Jan 23, 2024

Consequences of Failure to Confirm Compliance With POSH Act in Company’s Board Report

A recent Order by the Registrar of Companies, Karnataka (‘RoC’) came as a wake-up call for companies regarding mandatory compliance obligations under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 (‘POSH Act’). A public limited company (‘Company’) registered with the RoC was penalized for non-compliance with the provisions of Section 134(3)(q) of the Act read with Rule 8(5)(x) of the Companies (Accounts) Rules, 2014 (‘CA Rules’) which requires all companies (excluding one person companies and small companies) to disclose in its board report, a statement confirming that the company has complied with the provisions relating to the constitution of Internal Committee (‘IC’) under the POSH Act.

This non-compliance was identified by the RoC during an inspection that was conducted on the Company under Section 206(4) of the Act. During the course of this inspection, the RoC noticed that the board report attached to Company’s financial statements for the Financial Year (‘FY’) ended March 31, 2019, and March 31, 2020, did not disclose that it had complied with provisions relating to constitution of IC under the POSH Act and hence, it had violated the provisions of Section 134(3) of the Act and Rule 8(5)(x) of the CA Rules. The RoC imposed a penalty of ₹ 300,000 (approx. US$ 3615) on the Company and ₹ 50,000 (approx. US$ 615) each on the managing directors, CFO, and company secretary of the Company (i.e., officers in default during the period of offence committed) for each FY in which the non-compliance / default was committed.




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