CompanyMandatory CompliancePrivate Limited Company

Mandatory Compliance for Private Limited Company in India

Mandatory Compliance for a Private Limited Company in India

Mandatory Compliance for Private Limited Company in India

Although the most popular form of starting a business is Private Limited Company, there are different Mandatory Compliance for Private Limited Company that need to be met when the business is incorporated.

Managing the business‘ day-to-day activities along with compliance with corporate laws can be low taxation for any businessman. It is therefore necessary that a practitioner is supported and that such legal requirements are also understood to ensure prompt compliance without any interest or fee levy.

Government recently strike more than 2 Lakh firms and disqualify more than 3 Lakh directors for failing to comply with various provisions of the Companies Act, 2013. Such kind of historic action came when the government came to know about the different techniques that corporate entity used to evade taxes.

Company law provides legal compliance that every company should comply with, such as reporting financial results, reporting changes in management, maintaining legislative records, account auditing, etc.

All compliances issued under the Company Law can be divided into 2 parts to make it easy to understand mandatory compliances and compliances based on events. We have established such compliances below that a private limited company can compulsorily guarantee:

Mandatory Compliance for Private Limited Company

  1. Company Name Board

Each Company shall paint or affix the registered office name and address and hold the same painted / affixed in legible letters outside each office or place where its business is carried on.

  • Letter Head of Company

Which company shall have its name, registered office address, CIN, telephone and email printed on all letters of business, billheads, letter papers. 

Notices and other documents of official type.

  • First Board Meeting

First Board Meeting is expected within 30 days of Company Incorporation. BM’s notice must be sent at least 7 days before the meeting to each manager.

  • Subsequent Board Meetings

Minimum 4 Board meetings to be held each year with a break between two meetings of no more than 120 days. In the case of a small company, only two Board meetings are necessary

  • Issuing of Share Certificate

The Company shall issue Share Certificates to memorandum subscribers within 60 days of Company Incorporation.

  • 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

Disclose its concern or interest in any corporation, corporate entity, business or other group of persons (including shareholding interest) in Form MBP‐1 (including the list of relatives and concerns of the Company’s relatives as specified in the RPT).

Form MBP‐1 shall be kept in the records of the company.

  • Resident Director

Every company is required to nominate at least one director who stayed in India in the financial year for a maximum duration of not less than 182 days.

  • Alteration in MOA and AOA

Any modification of the Articles and Memorandum shall be forwarded to the Registrar with a copy of the amended Articles, Notice of Meeting and SR within 30 days of the Special Resolution being passed. Any changes made in MOA and AOA shall be noted in each of its copies

  • 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
  1. Other Registers

That organization shall maintain a Register of Directors and KMP in the prescribed format with specified information at its registered office.

  1. Resolution

‐ Copy of any resolution (with explanatory paragraph, if any) or agreement to be submitted to ROC in Form MGT‐14 within 30 days for the specified matters.

‐ The Articles of Association shall include a copy of the resolution amending the AOA and the Agreements referred to in Section 117(3) of the Act

  1. Minutes of Meeting

‐The minutes of each general meeting shall be prepared and held within 30 days of the end of each meeting concerned by the shareholders, board and committee.

‐ All appointments in the meeting shall be included in the minutes.

-Minutes of each meeting shall be registered in the Minutes Book together with the date of that registration.

    13. Appointment of Director

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

  1. Provisions related to DIN

Any person who intends to be appointed as Director shall submit to the Central Government an electronic application for DIN allocation in Form DIR-3.

  1. Qualification of Director

Qualification for appointment of director

Declaration from Director at the time of appointment or reappointment in Form DIR‐

Annual disclosure from Director to be taken

  1. Number of Directorship

No person shall be a director in more than 20 companies

The total number of public corporations may be 10 (not to be included as Director in Section 8 Co. and Dormant Administrator)

  1. Resignation by Director

The Director shall inform the Company of his resignation, which the Company shall file in 30 days with ROC in Form DIR‐12

Company will put specifics of the resignation on its website and in the statement of its directors.

