Compounding Companies Act

Resolve company non-compliance issues legally without facing criminal prosecution. Under Section 441 of the Companies Act, 2013, companies and their officers can settle defaults by paying a compounding fee. Our experts help you file compounding applications before the NCLT or Regional Director and complete the process smoothly within 30–45 days. Clear your compliance history and avoid legal consequences today.

Pricing Plans

Compounding of offences is a legal mechanism that allows companies and officers to regularize defaults by paying prescribed penalties instead of undergoing criminal proceedings. This facility is available for various defaults like delayed filings, non-compliance with statutory requirements, and procedural lapses. At Indian Taxpert, we provide complete assistance—from preparing petitions and filing Form GNL-1 to representation before the NCLT or Regional Director—ensuring hassle-free and timely resolution.

Checklist for Filing Compounding Application

Company or Director Can Apply

Any company can submit the compounding application through a director authorized by a board resolution.

Officers in Default

Whole-time directors, key managerial personnel, and other liable officers can file compounding petitions.

Rectify the Default First

All rectifiable defaults must be corrected before filing, with proof of compliance attached.

Board Resolution Required

The board must approve the compounding application and authorize a representative (CA/CS/Advocate).

Separate Application for Each Offence

Different offences cannot be combined. Each default requires a separate compounding petition.

Authority Based on Penalty Amount

Penalties up to ₹25 lakh are handled by the Regional Director; higher amounts are dealt with by the NCLT.

Form GNL-1 Filing

The application must be filed online with a government fee of ₹1,000. Maximum 8 persons per form.

Joint Application Allowed

The company and officers can jointly apply for the same offence across multiple financial years.

Compounding of Offences – Legal Framework & Documentation

Indian Tax Expert provides complete assistance in compounding of offences under the Companies Act, 2013, helping companies regularize defaults and avoid prosecution through structured legal compliance.

Legal Provisions Governing Compounding

Section 441 of Companies Act, 2013: Allows settlement of certain violations by paying penalty instead of prosecution.
Regional Director Authority: Compounds cases involving penalties up to ₹25 lakh.
NCLT Jurisdiction: Handles compounding cases exceeding ₹25 lakh penalty.
Non-Compoundable Offences: Fraud-related offences under Section 447 cannot be compounded.
Mandatory Compliance: All pending statutory filings must be completed before compounding.
Post-Compounding Filing: Form INC-28 must be filed within 7 days to update ROC records.

        Purpose of Compounding Framework
        Regularization of statutory defaults
Avoidance of criminal prosecution and litigation
Restoration of compliance status with ROC
Improved corporate governance and regulatory credibility

      

Company Documents Required

Detailed compounding petition
Certified copy of Board Resolution
Latest MOA & AOA
Latest audited financial statements
Proof of rectification of default
ROC notices or show-cause notice (if any)

Director / Officer Documents

Affidavit on stamp paper
Digital Signature Certificate (DSC) details
Authorization letter or Power of Attorney for professionals

Step-by-Step Process for Compounding of Offences

Step 1

Rectify the Default

File pending returns, pay penalties, and complete compliance before applying for compounding.

Step 2

Pass Board Resolution

The board approves compounding and authorizes a director and professional representative.

Step 3

Prepare Petition & Documents

Draft a detailed petition explaining the default, reasons, and corrective actions taken.

Step 4

File Form GNL-1

Submit the compounding application online with required documents and government fees.

Step 5

ROC Review & Forwarding

ROC scrutinizes the application and forwards it to the Regional Director or NCLT.

Step 6

Attend Hearing

The authority conducts a hearing and evaluates the nature and severity of the offence.

Step 7

Pay Compounding Fees

After approval, pay the prescribed penalty through the MCA portal.

Step 8

File Form INC-28

Submit the compounding order to ROC within 7 days to complete the process officially.

Indicative Timeline for Compounding of Offences

The timeline for compounding of offences may vary depending on the nature of default, authority jurisdiction, and regulatory workload. Below is an indicative timeline to help companies plan their compliance process efficiently.

Compounding Process Timeline

1–2 Days: Board meeting and passing of board resolution for compounding application.
3–5 Days: Preparation of documents and drafting of compounding petition.
1–4 Weeks: ROC processing and forwarding of application to Regional Director or NCLT.
Few Weeks to Months: Hearing by authority and issuance of final compounding order.

        Factors Affecting Timeline
        Nature and number of defaults involved
Jurisdiction of Regional Director or NCLT
Completion of pending statutory filings
Regulatory workload and hearing schedules
Timely submission of documents and clarifications

      

Adjudication vs Compounding – Key Differences

Particular	Adjudication	Compounding
Nature	Government-initiated penalty	Voluntary settlement
Authority	Adjudicating Officer	Regional Director / NCLT
Appeal	Allowed	Not Allowed
Criminal Proceedings	Not avoided	Avoided
Filing Form	ADJ Form	GNL-1 & INC-28

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Compounding of Offences Under Companies Act, 2013 (Section 441)

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Compounding – The Smart Way to Fix Compliance Defaults