Private Limited Company Compliance

Did you know that every month, around 15000 private limited companies are registered in India and many of them get closed by the Registrar of Company for being non-compliant and face STK-1 Notice for the strike off. Staying compliant with regulatory requirements under MCA is essential for private limited company in India to avoid legal complications and penalties. This guide by CA Manish Mishra provides a complete overview of the annual compliance process, key activities, deadlines, and tips to streamline applicable compliance.

In India, private limited companies must adhere to several statutory requirements to maintain transparency and accountability and ensuring timely compliance not only avoids penalties but also boosts the credibility of the company.

Annual Compliance Basics

- What is Annual Compliance?
Annual compliance refers to the set of legal obligations that private limited companies must fulfill annually to operate within the framework of Indian laws.

- Objectives of Annual Compliance

• Protect stakeholders’ interests.
• Maintain accurate records of financial and non-financial activities.
• Strengthen the company's operational integrity.

Key Compliance Activities

- Preparation and Filing of Financial Statements

• Includes the Balance Sheet, Profit and Loss Account, and Cash Flow Statement.
• Must be audited by a statutory auditor who has to be a CA in practice.

- Annual General Meeting (AGM)

• For companies with more than one shareholder (other than OPC), AGMs must be held to approve financials and other resolutions. For the first AGM, it falls within 9 months of the closure of the financial year and subsequent ones closed within 6 months of the closure of the financial year.

- Filing of Annual Return (Form MGT-7/7A)

• This form contains details of the company’s shareholding structure and management.
• Deadline: Within 60 days of holding the AGM.

- Filing of Financial Statements (Form AOC-4)

• Financial statements, including the Board’s report and auditor’s report, must be filed with the ROC.
• Deadline: Within 30 days of holding the AGM.

Statutory Registers and Minutes

Maintaining statutory registers like the Register of Members, Directors, and Charges is mandatory. These records are inspected during audits and are critical for compliance. At the same times, it is mandatory to keep record of minutes book for the board and general meeting alike.

Tax-Related Compliance

- Income Tax Returns

• Filing the income tax return (ITR) annually is mandatory, regardless of profitability.

- GST Compliance

• Monthly, quarterly, and annual GST filings must be done if the company is registered under GST.

- Advance Tax

• Payment of advance tax in installments is required if the company's tax liability exceeds ₹10,000.

Audit Requirements

- Statutory Audit

• Conducted by an independent auditor to verify the financial statements’ accuracy.

- Internal Audit

• Ensures internal controls are efficient and financial processes are sound

- Tax Audit

• Applicable if turnover exceeds ₹1 crore (or ₹10 crore in cases of digital transactions).

Compliance with the Companies Act, 2013

The Companies Act, 2013, outlines numerous provisions for private limited companies. Key sections include:

• Section 134: Board’s report.
• Section 137: Filing of financial statements.

Penalties for Non-Compliance

Failing to comply can result in heavy fines and legal consequences. Directors may face disqualification or imprisonment in severe cases.

Secretarial Compliance

Engaging a qualified company secretary ensures accurate compliance filings and adherence to deadlines. Secretarial audits are beneficial for larger companies.

Due Dates for Compliance

Digital Signature Certificates (DSCs)

DSCs are vital for e-filing with government portals. Ensure timely renewal to avoid last-minute hurdles.

Filing with the Registrar of Companies (ROC)

Filing with the ROC involves uploading forms like MGT-7/7A and AOC-4. Double-check the data to avoid rejections or penalties.

Corporate Social Responsibility (CSR)

Companies meeting certain criteria must allocate 2% of their net profits to CSR activities and disclose these in annual filings.

Amendments and Updates

Stay updated with recent legal amendments to ensure seamless compliance. Engage professionals to navigate changes effectively.

Role of Technology in Compliance

Compliance software simplifies tasks like form filing, due date tracking, and maintaining statutory registers.

FAQs

- What is the penalty for late filing of annual returns?

The penalty ranges from ₹100 per day of default with no upper limit.

- Is an AGM mandatory for all private limited companies?

Companies with only one shareholder are exempt.

- Can compliance be handled internally?

Yes, but hiring professionals ensures accuracy and timeliness.

- What are statutory registers?

Registers recording members, directors, and charges maintained as per the Companies Act.

- What is Form AOC-4?

It is a form for filing the company’s audited financial statements with the ROC.

- Do private limited companies need GST registration?

Yes, if turnover exceeds ₹20 lakh (₹10 lakh for special category states).

GenZCFO Advice

Annual compliance is not just a regulatory obligation but a step towards building a trustworthy and sustainable business. Timely and accurate adherence safeguards the company from legal repercussions and enhances its reputation. If you need any help with your private limited company compliance, do not hesitate to contact our team of experienced Chartered Accountants at GenZCFO.