Reply to Show Cause Notice Received from Ministry of the Corporate Affairs Compliance Management System

Reply to Show Cause Notice Received from Ministry of the Corporate Affairs Compliance Management System
27 March 2020

Reply to Show Cause Notice Received from Ministry of the Corporate Affairs Compliance Management System

The MCA-Compliance Monitoring System which is an AI-based system is tracking certain non-compliance of the company automatically and sending show cause notice under Article 96 (Annual General Meeting) of the Companies Act, 2013.

Why Show Cause Notice?

As per Section 96 of the Companies Act, 2013: Every company other than a One Person Company shall in each year hold in addition to any other meetings, a general meeting as its annual general meeting and shall specify the meeting as such in the notices calling it, and not more than 15 months shall elapse between the date of one annual general meeting of a company and that of the next. Provided that in case of the first annual general meeting, it shall be held within a period of 9 months from the date of closing of the first financial year of the company and in any other case, within a period of 6 months, from the date of closing of the financial year. Now, there are following 2 probabilities for getting a notice for violation of Section 96:

  1. You exceeded the specified timeline of 9 months or 6 months from the closure of the financial year or
  2. The gap between 2 AGM exceeded 15 months.
How did MCA come to know about the violation?

MCA comes to know your AGM dates through filings done in AOC-4 and MGT-7. New launched an AI-based system that keeps a track on the dates from the e-forms and if there is a violation, it will automatically send the notice on your company’s email id.

What exactly does SCN tell?

SCN is a system-generated notice sent on company’s email which is registered with the Ministry of Corporate Affairs. Notice will contain its unique number, date & time, non- compliant section, provisions of that section and other things. SCN also provides 15 days time to reply to the SCN through MCA CMS portal. If the company fails to reply within 15 days, Registrar of Companies will initiate penal action against the company.

Further, it is the duty of the company to give the show cause notice to all its Directors, KMP etc. Delivering SCN through e-mail will be treated as deemed to have been served upon every officer in default of the company in terms 20 of the Companies Act, 2013

What should be the reply for Violation of Section 96?

Firstly you will have to check for what violation you’ve received the show cause notice. If you really failed to conduct an AGM according to the timeline provided, your reply should contain acceptance of non-compliance and prayer for imposing low penalty due to the small size of the company. There shall be no loss to the shareholders and the general public, no repetitive nature of non-compliance etc. etc.

There are chances that you have conducted an AGM within due date but you have mentioned the wrong AGM date in e-forms AOC-4 or MGT-7 which give rise to the issuance of SCN. In that case, your reply should categorically deny the non-compliance of Section 96 but you should accept the mistake of writing the wrong date while filing e-forms and the prayer should contain no penalty as the AGM was held within the due date. After filing the e-form, you might get an order to amend both the e-forms with the correct date of AGM.

Process of reply to the show-cause notice:

Since many companies receive notice for non-compliance in the first week of November, they are not clear about how to reply to show cause notice from MCA-CMS or making representation. In reply, you should contain a clause that ‘Opportunity of being heard personally must be provided before passing any order or imposing any penalty’. The process for replying to show cause notice:

  1. Check the non-compliance for which SCN is issued.
  2. Prepare a reply letter in the PDF format for the reply.
  3. Prepare evidence which shall be attached to the reply and it should be in the PDF format as well.
  4. Click on https://mcacms.gov.in/
  5. Click on the Reply for Show Cause Notice
  6. After clicking on it a new page will open naming Reply Module
  7. Click on the non-compliance which can be related to Secretarial Audit and Annual General Meeting
  8. After clicking on the non-compliance, a new page will open which will ask you to enter the CMS reference Number
  9. After entering the Reference Number click on Send OTP button
  10. OTP will be sent on registered email id of the company in which SCN received
  11. Enter OTP and Login
  12. After login, you will find your company’s name and non-compliance
  13. You can give reply maximum by 500 words in the tab. If reply exceeded 500 words, attach PDF file in attachment section
  14. You can attach 2 PDF file up to 50 MB
  15. After writing a reply or attaching attachments, press submits reply button to finally submit.

Please note that the CMS portal is not accepting e-forms. If you want to attach e-form as a proof, you need to first print it out, scan and then attach.

After submission of Reply:

If the company desires to make an oral representation through its authorized representative, it must indicate the same while submitting its reply in electronic mode. The adjudicating officer shall allow such person to make such representation after fixing a date of the appearance.

If, after considering the reply submitted by the company, the adjudicating officer is of the opinion that physical appearance is required, he shall issue a notice, within a period of 10 working days from the date of receipt of the reply, fixing a date for the appearance of such company, through its authorized representative.