Mandatory Compliances for a Private Limited Company in India

Even though a private limited company is not the preferred form of initiating a business in India, there are several compliances that your private limited company will have to follow once your business is incorporated.

Managing run-of-the-mill operations and tasks of the business and abiding by the corporate laws can be a little strenuous for any entrepreneur. Thus, it becomes pertinent to take aid from experts and comprehend some legal necessities to ensure compliance without penalty or interest.

Here, you can see some common compliances which a business needs to follow post private limited company registration in India;

–  Statutory compliance for auditing

A statutory audit serves the same purpose as other audits – to examine whether an organization is presenting an impartial and accurate representation of its financial position by determining information such as bookkeeping records, bank balances, and financial transactions.

  • Designation of statutory auditors of the company.
  • Completion of annual accounts of the company by the auditors.

–  Annual RoC submission

  • Private limited companies are obliged to submit their returns, revealing shareholders and directors’ details and annual accounts and so forth to the company’s registrar. Stated compliances are needed to be filed once a year only.
  • While submitting the annual RoC, the following forms are to be submitted along with the RoC.
  • Form MGT-7 (annual return) – every private limited company is obliged to submit its annual returns within the period sixty days of the convening of AGM (annual general meeting). The annual return would be for the period 1st of April to 31st of March.
  • Form AOC-4 (financial statements) – every private limited company is obliged to submit its balance sheet along with its statement of P&L account and directors report in this form within thirty days of the convening of AGM (annual general meeting).

–  AGM (annual general meeting).

  • Every private limited company is obliged to convene a meeting of its shareholders once a year within six months from the financial year’s closing date.
  • AGM’s fundamental agenda contains the declaration of dividends, approval of financial statements, auditors’ appointment, and re-appointment and directors’ appointment and remunerations, so on and so forth.
  • AGM should be convened during business hours on a day that is not a public holiday and should happen at the company’s registered office or at some other place within the city, town, or hamlet in which the company’s registered office is located.

–  Board meetings.

  • Private limited company’s board of directors’ first meeting should be arranged within thirty days from the date of the company’s incorporation.
  • Additionally, a minimal four board meetings should be convened in a calendar year (one session every three months). A private limited company is categorized as a small company, at least two board meetings should be convened in a calendar year (one session every six months).
  • Many of the start-ups would come under the category of a small company.
  • Minimal two directors or 1/3rd of a total number of directors, whichever is considerable, are needed to be there in the board of directors meeting. The meeting’s discussion has to be prepared and recorded in the form of ‘minutes of the meeting’ and kept and the company’s registered office.
  • Directors should be notified about the date and objective of the meetings by sending a notice at least seven days beforehand from the meeting date.

–    Report of the director

Every director will have to reveal information about his/her directorship in other companies annually. This can be done via furnishing a written declaration to the company every year in a stated directors’ report format.

–    IT (income tax) compliances

  • Calculation and advance tax’s quarterly payment.
  • Submission of ITR (income tax return) (tax would be payable at the flat rate of thirty percent with educational expenses).
  • Tax audit – compulsory in cases of turnover, sale, or gross receipts of business beyond the Rs. 1 crore in a preceding year relevant to the assessment year.
  • Submission of the tax audit report.

–  Upkeeping of statutory records and registrars

A private limited company will have to upkeep several statutory registrars and records as needed by the company law such as registrar of members, registrar of shares, registrar of directors so and so forth. It also includes a separate alteration in AOA for share transfer procedure in a private company. Along with that company’s incorporation documents, the board of directors’ meetings resolutions, board meetings’ minutes, AGM, and so on need to be conserved by the company.

Such records are to be retained at the company’s registered office and open to assessment to its members during working hours. The company’s books of account concerning at least eight financial years have to be conserved and retained in good condition and order.

–  Other compliances based on the events

Along with the annual submission, several other compliances are required as and when any such events occur in the company. Events such as given below.

– Alteration in authorized or company’s paid-up capital.

– Allocation of new shares or shares transfer.

– Lending a loan to other companies.

– Lending a loan to directors.

– Designation of managing or full-time director and payment of remuneration.

– Directors’ loans.

– Creation or closure of bank accounts or alteration in signatories of the bank account.

– Designating or changing a statutory auditor of the company.

Separate forms are needed to be submitted with the registrar for all events mentioned above within stipulated periods. If that has not been done, additional fees or mulct might be levied. Thus, such compliances must be abided by promptly.

–  Non-compliance

Suppose a company cannot abide by the rules and regulations of the companies act. In that case, the company and its officer will be subjected to punishment with a fine for a period for which default persists.

If there is any lingering in any submission, additional fees are needed to be paid, which is incremental as non-compliance increases. It is to remember that some of the annual submission of forms can also be corrected. Still, fees for succeeding correction submission should be levied, assuming it as a new submission.