The Tax Publishers

General Circular

General Circular No. 5/2020 [F.No. 16/1/2020-LEGAL], dt. 02-03-2020

Section 2(60), Read With Section 149 Of The Companies Act, 2013--Officer Who Is In Default--Clarification On Prosecutions Filed Or Internal Adjudication Proceedings Initiated Against Independent Directors, Non-Promoters And Non-KMP Non-Executive Directors

Under several provisions of the Companies Act, 2013 [Act], proceedings are required to be initiated against an officer in default for violations committed under the Act. The term 'officer who is in default' is defined under section 2(60) of the Act, wherein various officers of the company have been identified.

2. Ordinarily, a whole-time director [WTD] and a key managerial personnel [KMP] are associated with the day-to-day functioning of the company and accordingly such WTDs and KMPs would be liable for defaults committed by a company. In absence of a KMP, such director or directors who have expressly given their consent for incurring liability in terms of the e-form GNL-3 filed with the Registrar would be liable. Where the consent for incurring liability for any of the provisions dealing with maintenance, filing or distribution of accounts or records is submitted in e-form GNL-3 by a person under the immediate authority of the Board or any KMP, the liability of such person will arise. However, in certain cases, the penal provisions in the Act hold a specific director, or officer, or any other person accountable for the default, in such cases, action should be initiated only against such director, or officer, or person, as the case may be, such as disclosure of interest by directors under section 184 of the Act.

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