Penalty Provisions of LLP and Private Limited Company

This is perhaps the most crisp content prepared by the Corporate Law Department of Team Taxmantra directly focused on penalty provisions of LLP and Private Limited Company. Along with focusing on the start up community with start up counseling services, followed by company or LLP incorporation, our range of services stretches to the annual maintenance services, which captures mandatory services in the field of accounting, punching financial transactions, finalizing the statements, attestation and audit services by our attestation wing, income tax and service tax return filing, annual ROC filings and secretarial drafting services. That being said, all the companies or LLPs we incorporate avails our annual maintenance services, majorly because the promoters of such companies and LLPs needs to focus on their major line of business, with minimum involvement in the regulatory compliances. And this is where we take care of all the mandatory compliances, allowing our esteemed clients to remain completely engrossed in their business, as is very evident for expansion and growth of the organization. In the process, any situation of penalty provisions of LLP and Private Limited Company does not come into picture. The problem arises when a director or designated partner of a company or LLP registered through a different consultant who does not provide annual maintenance services, suddenly comes across one of our contents, and realizes the mandatory requirements that  his/her entity had not adhered to. At a time when we get to check the non-compliance areas, penalty is already levied and there is no way of waiver of such penalty. We really discourage this mishap, because the designated partner or director is not to be blamed for the non-compliance, since he/she is not supposed to remain aware of such mandates. The pain point lies that when he/she assigns us to do the pending compliances, we have to pay the penalty and do the needful, and which is a sheer waste of money, and which could have been easily avoided if they were notified just after the incorporation about the necessary compliances that should have been taken care of. Surprisingly, at this time where LLP concept is relatively favoured, on the grounds of cheaper cost and less compliances, cost dearer when it comes to pending compliances. Here is how it goes. PENALTY COMPUTATION FOR COMPANIES Schedule X provides us with the fee structure for companies, which is a function for calculation of penalty, if the company is in default i.e. details of fees for filling of form. The normal filling fees for each form will be as under:-

(a) Nominal Capital Rs. 1,00,000/- or more but less than Rs. 5,00,000Rs. 200
(b) Nominal Capital Rs. 5,00,000/- or more but less than Rs. 25,00,000Rs. 300
(c) Nominal Capital Rs. 25,00,000/- or moreRs. 500

In case of delay the additional fees will be as under:-

Period of DelayFixed rate of additional fee
Upto 30 daysTwo times of normal fee
More than 30 days and up to 60 daysFour times of normal fee
More than 60 days and up to 90 daysSix times of normal filing fee
More than 90 daysNine times of normal filing fees

The maximum amount of fees payable would be 10 times of normal fees. Please also note that the period of delay will be calculated from the expiry of 30 days from the date in which the last AGM is held i.e 30th September, 2012. Summing up the entire provision, the total fees for filing Form 23AC and 23ACA for FY 2011-12 would be Rs 2000 [Rs 200 as normal fees and Rs (200*9)=Rs 1800]. Same is the case with form Form 20B, and Form 23B. Therefore, if the company is in default for filing Form 20B, 23AC, 23ACA and 23B, the minimum penalty would be Rs (2000*3)=Rs 6000 and maximum of Rs (5000*3)=Rs 15000.   PENALTY COMPUTATION FOR LIMITED LIABILITY PARTNERSHIPS This is where the situation of huge penalty for non-compliance of ROC Annual Filings of LLPs arises. Non-Filing of Form 8 (Statement of Accounts & Solvency) and Form 11 (Annual Return) after the specified due dates attracts additional fee @ Rs 100 per day of default. In simple words if  the LLP fails to file both Form 8 and Form 11 within the prescribed time limit, then an additional fees of Rs 100 is payable per day from the due date to the date of filing. Moreover, a LLP cannot file Form 8 unless and until form 11 is filed within the specified due date.   The under listed documents may also be relevant reads : Pvt vs LLP vs Partnership Firm Can winding up of LLP save penalty ? Which entity is right for your business – Pvt or LLP ?