Engagement
Compounding of Offences under the Companies Act and LLP Act
Last reviewed 28 October 2026
Which Companies Act and LLP Act offences can be compounded, who compounds them (RD or NCLT), the ₹25 lakh limit, the three-year bar and how to apply through the ROC.
In short
Compounding lets a company or officer settle an offence by paying a sum fixed by the authority, before or after prosecution. Many old offences are now penalties under s.454 instead, so first check which regime applies to your default.
1. Compounding or penalty: which applies?
Since 2018, several defaults have moved from criminal fines to civil penalties imposed by an adjudicating officer under s.454. These are not compounded; they go through adjudication. Examples:
| Default | Section | Now |
|---|---|---|
| Annual return not filed | Section: s.92(5) | Now: Penalty ₹10,000 plus ₹100 a day; max ₹2 lakh (company), ₹50,000 (officer) |
| Financial statements not filed | Section: s.137(3) | Now: Penalty ₹10,000 plus ₹100 a day; max ₹2 lakh (company); MD/CFO up to ₹50,000 |
| Resolutions not filed (MGT-14) | Section: s.117(2) | Now: Penalty ₹10,000 plus ₹100 a day; max ₹2 lakh (company), ₹50,000 (officer) |
If you have a show cause notice for one of these, see our ROC notice page. Compounding under s.441 is for offences that still carry a fine.
2. Which offences can be compounded (s.441)
- Can be compounded: offences punishable with fine only, or with imprisonment or fine or both (s.441(1)).
- Cannot be compounded: offences punishable with imprisonment only, or with imprisonment and also with fine (s.441(1), s.441(6)).
- Compounding is possible before or after prosecution is instituted.
3. Who compounds
| Authority | When |
|---|---|
| Regional Director (or officer authorised by the Central Government) | When: Maximum fine for the offence does not exceed ₹25 lakh (s.441(1)(b)) |
| NCLT | When: All other compoundable offences (s.441(1)(a)) |
The ₹25 lakh limit was raised from ₹5 lakh by the Companies (Amendment) Act 2019, w.e.f. 02.11.2018.
4. Limits and bars
- Amount: the sum specified cannot exceed the maximum fine for the offence (first proviso to s.441(1)).
- Investigation: an offence cannot be compounded if an investigation against the company has been initiated or is pending under the Act (second proviso to s.441(1)).
- Three-year bar: an offence committed within three years of the date on which a similar offence was compounded cannot be compounded. A repeat after three years is treated as a first offence (s.441(2) and Explanation).
- Filing pending documents: the authority may order pending returns or documents to be filed (s.441(4)). If that order is not complied with, the maximum fine is doubled (s.441(5)).
5. How to apply
- 1.Rectify the default first: file the pending form or return.
- 2.Prepare the application: facts, period of default, rectification, and the officers involved.
- 3.File it with the Registrar in Form GNL-1 (rule 12(2), Companies (Registration Offices and Fees) Rules 2014; form substituted by G.S.R. 360(E) dated 30.05.2025, w.e.f. 14.07.2025). Every compounding application is made to the Registrar, who forwards it with comments to the RD or NCLT (s.441(3)(a)).
- 4.Where it goes to the NCLT, the application is filed in Form NCLT-9 (rule 88, NCLT Rules 2016).
- 5.Attend the hearing and pay the compounding fee within the time fixed in the order.
6. LLPs (s.39, LLP Act 2008)
Section 39 was substituted by the LLP (Amendment) Act 2021, in force from 01.04.2022.
- The Regional Director, or an officer not below that rank, compounds offences punishable with fine only.
- The sum is not less than the minimum and not more than the maximum fine for the offence.
- Three-year bar for a similar offence by the LLP, a partner or designated partner (s.39(2)).
- The application goes to the Registrar, who forwards it with comments (s.39(3)); the Registrar is informed within 7 days of compounding (s.39(4)).
- Compounding before prosecution bars prosecution (s.39(5)); after prosecution, it leads to discharge (s.39(6)).
- Non-compliance with an order to file documents doubles the maximum fine (s.39(8)).
- Many LLP defaults are now penalties adjudicated under s.76A (inserted by the 2021 Act).
7. How we help
We check whether the default is a penalty or a compoundable offence, rectify the filings, draft the compounding application, file it through the ROC and represent the company or LLP before the RD. Share the notice or the details of the default to get a fee quote.
Documents & E-Forms
- Sec. 441
- GNL-1
- NCLT-9
- LLP Sec. 39
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