  1. Return of Director and KMP

Return of directors and KMP to be filed within 30 days of appointment or transfer with ROC in Form DIR 12.

  1. Meeting, at shorter notice

Meeting may be held on a short notice on urgent matters

Consent of not less than 95% of members eligible to vote

  1. Quorum

Quorum is one-third or two directors, the lower the quorum.

Directors participating through Video Conferencing shall be counted for the purpose of quorum

  • Quorum

‐ Quorum shall be one‐third or two directors, whichever is higher

Directors involved in video conferencing were counted for quorum purposes

  • First Auditor

The company’s First Auditor shall be appointed by the BOD within 30 days of the Incorporation holding the office until 1st AGM has been concluded. The submission of ADT-1 is not compulsory in the case of First Auditor.

  • Subsequent Auditor

The BOD shall appoint the auditor at the company’s first AGM to hold the office until the 6th AGM is concluded and shall notify ROC by filing ADT-1 of the same.

  • Ratification of Auditor

Today, there will be no provision for confirmation of the appointment of an auditor for a single term of 5 years.

  • Casual Vacancy of Auditor

When Casual Vacancy occurs as a result of the auditor’s resignation, it shall be done within 30 days of the BOD meeting, subject to approval by the General Meeting (AGM or EGM). Any auditor named to a Casual Vacancy must hold office until the next Annual General Meeting is concluded.

  • ADT-3

Within 30 days from the date of resignation, the auditor shall file with the company a resignation letter specifying the reason for resignation and file Form ADT-3 with the registrar. The auditor is liable for filing the ADT-3 form and can only be submitted if the applicable auditor’s ADT-1 has been filed.

  • Annual General Meeting

Every Company is required to conduct an Annual General Meeting during business hours (9 a.m. to 6 p.m.), on a day that is not a public holiday, either at the Company’s registered office or within the city, town or village where the registered office is located, on or before 30 September. It is necessary to give a notice of 21 clear days for the same.

  • Filing of Financial Statements

The company is required to apply its financial statements to the Registrar of Company in E-Form AOC-4 within 30 days of its Annual General Meeting. The same must be signed electronically by one supervisor and approved in operation by CA / CS / Cost Accountant.

    28.Filing of Annual Return

Within 60 days of the Annual General Meeting in E-Form MGT-7, the company is required to send its annual return to the Registrar of Companies. A business with an INR 50 Crore turnover or more shall be accredited in Form MGT-8 by a Practitioner CS.

   29. Regularization of Additional Director

If the company decides to designate additional director as director, then by passing Shareholder Resolution, it will regularize the individual as director at the General Meeting. DIR-12 file for Change in Director’s Designation together with ordinary resolution within 30 days of AGM.

30. Directors’ Report

The report of the directors shall be submitted covering all the information required by Section 134 of the Small Company within 30 days of the AGM together with Form AOC-4. It should be signed by the board appointed “Chairperson,” where at least 2 directors do not so approve this.

31. Filing of Financial Statements of a Foreign Co.

Every Foreign Company is required to file annual reports (consolidated financial statements / global accounts) together with the list of all major business locations in India within 6 months of the end 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 caused on the basis of some events happening. For the same reason, there are reports to be completed and there are specific deadlines for these activities. There may be fines, additional fees or a compounding of offence, etc. in the case of non-compliance or even a missed deadline. It is therefore important to monitor the frequency of such events and to reach compliance on time. Mandatory Compliance for Private Limited Company

