Friday, 31 May 2019

Mandatory Compliances for a Private Limited Company in India

Although Private Limited Company is the most popular form of starting a business, there are various compliances which are required to be followed once your business is incorporated.
Managing the day to day operations of your business along with complying the corporate laws can be little taxing for any entrepreneur. Hence, it is essential to take help of a professional and also understand such legal requirements to ensure timely fulfilment of compliances, without any levy of interest or penalty.

Recently, Government strike off more than 2 Lakh companies and disqualified more than 3 Lakh directors for non-compliance of various provisions of Companies Act, 2013. Such type of historic action came at the time when government came to know about the various techniques used by corporate entity to evade taxes.

Company law provides legal compliance that are required to be followed by every company like reporting of financial results, reporting of changes in management, maintenance of statuary registers, auditing of accounts etc.

All the compliances provided under the Company Law may be divided in 2 parts for making it easy to understand Mandatory Compliances and Event Based Compliances.
We have elaborated below such compliances which a private limited company has to mandatorily ensure:

Mandatory Compliances
1. Company Name Board
Every Company shall paint or affix the name and address of registered office and keep the same painted/affixed, outside every office or place in which its business is carried on, in legible letters.

2. Letter Head of Company
Every Company shall get its name, address of registered office, CIN, telephone and email printed on all business letters, billheads, letter papers.
Notices and other official publications.

3. First Board Meeting
First Meeting of Board of Directors is required to be held within 30 days of Incorporation of Company. Notice of BM must be send to every director at least 7 days before the meeting.

4. Subsequent Board Meetings
Minimum 4 Board Meetings to be held every year with not more than 120 days gap between two meetings. In case of small company, it is sufficient to conduct only two Board Meetings.

5. Issuing of Share Certificate
The Company is required to issue Share Certificates to the subscribers of memorandum within 60 days of Incorporation of Company.

6. Filing of Disclosure of interest by Directors
Every director at:
‐ First meeting in which he participates as director; or
‐ First meeting of Board in every FY; or
‐ Whenever there is change in disclosures
shall disclose in Form MBP‐1 (along with list of relatives and concern of relatives in the Company as per RPT definition), his concern or interest in any company, body corporate, firm or other association of individuals (including shareholding interest).
Form MBP‐1 shall be kept in the records of the company.

7. Resident Director
Every Company is required to appoint at least one Director who has stayed in India for a total period of not less than 182 days in the previous calendar year.

8. Alteration in MOA and AOA
Every alteration of Articles and Memorandum shall be filed with Registrar together with copy of altered Articles, notice of meeting and SR within 30 days of passing Special Resolution. Every alteration made in MOA and AOA shall be noted in every copy thereof.

9. Registers
Every Company shall keep and maintain following Registers in the specified format:
‐ Register of Members MGT-1
‐ Register of other Security Holders residing outside India MGT-3
– Register of Transfer and Transmission of Shares SH-6
– Register of Charge CHS-7
‐ Index of the Registers

10. Other Registers
Every Company shall keep at its Registered Office, a Register of Directors and KMP in the prescribed format containing prescribed particulars.

11. Resolution
‐ Copy of every resolution (with explanatory statement, if any) or Agreement for the specified matters to be filed with ROC in Form MGT‐14 within 30 days.
‐ Articles of Company shall have copy of resolution effecting amendment in AOA and Agreements referred in Section 117(3) of the Act

12. Minutes of Meeting
‐ Minutes of every general meeting, Creditors, Board and Committee shall be prepared and kept within 30 days of conclusion of every meeting concerned.
‐ All appointments in the meeting shall be included in the minutes.
– Minutes of each meeting shall be entered into Minutes Book along with date of such entry.

13. Appointment of Director
Every person to be appointed as Director shall provide his consent in Form DIR‐2 and such consent shall be filed by the Company with ROC in Form DIR‐12, within 30 Days of appointment.

14. Provisions related to DIN
Every individual intending to be appointed as director shall make an electronic application in Form DIR-3 to Central Government for allotment of DIN.

