Continuous Compliance Requirements for Private Limited Company
Definition of Private Company
As per Section 2 (68) of Companies Act, 2013 “private company” means a business enterprise having a minimum paid-up share capital (of one lakh rupees or such higher paid-up proportion capital*) as can be prescribed, and which through its articles, —
(i) restricts the right to transfer its shares;
(ii) limits the number of its members to 200 except One Person Company
Provided that where 2 or more persons hold 1 or more shares in a company jointly, they shall, for the purposes of this particular clause, be deemed as a single member.
Provided further that—
(A) people who are in the employment of the company; and
(B) persons who, having been formerly in the employment of the company, were members of the company while in that employment and have continued to be members after the employment ceased, shall not be included in the list of members; and
(iii) prohibits any invitation to the public to subscribe for any stocks of the company;
Note: *Words ‘of one lakh rupees or such higher paid-up share capital’ omitted by the Companies (Amendment)Act, 2015, w.e.f. 29.05.2015.
Board Meetings and Shareholder’s Meetings provisions and key points:
First Meeting of Board of Directors is required to be held within thirty days of its Incorporation of Company and thereafter four meetings are required to be held in every financial year in such a manner that the gap between two Board Meetings should not be more than 120 days. Notice of Board meeting must be send before 7 days of meeting to every director by way of physical or through e-mail.
Benefits to Small Company:
Small company means private limited company which has a paid up capital of less than Rs. 50 lacs AND turnover less than Rs. 2 Crore. Such small companies benefits here as they need to conduct only 2 board meetings.
Annual General Meeting (AGM)
- Every Private Limited Company is required to hold a meeting of its shareholders once in every year within a period of 6 months from the date of closing of the financial year.
- The primary agenda of an Annual General Meeting includes approval of financial statements, declaration of dividends, appointment or re-appointment of auditors, appointment and remuneration of directors etc.
The AGM shall be held during business hours on a day which is not a public holiday and shall take place at the registered office of the company or at some other place within the city, town or village in which the registered office of the company is situated.
Maintenance of Statutory Registers and Records
A Private Limited Company has to maintain various statutory registers and records as required by the Company regulation such as Register of shares, Register of Members, Register of Directors and so forth. Besides, Incorporation documents of the enterprise, Resolutions of the meetings of the Board of Directors, Minutes of the Board Meetings and Annual General Meeting etc. are also required to be preserved by the Company for at least 8 eight financial years.
Such books and records are to be kept at the registered office of the company and shall be open for inspection to its members during business hours. Also, the books of account of company relating to a period of at least 8 financial years should be preserved and kept in good order.
Following are the registers required to be maintained by every company:
- MGT-1: Register of Members
- MGT-3: Foreign register of members, Debenture Holders other security holders or beneficiary residing outside India
- FORM SH-2: Register of renewed and duplicate share certificate
- FORM SH-3: Register of Sweat Equity Shares
- FORM SH-6: Register of Transfer and Transmission of Shares
- FORM SH-10: Register of Shares or Securities bought back
- FORM SH-12: Register of loan, investment and guarantee
- FORM CHG-7: Register of Charges
- FORM MBP-4: Register of contract or arrangement in which directors are interested
- Register of Director and KMP
- Register of deposits
Summary of Annual Accounting Compliance Requirements
Audit of Accounts
Audit is an unbiased examination of books of accounts, statutory records, and vouchers so as to verify whether or not the financials represent genuine & fair value.For the audit of books of accounts, an auditor has to be appointed by the company within 30 days from the date of incorporation
Income Tax Compliance Requirements
Every company is required to file Annual income tax returns by 30th September of the following financial year. Also, companies are required to adhere to withholding tax compliance. While making specific payments, a Company has to deduct tax at source (TDS) which is applicable on payments such as Salary, Interest, Dividend, Rent, Fee for professional and technical services, Commission and brokerage etc.
It is mandatory for the payer to deduct a specific percentage from the payment and pay the balance to the recipient. A quarterly return has to be filed by the payer to the Income tax department containing details of payee, date of deduction and date of remittance to department etc.
The due dates for submitting TDS returns are as follows:
|Quarter||Filing Due Date|
|1st Quarter||15th July|
|2d Quarter||15th October|
|3rd Quarter||15th January|
|4th Quarter||31st May|
After Obtaining GST Registration as Normal Taxpayer, the entity should be required to file the GST returns (In Total 37) on time. The requirement of GST Returns is primarily based at the annual turnover of a taxable person. If annual turnover is less than Rs 150 Lacs then only you need to submit quarterly returns. On the respective due dates of filling GST returns, you need to submit details of purchase and sale. Failure to file GST Returns will attract penalty.
Below are some of the common compliance which a private limited company has to mandatory ensure:
|Compliance Requirement||Description and Timeline|
|Appointment of Auditor||Auditor will be appointed for the FIVE years and form ADT-1 will be filed for 5-year appointment. The first Auditor will be appointed within 1 month from the date of incorporation of the Company.|
|Statutory Audit of Accounts||Every Company shall be mandatorily required to prepare its Accounts and get the same audited by a CA. The Auditor shall certify the Audit Report and the Audited Financial Statements for the purpose of filing it with the Registrar of Companies.|
|Filing of Annual Return (Form MGT-7)||Every Private Limited Company shall file its Annual Return within a period of 60 days from the date of its Annual General Meeting.|
|Filing of Financial Statements (Form AOC-4)||Every Private Limited Company shall file its Annual Financial Statements including its Balance Sheet, Statement of P&L Account and Directors Report within 30(Thirty) days from the date of its Annual General Meeting.|
|Holding Annual General Meeting||It is mandatory for every Private Limited Company Company to conduct an Annual General Meeting of the members of the Company in every Calendar Year. Companies are required to hold their AGM within a period of six months, from the date of closing of the relevant Financial Year.|
|Preparation of Directors’ Report||Every Company shall prepare its Directors’ Report including all disclosures required under Section 134. Also, every Director is under an obligation to provide the details about all the directorships held in other companies every year. This is required to be made in writing and in a prescribed format.|
If the Private limited company fails to comply with the rules and regulations of the Companies Act, then the Company and every officer in default are punishable with fine as provided by the Act for the period during which the default continues.
Hence, the private limited companies should ensure that they remain fully compliant with all the applicable compliance requirements since “it takes less time to do things right than to explain why you did it wrong”.
DISCLAIMER- This write-up is based on the understanding and interpretation of author and the same is not intended to be a professional advice.
CS Shubham Katyal
CS Shubham Katyal is an Associate Member of The Institute of Companies Secretaries of India and a commerce graduate having good experience in secretarial and legal matters. He is a Speaker and Visiting Faculty Member at The Institute of Companies Secretaries of India and Former Committee member of Young Member Empowerment & Placement Committee NIRC-ICSI(2019-20). He has authored several articles on complex subjects which featured on various professional forums.
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