The Ministry of Corporate Affairs (MCA) is the regulatory body in India responsible for managing corporate legislation, including the Companies Act 2013 and the Limited Liability Partnership (LLP) Act 2008. One essential part of complying with these laws is filing various statutory forms and returns with the MCA through its electronic system, the MCA21 system. These electronic forms, or as they are called MCA forms, allow corporations and LLPs to communicate with the Registrar of Companies (ROC) and undertake their statutory requirements and corporate operations.
MCA forms are used for various purposes, including the incorporation of a business, appointment or resignation of directors, alteration of the registered office, issue of shares, filing annual reports and financial statements, and reporting resolutions of the board or shareholders. Every form is assigned a specific number and is to be used for a particular purpose; for example, Form INC-22 is used for the alteration of the registered office, Form DIR-12 is used for director-related changes, and Form AOC-4 is used to file financial statements.
Timely and proper filing of these forms is crucial for maintaining legal compliance, avoiding penalties, and maintaining transparency in the activities of businesses and LLPs. Non-filing or inaccurate filings can result in huge penalties, disqualification of directors, and other consequences. Therefore, it is important that each company secretary, compliance officer, and businessman dealing with corporate governance in India understands the application, matter, and due dates relating to MCA forms.
What is Form MGT-7?
Form MGT-7 is a mandatory document as mandated under Section 92 of the Companies Act, 2013 and Rule 11 of the Companies (Management and Administration) Rules, 2014. Form MGT-7 is meant for filing a company’s annual return with the Registrar of Companies (ROC). Annual return includes detailed information about the company’s organisation, management, shareholding pattern, and other information as on the last day of the financial year.
All business firms, with the exception of One Person Companies (OPCs) and Small Businesses, are required to file Form MGT-7 within 60 days after the Annual General Meeting (AGM).
Where the AGM is not held, the report has to be filed within 60 days from the date of the scheduled meeting of the AGM.
MGT-7 holds details regarding registered offices and business activities, directors, key employees, shareholders, shareholding structures, debentures, securities, meetings, penalties, and compliance issues.
If the company has a paid-up capital of more than ₹10 crore or a turnover of more than ₹50 crore, a certificate from a Company Secretary is required.
Filing of MGT-7 protects against confidentiality and statutory compliance violations, while non-filing could attract fines.
Objectives of MGT-7
The goals of Form MGT-7 extend far beyond compliance with the law. It acts as a critical tool for ensuring transparency in the company, safeguarding legal compliance, and fostering trust among regulators, investors, and the general public. Timely and accurate filing of MGT-7 not only guarantees legal compliance by the company but also helps in creating a stronger and more accountable corporate setup.
- Compliance with law under the Companies Act, 2013: The primary purpose of Form MGT-7 is to ensure that companies comply with the statutory requirement of filing an annual return. It signifies adherence to the principles of corporate governance and ensures that the company continues to be accountable to the Ministry of Corporate Affairs (MCA) in terms of its operations and organizational setup.
- Clear disclosure of corporate information: MGT-7 covers detailed information regarding the shareholding pattern of the company, management structure, director/key managerial personnel changes, and corporate actions taken by the company during the financial year. This increases transparency as it gives the regulators, stakeholders, and investors the necessary information.
- Government and Regulator Data: MGT-7 furnishes critical information to the Registrar of Companies (ROC) and the MCA for statistical analysis, policy-making, selection of public interest companies for scrutiny, and determination of compliance levels across different industries.
- Electronic record for public access: The filed MGT-7 forms become public domain (available through the MCA portal). This reinforces the stakeholders’ right to information while at the same time promoting corporate integrity and investors’ confidence.
- Curbing Corporate Fraud and Mismanagement: The timely and accurate filing of the MGT-7 provides the ROC with an opportunity to identify share transfer irregularities, lack of disclosure of related party transactions, and unauthorized appointments. This helps in identifying fraud or mismanagement at an early stage.
What is Form MGT-9?
Form MGT-9 was a structure specified under Section 92(3) of the Companies Act of 2013 and Rule 12 of the Companies (Management and Administration) Rules of 2014. It had the function of preparing an abridged version of the annual return to be incorporated in the Board Report of the company. It incorporated vital features from Form MGT-7, thus rendering stakeholders’ access to the financial and ownership information of the company.
MGT-9 reports major items like the structure of the corporation and the business operations, pattern of shareholding (promoters and public at large), movement in shareholding during the year, liabilities of the company, information about directors and key managerial persons (KMP), remuneration, compliance, and any penalty incurred.
The objective of MGT-9 was to improve corporate governance and transparency by providing stakeholders with quick access to important company information without having to read the entire annual return filed with the ROC.
However, due to the amendment in the Companies (Management and Administration) Rules, 2021, the necessity of annexing Form MGT-9 to the Board Report has been done away with. Instead, companies must place the entire annual return (Form MGT-7) on their website and include a link to the same within the Board Report, in place of MGT-9.
Objectives of MGT-9
In spite of the discontinuance of Form MGT-9 by virtue of the 2021 amendment, its aims continue to guide the overall framework of corporate disclosure. MGT-9 was formulated as a powerful tool for increasing transparency, stakeholder participation, and governance by articulating vital company information in a publicly accessible format. The obligation to publish the complete annual return (MGT-7) on the company’s website has replaced MGT-9, enabling the fundamental aim to be achieved through more contemporary, digital methods.