15. Qualification of Director
‐ Qualification for appointment of director
‐ Declaration from Director at the time of appointment or reappointment in Form DIR‐8
‐ Annual disclosure from Director to be taken

16. Number of Directorship
‐ No person shall be a director in more than 20 companies
‐ Maximum number of public companies can be 10 (Director in Section-8 Co. and Dormant Director not to be included)

17. Resignation by Director
‐ Director shall intimate his resignation to the Company, which the Company shall file with ROC in Form DIR‐12 in 30 days
‐ Company shall put resignation details on its website and in its Directors’ Report.

18. Return of Director and KMP
Return of Directors and KMP to be filed with ROC in Form DIR 12, within 30 days of appointment or change.

19. Meeting, at shorter notice
‐ Meeting can be convened on a shorter notice for urgent matters
‐ Consent from not less than 95% of members entitled to vote thereat

20. Quorum
‐ Quorum shall be one‐third or two directors, whichever is higher
‐ Directors participating through Video Conferencing shall be counted for the purpose of quorum

21. First Auditor
First Auditor of the company shall be appointed by the BOD within 30 days of Incorporation who shall hold the office till the conclusion of 1st AGM. In case of First Auditor, filing of ADT-1 is not mandatory.
22. Subsequent Auditor
The BOD shall appoint the auditor in first AGM of company who shall hold the office till the conclusion of 6th AGM and shall inform the same to ROC by filing ADT-1. The responsibility to file Form ADT 1 is that of the company and not of the auditor within 15 days from the date of appointment.

23. Ratification of Auditor
Shareholders will ratify the appointment of Auditor in every AGM but there is no need to file ADT-1 for ratification.

24. Casual Vacancy of Auditor
If Casual Vacancy is arising due to the resignation of auditor, it shall be filled within 30 days of BOD meeting, subject to approval in General Meeting (AGM or EGM). Any auditor appointed in a Casual Vacancy shall hold office until the conclusion of the next Annual General Meeting.

25. ADT-3
The auditor shall file with the company a resignation letter stating the reason for resigning and file Form ADT-3 with the registrar within 30 days from the date of resignation. Filing form ADT-3 is the responsibility of the auditor and can only be filed if ADT-1 of the relevant auditor was filed.

26. Annual General Meeting
Every Company is required to hold an Annual General Meeting on or before 30th September every year during business hours (9 am to 6pm), on a day that is not a public holiday and either at the registered office of the Company or within the city, town or village where the registered office is situated. A 21 clear days’ notice is required to be given for the same.

27. Filing of Financial Statements
Every Company is required to file its Financial Statements within 30 days of its Annual General Meeting with Registrar of Company in E-Form AOC-4. The same shall be digitally signed by one director and certified by CA/CS/Cost Accountant in Practice.

28. Filing of Annual Return
Every company is required to file its Annual Return with Registrar of Companies within 60 days of Annual General Meeting in E-Form MGT-7. A company having turnover of INR 50 Crore or more shall be certified by a Practicing CS in Form MGT-8.

29. Regularisation of Additional Director
If company wants to appoint additional director as director, then it shall regularize the person as director in General Meeting by passing Shareholder Resolution. File form DIR-12 for Change in Designation of Director along with ordinary resolution within 30 days of AGM.

30. Directors’ Report
Directors’ Report is to be filed covering all the information required for Small Company under Section 134 within 30 days of AGM along with Form AOC-4. It should be signed by the “Chairperson” authorized by the Board, where he is not so authorized by at least 2 Directors.

31. Filing of Financial Statements of a Foreign Co.
Every Foreign Company is required to file Annual accounts (consolidated financial statements/ global accounts) along with the list of all principal places of business in India within 6 months of close of the Financial Year.

32. Filing of Annual Return of a Foreign Co.
Every foreign company shall prepare and file annual return of the company in e-Form FC-4 within 60 days from the close of financial year.

Event Based Compliances
These are triggered based on happening of certain events. There is paperwork that needs to be done for the same and there are various deadlines for these tasks. In case of non-compliance or even a missed deadline there can be penalties, additional fees or a compounding of offence, etc. Hence, it is necessary that the happening of such events be tracked and compliances met with on time.

