Even though forming a Private Limited Company is the most common way to launch a company, there are a number of regulations that must be adhered to.
It is possible for any business owner to feel a little overwhelmed by the demands of managing day-to-day operations and adhering to corporate legislation. To avoid incurring interest or penalties for late compliances, it is crucial to seek the advice of a specialist and to learn about such legal requirements.
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We’ve outlined some of the most typical compliances a limited liability business must make below:
|Description and Timeline
|Appointment of Auditor
|The auditor will be appointed for a period of 5 (Five) years, and an ADT-1 will be filed. After the first month of the company’s incorporation, the first Auditor will be selected.
|Statutory Audit of Accounts
|At the close of each fiscal year, all companies must compulsorily have their books audited by a chartered accountant. For submission to the Registrar, the Auditor must supply both an Audit Report and the Audited Financial Statements.
|Filing of Annual Return (Form MGT-7)
|Annual Returns must be submitted by every private limited company within 60 days of the AGM. The Annual Report will cover the twelve-month period beginning on April 1 and ending on March 31.
|Filing of Financial Statements (Form AOC-4)
|This form, along with the company’s Balance Sheet, Profit, Loss Statement, and Director’s Report, must be submitted by all private limited companies within 30 days of their Annual General Meeting.
|Holding Annual General Meeting
|Annual general meetings (AGMs) must be held by all private limited companies every year. There is a strict time limit of six months before the end of the fiscal year before an annual meeting must be held.
|Preparation of Directors’ Report
|All of the data specified by Subsection 134 will be included in the Directors’ Report.
Statutory Audit Compliances Mandatory Compliances
Audits, including statutory audits, are performed for the same reason that any other type of audit is performed: to ascertain whether or not an entity is being truthful about its financial status by analyzing relevant data such as account balances, bookkeeping records, and financial transactions.
- Company Auditors are Sworn In.
- Consult with the Company’s Auditors to Complete the Annual Accounts
Annual ROC Filings
- In order to maintain their corporate status, private limited companies must report information about their shareholders, directors, and other officers to the Registrar of Companies by filing Annual Accounts and Returns. Each of these yearly compliances must be made.
- All of the following documents are required as part of your yearly filing with the ROC.
- The Annual Return (Form MGT-7) must be filed by every private limited company within 60 days of the AGM. The Annual Report will cover the twelve-month period beginning on April 1 and ending on March 31.
- Within 30 days of convening the Annual General Meeting, every Private Limited Company must file its Balance Sheet, Profit and Loss Account, and Director Report in Form AOC-4 (Financial Statements).
Annual General Meeting
- Once per year, and no later than six months after the end of the fiscal year, every Private Limited Company must convene a meeting of its shareholders.
- Approval of financial statements, dividend declaration, appointment or re-appointment of auditors, appointment and remuneration of directors, etc. are the key agenda items at an AGM.
- The Annual General Meeting must be held at the registered office of the company, or at some other place within the city, town, or hamlet where the registered office of the company is situated, during business hours on a day that is not a public holiday.
- A Private Limited Company’s initial Board of Directors meeting must take place no later than 30 days after the company’s incorporation date.
- Additionally, there must be at least four Board Meetings every calendar year (one meeting in every 3 months). At least two Board Meetings must be held each year by a Private Limited Company that falls under the “Small Company” category (one meeting in every half year)
- The term “Small Company” accurately describes the vast majority of new businesses.
- The quorum for a Board of Directors meeting is the larger of two directors or one-third of the total number of directors. An official record of the meeting’s proceedings, called “Minutes of the Meeting,” must be drafted and kept at the Registered Office of the Company.
- At least seven days before the scheduled meeting date, a notification should be sent out to directors informing them of the meeting’s date and purpose.
Each year, directors are required to come clean about any other board positions they hold. This must be done annually by submitting a written declaration to the corporation following the guidelines laid out in the Directors’ Report.
Income Tax Return Filing with Quarterly Advance Tax Payment (Tax to be paid at a flat rate of 30% plus Education Cess)
If a company’s sales, turnover, or gross revenues in the prior year relevant to the assessment year were over Rs. Ten Crore, a tax audit is required. It is important to note that the Rs. 10 crore barrier will only apply if cash transactions account for less than 5% of annual receipts or payments.
Declaration of Tax Audit
Maintenance of Statutory Registers and Records
A Private Limited Company must keep a number of statutory registers and records in accordance with the requirements of the Company Law, including a Register of Shares, a Register of Members, a Register of Directors, etc. In addition, the Company must keep its Articles of Incorporation, Board Resolutions, Board Meeting Resolutions, Annual General Meeting Minutes, Annual General Meeting Minutes, and other similar documents.
Members are welcome to visit the company’s headquarters during business hours to peruse these documents. Each business must also keep its books in order for a minimum of eight fiscal years.
Other Event-Based Compliances
In addition to the Annual Filings, the company must also comply with a number of other regulations immediately upon the occurrence of a material event. Exemplified cases of this type are:
- Alteration to the Company’s Authorized or Paid-Up Capital.
- Distribution of Shares or Share Transfers
- Finance other businesses by borrowing money from them.
- Financing Board Members with Loans
- Compensation for appointing a managing or full-time director.
- Advances to board members
- Bank account openings, closures, and changes in authorized signatories.
- Organizational changes, including the selection of new statutory auditors.
In accordance with the Registrar’s specific filing deadlines, all relevant forms must be sent to the Registrar in the event of any such occurrence. Otherwise, additional charges or penalties may be applied. Therefore, timely observance of such regulations is essential.
The Companies Act provides for monetary penalties against both the company and any officers who are responsible for the company’s failure to comply with the Act’s requirements.
Each day that a document is overdue brings with it a cost rise, and this trend continues until the filing is made. It’s important to remember that you can make changes to certain of the Annual Filing Forms, but you’ll have to pay the fees associated with a new filing if you do so.