Compliance Management, Audit and Due Diligence · Non-Compliances, Penalties and Adjudications

Lesser Penalties for OPCs and Small Companies under Section 446B

Updated 11 October 2026 · Fact-checked

Section 446B limits the penalty payable by a One Person Company, small company, start-up company or Producer Company, and its officers in default. The penalty cannot exceed one-half of the amount stated in the relevant provision, subject to a cap of ₹2,00,000 for the company and ₹1,00,000 for an officer or other person.

Understand Lesser Penalties for OPCs and Small Companies (Sec 446B)

Penalties in the Companies Act, 2013 are written with the average company in mind. A small business or a single-person venture can find the same fixed amounts crushing. Section 446B gives these entities relief.

The section starts with "Notwithstanding anything contained in this Act". So it overrides the penalty amounts given elsewhere in the Act. Where a provision prescribes a penalty for non-compliance, and the defaulter is a covered company, the lower figure applies.

Four types of company are covered: a One Person Company, a small company, a start-up company and a Producer Company. The relief extends to the company, to its officer in default, and to any other person in respect of such company.

The relief has two limits working together. First, the penalty must not be more than one-half of the penalty specified in the provision. Second, it is subject to a maximum of ₹2,00,000 for a company and ₹1,00,000 for an officer in default or any other person. You apply the half first, and then check the cap.

The Explanation defines two terms. A Producer Company is one as defined in clause (l) of section 378A. A start-up company is a private company incorporated under the 2013 Act or the Companies Act, 1956 and recognised as a start-up under the notification of the Central Government in the Department for Promotion of Industry and Internal Trade. The present text was substituted by Act 29 of 2020, effective 22 January 2021. The substituted section extended the relief to start-up and Producer Companies.

Key rules to remember

Lesser penalty rule: Penalty under 446B ≤ ½ × penalty specified in the provision; Applies to penalty (not imprisonment) for non-compliance of a provision of the Act. The words are "not more than one-half", so it is a ceiling.
Cap for the company: Maximum = ₹2,00,000; Applies to the covered company itself, after halving.
Cap for officer in default or other person: Maximum = ₹1,00,000; Applies to each officer in default or any other person in respect of the company.
Covered entities: OPC | small company | start-up company | Producer Company; A company outside these four types gets no relief under this section.
Start-up company test: Private company + incorporated under 2013 Act or 1956 Act + recognised as start-up by DPIIT notification; From the Explanation to the section.

How to solve Lesser Penalties for OPCs and Small Companies (Sec 446B) questions

Use this method for any case question on lesser penalty. Work from the type of company to the final figure.

1Identify the company type from the facts: OPC, small company, start-up company, Producer Company, or none of these.
2If it is none of these, state that section 446B does not apply and the full penalty under the provision stands.
3Where the type is a start-up, check the conditions: private company, incorporated under the 2013 Act or 1956 Act, and recognised as a start-up by DPIIT.
4Find the provision breached and the penalty it prescribes, for the company and for the officer in default separately.
5Halve each amount. This is the maximum under the rule.
6Compare the halved amount with the cap: ₹2,00,000 for the company and ₹1,00,000 for an officer or other person. Take the lower figure.
7If the penalty is per day, compute the total for the period first and then apply half and the cap, unless the provision itself states its own maximum. State your assumption.
8Conclude clearly with the company's figure and the officer's figure, citing section 446B.
9

Quickest way: Type, half, cap

When to use it: Use this when the question gives a company type and a penalty amount and asks what is payable.

Tick the company type. No match means no relief.
Halve the stated penalty.
Cap at ₹2,00,000 (company) or ₹1,00,000 (officer).
Write the answer for company and officer separately.

Common mistakes in Lesser Penalties for OPCs and Small Companies (Sec 446B)

Applying section 446B to every private company.
Students think lesser penalty is a general benefit for private companies.
Fix: Only OPCs, small companies, start-up companies and Producer Companies qualify. Check the type first.
Writing that the penalty is exactly half.
Students remember "half" and forget the wording.
Fix: The section says "not more than one-half". Write that the penalty is limited to half, subject to the cap.
Using one cap for both company and officer.
The two caps are close in wording.
Fix: ₹2,00,000 is for the company. ₹1,00,000 is for an officer in default or any other person.
Leaving out the start-up and Producer Company categories.
Older notes mention only OPCs and small companies, as the earlier section was titled.
Fix: The substituted section covers four types. Quote all four.
Treating a start-up as any new company.
The everyday meaning of start-up is loose.
Fix: Use the statutory definition: a private company recognised as a start-up under the DPIIT notification.
Applying the cap before halving.
Students rush to the cap figure.
Fix: Halve first, then compare with the cap. If the halved figure is below the cap, it stands.