Form No.
Time Limit
§ Change in Directors or KMP
Within 30 Days of such change
§ Increase in Authorized Share capital
Within 30 days of passing OR
§ Increase in Paid up share capital (Issue of security)
Within fifteen days from the date of the allotment
§ Change in registered office
Within fifteen days from the date of such change
§ Change in secured borrowing (Creation, modification and satisfaction of charge)
All types of Charges within 30 days of its creation
§ Change of name of company
Within 60 days from the date of applying reservation of name in INC-1
§ Conversion of company

§ Filing of resolution and agreements
Within 30 days from date of passing resolution
§ Removal of Director before Expiry
Within 30 days from date of passing SR
§ Application for KYC of Directors
On or before 30
April of immediate next Financial Year (Annual Compliance)
§ Report for Disqualification of the Director
To be filed by company within 30 days of such disqualification

Other relevant compliances
Form INC-22A – ACTIVE Company Tagging
All companies registered before 31st December 2017 are required to file e-Form ACTIVE (Active Company Tagging Identities and Verification) – INC-22A on or before 25th April 2019. Failure to file e-Form Active will lead to a penalty of Rs. 10,000.

Requirements for Filing ACTIVE Form
(a) DIN of all the directors shall be active while filing form INC-22A
(b) Form ADT-1 for appointment of auditor should have already been filed.
(c) Annual filing (Form AOC-4 and MGT-7) of the company shall be complete till F.Y. 17-18.
(d) Email ID which will be verified by OTP
(e) Photograph of Registered office showing external building and inside office also showing therein at least one Director KMP who has affixed his/her DSC to this form

Declaration of Commencement of Business 

Every company is now required to file e Form INC 20A with Registrar of Companies within 180 days of its Incorporation for commencement of its business with effect from 2nd November, 2018.
(a) a declaration is filed by a director within a period of 180 days of the date of incorporation of the company in form INC-20 A and verified in such manner as may be prescribed, with the Registrar that every subscriber to the memorandum has paid the value of the shares agreed to be taken by him on the date of making of such declaration; and
(b) The company has filed with the Registrar a verification of its registered office as provided in sub-section (2) of section 12 in Form INC-22.

Company (SBO i.e, Significant Beneficial Ownership) Rules 2019
1. BEN-1
Every individual who is SBO to file to company within 90 days from 8.2.2019 to make a declaration for SBO.
For any change in SBO, within 30 days of acquiring or change therein.
2. BEN-2
Company to file within 30 days of receipt of BEN 1 to ROC.
3. BEN-3
Register of SBO.
4. BEN-4
Every reporting company shall give notice in BEN 4 in all cases where its member (other than an individual), holds not less than 10% of its; –
(a) shares, or
(b) voting rights, or
(c) right to receive or participate in the dividend or any other distribution payable in a FY

MSME Rules
MSME Form 1 to be filed half-yearly by Specified Companies by 31st October / 30th
April every year. Below companies and details are to be provided therein:
All companies who get supplies of goods or services from micro and small enterprises and whose payments to them exceed 45 days from the date of acceptance or the date of deemed acceptance of the goods or services as per the provisions of the Act, shall submit a half yearly return to MCA stating the following:
a) The amount of payments due; and
b) The reasons for delay
  • 1st Return is to be filed within 30 days of deployment of Form on MCA Portal
  • Medium Enterprises are not covered under the notification
  • Only manufacturers and services providers covered
Deposit Rules
DPT-3 is to be filed annually by every company other than Government Company for:
  • Deposit or
  • Particulars of Transaction not considered as Deposit or
  • Both
To be filed annually by 30th June and furnish information as on 31st March of that year duly audited by auditor of the company.
Note: One-time Return shall be filed by every company other than Government company of outstanding receipt of money or loan by a company but not considered as deposits, in terms of rule 2(1)(c) from 1st April, 2014 to the date of publication of this notification (22.1.19), within 90 days from the date of said publication of this notification (22.1.19).

Clearly, running a business especially in the form of a private limited company is not something to be undertaken lightly, and requires both an ongoing investment of much time and effort, and significant knowledge of many financial and regulatory technicalities.
Compliance is a business asset that, if used in the right way, can bring companies competitive advantage, customer trust and ultimately return on investment. Compliance is not only ‘doing the right thing’, or ‘ticking a box’ but it is the way of working, part of the business, investor confidence, transparent and open culture. Remember, cost of non-compliance is always more than cost of compliance. There are established and competent professionals in the market today ready and willing to help you at every stage of the business cycle, not only in incorporation but with all the compliance and regulatory requirements through the long life of your organization.

Foreign company registration | Company formation in India

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