Whether Extract of Annual Return (Form MGT-9) required to be attached to Board’s Report?

According to general practises, every company is required to prepare the annual return extract in Form MGT-9 before preparing the actual Annual Return in E-form MGT-7, which is submitted to ROC within 60 days of the AGM.

The Form MGT-9 is an extract from the annual return that contains the following information about the company for one fiscal year and is annexed to the Board of Directors’ Report on the Company:

• Company fundamentals (CIN, address, primary business activity)
• The Company’s Primary Business Activities
• Holding, Subsidiary, and Associate Company Information
• Holding Pattern in Shares
• Company’s indebtedness
• Directors’ and key management personnel’s remuneration
• Penalties/punishment/additional offences

The Companies (Amendment) Act, 2017 (“Amendment Act, 2017”), which was published in the Official Gazette on 03.01.2018, made significant changes to various provisions of the Companies Act, 2013 (“CA, 2013”), including the omission of Form MGT-9 and the placement of the Annual Return in Form MGT-7 on the company’s website.

Through this article, the most important annual filing question: Is it necessary to prepare Form MGT-9 (Extract of the Annual Return) for the Fiscal Year 2020-21 and subsequent years shall be addressed.

Previous and current position concerning Annual Return Extract (in Form MGT-9)/Annual Return (in Form MGT-7)

From the 1st of April, 2014 to the 30th of July, 2018:

Every company must attach to its Board’s Report an extract of its Annual Return in Form MGT-9.

From 31/07/2018 to 27/08/20

• Every company must attach to its Board’s Report an extract of its Annual Return in form MGT-9.
• The web address, if any, of the Annual Return extract is to be disclosed in the Board’s Report.

From 28/08/2020 to 4/03/2021

• Every company must post a copy of its annual report (in Form MGT-7) on its website if it has one.
• The web address for such an annual report shall be included in the Board’s report.
• (c) If the web link to such annual return is not disclosed in the Board’s report/ If the Company does not have a website, an extract of the annual return in Form MGT-9 must be attached to the Board’s Report.

From 05/03/2021 onwards

• Every company shall post a copy of the annual return (in Form MGT-7/MGT-7A, as applicable) on the company’s website if any.
• The web address for such a small annual report shall be included in the Board’s Report.

Key points to consider when preparing the Board’s Report for the fiscal year 2020-21 and beyond

• Annual Return Web Link in Board Report
  • A copy of the Annual Return must be posted on the company’s website.
  • A web link to a copy of the Annual Return (in Form MGT-7/Form MGT-7A, as applicable) as posted on the website, which will be disclosed in the Board’s report.
  • If the company does not have a website, mention this in the Board’s report; there is no need to annex/attach the Annual Return to the Board’s Report.

• The Extract of Annual Return (MGT-9) is no longer required because it is missing
• Annual Return means the following for fiscal years 2020-21 onwards:
  • MGT-7A: One Person Companies (OPCs) and Small Businesses
  • MGT-7: for all other businesses.
• Non-Application of Section 93 to Specified IFSC Private/Public Companies
  Sec 92(3) does not apply to Specified IFSC private/public companies as of 04.01.2017, and thus there is no requirement to place a copy of the annual return on the company’s website or disclose a web link to such annual return in the Board’s report.
• MGT- 7A & Revised MGT-7
  The new form MGT-7A and revised form MGT-7 will be available on the MCA portal on July 16, 2021.
• Increase in threshold limits for Small Company
  Beginning April 1, 2021, the Small Company threshold limits (paid-up capital and turnover) will be increased. For Form MGT-7A or Form MGT-7, the company’s status as of the end of the fiscal year (March 31st) should be taken into account. However, it is important to note that the MCA/e-form takes into account the company’s status as of the date of filing. As a result, proper precautions must be taken.
• Difficulties encountered recently with e-Form MGT-7/7A
  An annual return must be prepared based on the particulars as of the end of the fiscal year. However, the system/e-form considers the date of filling/filing the form- to determine whether a company is a small business or not. For example, a company that was previously not a small company but has now become a small company due to increased thresholds, and e-form prompting an error to choose e-form MGT-7A even for previous financial year filings, despite Rule 11(1) stating that “One Person Company and Small Company shall file an annual return in Form No.MGT-7A from the financial year 2020-2021 onwards.”
  Even though holding/subsidiary companies are not small businesses, the system/e-form treats them as such based on the paid-up capital and turnover criteria, resulting in an error to select e-form MGT-7A.
  Because the e-Form does not highlight future dates, the AGM date cannot be filled electronically prior to the AGM date, i.e. at the time of preparing the Board’s Report. As a result, such a date can be manually entered.

Conclusion

The term “Form MGT-9” no longer exists in the Companies Act of 2013 and has been completely removed from the Act. Every company is required to post a copy of its annual return in Form MGT-7/Form MGT-7A (as applicable) on its website, and the web link to such annual return must be disclosed in the Board’s Report.

As a result, the Form MGT-9 is no longer required to be prepared beginning with the Fiscal Year 2020-21 and onwards, regardless of whether the Company has a website or not.