Ensuring compliance with Section 12 of the Companies Act, 2013, mandates every company to uphold its registered office. The Companies (Incorporation) Third Amendment Rules, 2022, introduced a pivotal change through the addition of Rule 25B. This rule outlines the stringent process for physically verifying a company’s registered office. The Registrar of Companies (ROC) oversees this verification, accompanied by two independent local witnesses. Additionally, if necessary, the ROC can involve local law enforcement for assistance.

Non-compliance invites penalties

Non-compliance with Section 12(8) invites penalties. A company and its defaulting officers may face – A fine ranging from one thousand rupees per day to a maximum of one lakh rupees for each day of default.

Moreover, under Section 12(9), if the registrar suspects that a company isn’t conducting business operations, a physical verification of its registered office may be initiated. Any default found in adherence to the requirements of this section could lead to action for the company’s removal from the register of companies under Chapter XVIII, apart from the penalties mentioned earlier.

When assessing the penalty quantum under Section 12(8) of the Act, the adjudicating officer must take into account specific factors:

a. Evaluation of any quantifiable disproportionate gain or unfair advantage resulting from the default.
b. Assessment of the loss incurred by an investor or a group of investors due to the default.
c. Consideration of the repetitive pattern of the default.

Concerning these factors for determining the penalty’s extent, it’s crucial to highlight that the record lacks information on any disproportionate gain or unfair advantage gained by the notice party. Similarly, there is no data available on the losses suffered by investors due to the delay in addressing investor grievances. Additionally, quantifying the unfair advantage gained or the losses incurred by investors in a default scenario of this nature presents considerable challenges.

For more tailored and specific advice on regulatory compliance and legal obligations, it’s crucial to seek professional guidance. Contact ‘Start-Up Kro’ for expert consultation and to ensure your company’s adherence to legal norms.