar in Form DIR-12 along with the specified fee.

Disclosure of Interest by Director

The authority must verify if all the directors have disclosed their concern or interest in any company or body corporate, firms or other association of individuals by issuing a notice in writing in Form MBP 1.

Register of Particulars of Contracts

The authority must verify whether:

The register is being maintained in Form MBP-4 by mentioning separate particulars.
The organization has recorded the names of the directors voting for/against the contract or off arrangement, as well as the names of those remaining neutral.
The register specifies the names of firms and bodies corporate pertaining to each of which notice has been issued by him/her.
The register includes the signature of the directors who were present at the Board meeting following the meeting in which the contracts were considered.
The particular contracts/arrangements have received the approval of members in the general meeting, and the register is being maintained and signed according to terms of the resolution threat.
The register is being maintained at the registered office and is available for inspection. The extract and copies are permitted to be taken or are provided to the members in the same manner and on payment of the same fee as that of the Register of members.
The entries in the register have been validated by the company secretary or a person authorized by the board.

Disqualification of Directors

The authority must verify whether:

The appointed director who is disqualified in any manner, has intimated the same to the company in Form DIR-8.
None of the directors has been disqualified from being appointed as director.

Know more about Director Disqualification.

Appointment of Key Managerial Personnel

The certifying authority must verify whether kmp’s are appointed by a resolution of the board.

Appointment of Auditors

The authorities must verify whether:

The company’s first auditor was appointed by the Board within 30 days of its company registration, and the appointment was ratified in every Annual General meeting.
The auditor is designated to his/her role only for the stipulated period.
Letter of consent is obtained from the auditor/firm.
The company has placed the matter with respect to appointment for ratification by members at every Annual General Meeting.

Corporate Social Responsibility

Corporate Social Responsibility (CSR) refers to the responsibility of an organization towards societal betterment. Every company having a Net worth of Rs 1000 crores or Net Profit of Rs 5 crores or more during a particular financial year must constitute a CSR committee of Board. The committee should consist of 3 or more directors; out of which at-least one of them should be an independent director. The concerned authority must verify whether:

The committee is constituted with a minimum of three directors out of which one should be an independent director.
The CSR policy has a list of CSR projects or programs which a company plans to undertake falling within the ambit of Schedule 7 of the Act, and includes details such as specifying modalities of execution of such project or programs, along with the implementation schedules for the same and monitoring process of such projects or programs.
The CSR policy is not inclusive of the activities which come under the purview of the normal course of business.
CSR expense includes all the relevant expenditures including contribution to corpus, or projects or programs pertaining to CSR activities approved by the Board.
The company invests a minimum of 2% (in a given financial year) of the average net profits that the company made during the three immediately preceding financial years, in pursuance of its CSR policy.
CSR policy is placed on the company’s official website.
In the event of any failure to spend the specified amount, disclosure for the same is made in the annual report.