Particulars Form No. Time Limit
§ Change in Directors or KMP DIR-12 Within 30 Days of such change
§ Increase in Authorized Share capital SH-7 Within 30 days of passing OR
§ Increase in Paid up share capital (Issue of security) PAS-3 Within fifteen days from the date of the allotment
§ Change in registered office INC-22 Within fifteen days from the date of such change
§ Change in secured borrowing (Creation, modification and satisfaction of charge) CHG-1 All types of Charges within 30 days of its creation
§ Change of name of company INC-24 Within 60 days from the date of applying reservation of name in INC-1
§ Conversion of company INC-27
§ Filing of resolution and agreements MGT-14 Within 30 days from date of passing resolution
§ Removal of Auditor before Expiry ADT-2 Within 30 days from date of passing SR
§ Application for KYC of Directors DIR-3 KYC On or before 30th April of immediate next Financial Year (Annual Compliance)
§ Report for Disqualification of the Director DIR-9 To be filed by company within 30 days of such disqualification

Other relevant compliances

 Form INC-22A ACTIVE Company Tagging

All companies registered before 31 December 2017 are required to file on or before 25 April 2019 the e-Form ACTIVE (Active Business Tagging Identities and Verification) – INC-22A. Failure to file e-Form Active would result in Rs. 10,000 being penalized.

Requirements for Filing ACTIVE Form

  • The DIN of all directors is involved when sending the INC-22A form
  • Form ADT-1 should have already been filed to name an auditor.
  • The company’s annual report (forms AOC-4 and MGT-7) is complete before F.Y. 17-18.
  • Email ID which will be verified by OTP
  • Photograph of the registered office showing an external building and an inner office showing at least one KMP director connected to this type by his / her DSC

 Declaration of Commencement of Business

With effect from 2 November 2018, each company is now required to file e Form INC 20A with the Registrar of Companies for commencement of its business within 180 days of its incorporation.

  • A declaration shall be submitted by the Director within 180 days of the date of incorporation of the company in the form INC-20 A and confirmed by the Registrar in such a manner as may be required that each memorandum recipient has paid the value of the shares agreed upon by the Registrar on the date of the declaration; and
  • The organization has submitted a confirmation of its registered office to the Registrar as set out in Form INC-22 in sub-section (2) of section 12.

Company (SBO i.e, Significant Beneficial Ownership) Rules 2019

  1. BEN-1

Any person who is SBO to send a declaration to SBO within 90 days from 8.2.2019.

For any change in SBO, within 30 days of acquiring or change therein.

  • BEN-2

Company to file within 30 days of receipt of BEN 1 to ROC.

     3. BEN-3

Register of SBO.

  • BEN-4

Any reporting company shall notify BEN 4 in all cases where its member (other than an individual) holds not less than 10% of its membership;

(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 issued by Specified Companies on an annual basis by 31 October/30 April. Companies and information should be given below:

All companies that receive goods or services from micro and small businesses and whose payments exceed 45 days from the date of acceptance or the date of deemed acceptance of goods or services in accordance with the provisions of the Act shall submit to MCA a half-yearly return stating the following : Mandatory Compliance for Private Limited Company

a) The amount of payments due; and

b) The reasons for delay

Notes:

  • 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 reported annually by 30 June and to provide data as properly audited by the company’s auditor as of 31 March of that year.

Note: One-time Return from 1 April 2014 to the date of publication of this notification (22.1.19) shall be submitted by any company other than government pending receipt of cash or loan by a company but not regarded as deposits, within 90 days of the date of publication of this notification (22.1.19).

Conclusion

Clearly, running a business, especially in the context of a private limited company, is not something that needs to be done smoothly, requiring both ongoing expenditure of a great deal of time and energy, and considerable knowledge of many financial and regulatory techniques.

Compliance is a business tool that can give competitive advantage to firms, consumer trust and eventually return on investment if used in the right way. Compliance is not just’ doing the right thing’ or’ taking a box’ but it is the way to work, part of the market, trust of investors, transparent and open culture. Note, non-compliance costs are always higher than compliance costs. Today, there are well-established and qualified practitioners on the market ready and willing to assist you during the organization’s long life, not just in incorporation but with all the legal and regulatory requirements. Mandatory Compliance for Private Limited Company

Leave a Reply

Your email address will not be published. Required fields are marked *