The Hindu Business Line : Co law norms: Ministry clarifies on who can be nailed for non-compliance

COMPANY employees can breathe easy now. The Ministry of Company Affairs has fixed responsibility for non-compliance of certain provisions of the company law.

Hitherto, the absence of clarity on this front led to officials and employees of companies facing legal hardships.

As per the clarification, persons who are to be considered as liable for prosecution include the Managing Director or Manager as the case may be and the Company Secretary, if appointed, or a person who is in-charge for maintenance and preparation of annual accounts in compliance with the provisions.

In companies where there is no Managing Director or Manager, the entire board of directors and the Company Secretary, if appointed, would be responsible, the Ministry said.

In fact, industry sources said, this has led to all the directors, officers and other employees who were not charged with the responsibility of specific compliances to be penalised.

This was neither practical nor realistic.

The problem, according to them, was more so in cases of penal action for violation of sections pertaining to form and content of balance sheet and profit/loss accounts.

Further, the term `officer' was interpreted differently on various occasions.

Clarifying on the term `officer', the Ministry stated that only those persons from among the officers and employees other than the Managing Director, Manager and Directors who have been charged by either the Managing Director, Manager or the Board with specific responsibility of complying with the said provisions would be held responsible.

The sources said that a doubt had arisen as to whether in addition to Managing Director or Manager as the case may be, other directors, namely the Wholetime director and non-Wholetime Director or ordinary Director of an erring company were also liable for penal action. This clarification, they said, would absolve such officers and employees who are not connected with the responsibility of complying with the said provisions.