The term "compliance" refers to the capacity to adhere to orders, a set of regulations, or a request.
A private limited company registered in India must ensure that all compliance requirements are met under the Companies Act, 2013. The Companies Act, 2013 governs the appointment, qualification, salary, and retirement of the directors of a company, as well as other matters such as the conduct of board meetings and shareholder meetings.
Compliance with the RoC is required for registered Private Limited Companies. Regardless of total revenue or capital, the company must meet the annual compliance obligation.
Every company registered in India, whether it is a private limited company, a sole proprietorship, a limited liability company, or a section 8 company, is required to file annual compliance documents such as annual returns and income tax returns. While incorporation is the most common method of starting a business, certain compliances must be followed once the business is incorporated.
Managing the day-to-day operations of the business while adhering to the complex corporate laws can be a challenge for the entrepreneur. Thus, it is always preferable to seek expert assistance and gain an understanding of the legal requirements in order to ensure timely compliance with these requirements and avoid penalties or fines. Here, we will examine several of the mandatory compliances that a private limited company must adhere to.
Annual Compliance Checklist for Private Limited Company
1) First board Meeting - The first Board of Directors meeting should be held within 30 days of the Company's establishment.
2) Subsequent Board Meetings - A minimum of four Board meetings shall be held per calendar year, with no more than 120 days between meetings. Minimum of two meetings in each half of the calendar year for small businesses, with a minimum break of 90 days between meetings.
3) First Annual General Meeting – Within nine months of the end of the Company's first financial year. A company's annual general meeting shall not be held more than fifteen months apart.
4) Subsequent Annual General Meeting - Within six months of the financial year's end. A company's annual general meeting shall not be held more than fifteen months apart.
5) Disclosure of Directors' Interests/Declaration - Each Director shall disclose his or her interest in form MBP-1 and make a declaration in form DIR-8 at the board's first meeting of each financial year.
6) Appointment of the First Auditor - The Board of Directors shall appoint the first auditor within 30 days after incorporation.
7) Appointment of Subsequent Auditor - Will be appointed for a five-year term at the AGM. Within fifteen days of appointment at the Annual General Meeting.
8) Filing of Form ADT-1 - Within 15 days from the date of Auditor's appointment.
9) Filing of Form AOC-4 - Within thirty days after the Annual General Meeting.
10) Filing of Form MGT-7 - Must be within sixty days after the Annual General Meeting.
11) Statutory Accounts Audit - Performed by a Chartered Accountant
12) Annual filing of the company's income tax return - 30th of September every year
13) Maintenance of Statutory Registers, Minutes Books, and Records - All companies are advised to maintain a few statutory registers in the prescribed format, including a register of members, a register of charges, a register of directors and key management personnel, and a register of loan and guarantee.
Minutes of Board and general meetings, attendance registers, and books of accounts, among other things, must be kept.
14) A copy of the Notice of Meeting, the Draft Minutes, and the Signed Minutes - should be kept for a period of three years from the date of the meeting.
15) Directors' Know Your Customer (KYC) - September 30th
16) E-Form MSME-I - If a company owes money to micro and small businesses and the payment is more than 45 days overdue, the company is required to provide information as per the following timeline :
For April to September by 31st October
For October to March by 30th April
17) E-Form DPT-3 - All companies with an outstanding loan/amount as of 31st March of each financial year are required to submit details and bifurcation of such outstanding amount by 30th June, regardless of whether such amount falls within the definition of deposit or not.
Note - The compliance deadlines specified above for Form DPT-3 and Director KYC are based on the previous year's deadlines and notifications/circulars issued by the Hon'ble Ministry of Corporate Affairs.
What are the Benefits of Annual Compliance of a Private Limited Company?
1) Separate legal entity - According to the Act, a company is a distinct legal entity and a juristic person. As a result, a company can own property and incur debts in its own name. Members (Shareholders) and directors of a company are not liable to the company's creditors for such debts. As a legal entity, a company may acquire, hold, enjoy, and alienate property in its own name. A member cannot make a claim against the company's property as long as the business continues to operate.
2) Share transfer Ability - One of the primary advantages of annual compliance for a Private Limited Company is the flexibility to transfer shares. A shareholder can simply transfer his or her shares in a business limited by shares to another person. Transferring shares is as simple as filling and signing a share transfer form and providing the share certificate to the buyer of the shares.
3) Perpetual succession - A company, as a distinct legal entity, is unaffected by the death of any member and continues to exist regardless of membership changes. A corporation has 'perpetual succession,' which means it will continue to exist indefinitely until it is legally dissolved.
Therefore, if you require additional information regarding annual compliance for a Private Limited Company, please contact our specialists at any moment.
Other Event Based Compliances for Private Limited Company
Besides Annual Filings, there are various other compliance's that need to be done as and when any event takes place in the Company. Instances of such events are:
- Change in Authorised or Paid-up Capital of the Company.
- Allotment of new shares or transfer of shares
- Giving Loans to other Companies.
- Giving Loans to Directors
- Appointment of Managing or whole-time Director and payment of remuneration.
- Loans to Directors
- Opening or closing of bank accounts or change in signatories of Bank account.
- Appointment or change of the Statutory Auditors of the Company.
Documents required for Annual Filing of Private Limited company
PAN Card, Certificate of Incorporation, and Memorandum of Association - Articles of Association of Private Company
Audited Financial Statements
Financial statements must be audited by a certified independent auditor.
Audit Report & Board of Directors Report
A report from an independent auditor and a report from the board of directors must be presented.
DSC of Director
A valid and active director's DSC must be provided.
Frequently Asked Questions
Is Annual Filing Required for All Companies?
Yes, ROC compliance for Private Limited Companies is required of all registered businesses. Regardless of total revenue or capital, the company must meet the annual compliance requirement. Since the company's first financial year, annual compliance is due after the annual general meeting.
What is the penalty for a Private Limited Company failing to file its annual return on time?
Since July 2018, businesses who fail to comply with the statutory Compliance for Private Limited will be levied a fee of Rs.100 per day of delay until the actual date of filing. There is no maximum limit on the amount of an additional fee. For continued failure, a penalty, in addition to the additional Government fee, may be imposed on both the company and its directors, including imprisonment.
Is the annual reporting of audited financial statements necessary for private companies?
Since the incorporation of a business, audited financial statements have been required. The company is only required to file audited financial statements. Additionally, the non-audit of financial statements does not constitute a reason for delaying the annual filing.
Is the appointment of a statutory auditor considered to be part of annual compliance?
A company may appoint a statutory auditor for a period of five consecutive years or until the end of the next annual general meeting. As a result, the statutory auditor's appointment cannot be considered part of annual compliance.
Do directors have to sign directors reports if the company has no operations?
As required by the Companies Act, 2013, the signed Director Report for each financial year must be filed with the MCA along with the company's annual return. The Director Report is an attachment to the MGT-7 form.
Which form is used to appoint a Statutory Auditor?
ADT-1 must be filed in order to appoint or replace the Statutory Auditor.
Which form is an attachment to the company's Director report?
MGT-9 is an attachment to the director report of the company. It is an extract from MGT-7 and addresses the following:
1. Registration and other information such as CIN, date of incorporation, company name, and registered office address
2. The company's principal business activity
3. Of holding companies, subsidiary companies, and associate companies
4. Shareholding structure
5. The company's indebtedness
6. Remuneration of managing directors, directors and/or managers, and other senior management staff.
7. Penalties/Punishment/Compounding of offence.
How should the MCA be notified about a company's share transfer or transmission?
The company can make this notification by filing an MGT-7.
Any Questions? Request a callback from our Tax Experts.