Worked examples

Example 1

Arjun Traders Private Limited is a small company. It closed its register of members for 40 continuous days after giving the required notice. The limit is 30 days at any one time, so the closure breaches section 91(1). Under section 91(2), the penalty is ₹5,000 for every day the register is kept closed, subject to a maximum of ₹1,00,000. Assume the penalty is computed on all 40 days of the closure. Find the maximum penalty on the company under section 446B.

Show the solution

Company type: small company, so section 446B applies.
Penalty under section 91(2) before its own cap: 40 × ₹5,000 = ₹2,00,000. Section 91(2) limits the penalty to a maximum of ₹1,00,000, so the penalty specified in the provision is ₹1,00,000.
Halve it under section 446B: ₹1,00,000 ÷ 2 = ₹50,000.
Compare with the section 446B company cap of ₹2,00,000. The halved figure of ₹50,000 is lower, so it stands.

Answer: The penalty on the company is limited to ₹50,000 under section 446B, as against ₹1,00,000 otherwise.

Example 2

Meera Foods One Person Company did not furnish the Director Identification Number of its director to the Registrar within fifteen days of receiving the intimation under section 156, as section 157(1) requires. Find the maximum penalty on the company under section 446B and, on the assumption stated below, on the officer in default. Assume no continuing failure. Assume also that the officer's penalty under section 157(2) is taken at the minimum of ₹25,000.

Show the solution

Company type: One Person Company, so section 446B applies.
Section 157(2) fixes the penalty on the company at ₹25,000. For the officer in default it is 'not less than ₹25,000', so the statute sets a floor, not a fixed sum. For this example only, we assume the officer's penalty is the minimum, ₹25,000.
Company: half of ₹25,000 = ₹12,500. This is below the ₹2,00,000 cap.
Officer (on the assumption): half of ₹25,000 = ₹12,500. This is below the ₹1,00,000 cap.
The halved officer figure of ₹12,500 is below the ₹25,000 floor in section 157(2). Section 446B applies "notwithstanding anything contained in this Act" and limits the penalty to "not more than one-half" of the penalty specified. On that wording, the halved figure is taken. This is an interpretation of how the section works with a minimum penalty, so state it as your reasoning in the answer.
If the officer's penalty under section 157(2) were higher than ₹25,000, the halved figure would be higher, but never above the ₹1,00,000 cap.

Answer: The penalty on the company is limited to ₹12,500. On the stated assumption that the officer's penalty is ₹25,000, the officer's penalty is limited to ₹12,500 under section 446B, reading the section's opening words as overriding the minimum in section 157(2).

Exam tips

Begin every answer by classifying the company. The marks often sit in recognising that the company is an OPC, small or start-up company.
Quote the phrase "not more than one-half" and both caps, ₹2,00,000 and ₹1,00,000.
Show the arithmetic in two lines: halve, then compare with the cap. State company and officer figures separately.
Mention that the section overrides other penalty provisions because of the opening "notwithstanding" words.
If a case says a company is not a start-up or not small, say clearly that relief is unavailable and the full penalty applies.

Practice questions from Non-Compliances, Penalties and Adjudications

Lesser Penalties for OPCs and Small Companies (Sec 446B): frequently asked questions

Which companies get lesser penalty under section 446B?

One Person Companies, small companies, start-up companies and Producer Companies. The relief also covers their officers in default and any other person in respect of such company.

What is the maximum penalty under section 446B?

The penalty cannot be more than one-half of the penalty in the relevant provision. It is also capped at ₹2,00,000 for a company and ₹1,00,000 for an officer in default or any other person.

Who is a start-up company under section 446B?

It is a private company incorporated under the 2013 Act or the Companies Act, 1956 and recognised as a start-up under the notification of the Central Government in the Department for Promotion of Industry and Internal Trade.

Does section 446B apply to all penalties in the Act?

It applies where a penalty is payable for non-compliance of a provision of the Act, and it operates notwithstanding anything else in the Act. Check that the consequence is a penalty, not imprisonment.