- Enhancing transparency and accountability: The primary purpose of MGT-9 was to summarize critical information from the annual return of the company (MGT-7) and report it through the Board’s Report. This made it easier for stakeholders, investors, and regulators to access important information about the company’s operations, ownership, and governance.
- Easy Access to Company Information: Since Form MGT-7 had been filed with the ROC and was not included at once in the firm’s report to the shareholders, MGT-9 acted as a brief overview that highlighted the most important aspects of the annual return. This increased the awareness and understanding of the firm’s managerial and financial position among the shareholders.
- Raising investor awareness and protection: MGT-9 provided a rapid, quick reference for existing and prospective investors to evaluate the financial condition of the company, the ownership pattern, and the history of compliance. It made investors more informed in their decisions, hence increasing investor protection.
- Simplifying complexity for non-technical readers: Form MGT-7 is a detailed and lengthy return, usually technical and complex in nature. MGT-9 offered a simpler version of the data, which was more readable to shareholders who may not have professional accounting or legal training.
- Facilitating Regulatory Supervision: MGT-9 helped the MCA and other regulatory agencies in making initial checks and flagging potential problems, such as sudden changes in shareholding, meetings that are not disclosed, or directorship irregularities.
Form MGT-7 Vs Form MGT-9
Form MGT-7 is a detailed and statutorily required form presenting the Registrar of Companies with a full annual return for a company, while Form MGT-9 is only a brief overview of Form MGT-7, intended to increase stakeholder disclosure by way of the Board Report.
The 2021 amendment made MGT-9 outdated, as it shifted the focus towards online disclosures by mandating the filing of the entire annual returns on the website of the company. The move goes along with the Ministry of Corporate Affairs’ vision of strengthening compliance and digital rule-making.
According to the Companies Act of 2013, compliance with statutory filing requirements is necessary for promoting transparency, good governance, and accountability in the working of businesses. Form MGT-7 and Form MGT-9 are both significant forms concerning company disclosures; both are connected to annual return details, but serve different purposes. Here is a detailed analysis of the differences between Form MGT-7 and Form MGT-9:
1. Purpose & Nature
- As mandated under Section 92(1) of the Companies Act, 2013, companies need to file Form MGT-7 with the Registrar of Companies (ROC) as their statutory annual return. The form collects detailed information on the financial year of the company, shareholding pattern, directorship, and management information.
- Form MGT-9, being an exact or abridged form of the annual return (MGT-7), was earlier required to be accompanied by the Board’s Report under Section 92(3). It pinpointed salient features of the company’s annual report in a concise manner.
2. Requirement of Filing
- All firms (except for sole proprietorships and small businesses) are required to file MGT-7 with the Registrar of Companies (ROC) within 60 days after the Annual General Meeting (AGM) of each year.
- MGT-9 is not required to be filed with the ROC. Rather, it is supposed to be placed in the Board Report of the company for public circulation. The requirement has, however, been made redundant as of 2021.
3. Content Covered
MGT-7 has detailed information on the general information of the company, main business activities, shareholding pattern (public versus promoters), directors’ remuneration, board meetings, transfer of shares, debt, penalties, and status of compliance.
MGT-9 duplicates certain information from MGT-7, including shareholding patterns, changes in shareholding, significant shareholders, directors’ remuneration, Key Managerial Persons (KMP), and a summary of corporate governance practices in brief.
3. Legal Status and Amendments
- MGT-7 remains compulsory and operative. Every applicable company is required to file it every year with the ROC. The structure is stipulated by the MCA and has to be filed online through the MCA portal.
- The Companies (Management and Administration) Amendment Rules, 2021, abolished the requirement to annex MGT-9 to the Board’s Report from March 5, 2021. The Companies now need to display their full annual return (MGT-7) on their website and a link thereto in the Board’s Report.
4. Applicability
- MGT-7 applies to all companies except for OPCs and small companies. Filing with the ROC is compulsory.
- MGT-9 was earlier applicable to all companies but was amended in 2021. Disclosure is now achieved by a link on a website to the full MGT-7, eliminating the need for preparation or attachments.
5. Certification
- Paid-up capital above ₹10 crore or turnover over ₹50 crore companies need to be certified for MGT-7 by a certified Company Secretary (Form MGT-8).
- No certification was required for MGT-9. It was simply a disclosure document prepared based on MGT-7 information for incorporation in the Board Report.
Conclusion
Forms MGT-7 and MGT-9 have played an important role in promoting corporate transparency and compliance with the Companies Act of 2013. While MGT-7 is a statutory annual return filed with the Registrar of Companies, MGT-9 is a public disclosure extract in the Board’s Report.
Even though MGT-9 was sunsetted after 2021, its basic rationale of making available basic company information remains relevant through disclosures in digital form.
Together, these types have strengthened corporate governance, increased stakeholder vigilance, and helped foster a more accountable and transparent business scene in India. Compliance with these rules is a necessity for legal obligations as well as public image.
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