Compliances
An Overview
The term compliance refers to the ability to adhere to orders, rules, or requests. For a private limited company in India, strict adherence to the Companies Act, 2013 is essential. This Act regulates various aspects, including director appointments, board meetings, and shareholder gatherings.
To ensure compliance, companies must fulfil annual requirements, such as filing returns and income tax statements. Non-compliance can result in penalties, making professional assistance crucial for navigating complex corporate laws.
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Key Private Limited Company Compliances:
Commencement of Business: Companies in India must obtain a Commencement of Business certificate within 180 days of incorporation. This is crucial to demonstrate that the company is ready to start its operations. Failure to obtain this certificate within the specified timeframe may result in penalties.
Auditor Appointment: Within 30 days of incorporation, a company must appoint a statutory auditor to commence business operations. Timely appointment is essential for proper financial oversight. Failure to appoint an auditor within the stipulated period can lead to penalties.
DIN eKYC: Directors are required to undergo Director Identification Number (DIN) eKYC. This is a process to verify and update director details. Non-compliance with DIN eKYC regulations can result in penalties.
Hold Annual General Meeting (AGM): It is mandatory for companies to hold an Annual General Meeting within six months of the financial year’s close. During the AGM, various matters such as approval of financial statements and appointment of auditors are addressed.
Director’s Report: A comprehensive Director’s Report must be prepared under Section 134 of the Companies Act. This report typically includes financial performance, future outlook, and other key aspects of the company’s operations.
Statutory Audit Compliances: The company must appoint a statutory auditor, and the annual accounts must be finalized and audited as per statutory requirements. This is a crucial step to ensure transparency and accuracy in financial reporting.
Annual ROC Filings: Mandatory filing of MGT-7 (Annual Return) and AOC-4 (Financial Statements) forms with the Registrar of Companies (ROC) within specified timelines. This filing provides an overview of the company’s financial and operational status.
Board Meeting: Companies are required to conduct quarterly board meetings, adhering to proper documentation and notice procedures. These meetings play a crucial role in strategic planning and decision-making.
Income Tax Compliances: Companies must adhere to quarterly advance tax payments, file income tax returns, and undergo tax audit if applicable. This ensures compliance with the Income Tax Act and avoids legal consequences.
Other Event-based Compliances: Timely filing of necessary forms for events such as changes in capital, share allotments, loans, and director appointments is essential. This ensures accurate and up-to-date records with the regulatory authorities.
Non-compliance: Emphasis on the potential penalties for non-compliance with the Companies Act rules. Fines and additional fees may be imposed, underscoring the importance of meeting regulatory obligations.
Professional Assistance: Encouragement for companies to seek professional assistance for timely fulfilment of compliance obligations. Dedicated advisors can assist in compliance management, accounting, secretarial services, and annual return filing.
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Add Designated Partner
A company can intimate changes among designated partners’ or partners’ or change in any particulars of designated partners’ or partners’ of a LLP by filing Form 4 (Notice of appointment, cessation, change in name/ address/designation of a designated partner or partner and consent to become a partner/ designated partner) with Registrar.
Changes to LLP Agreement
A Limited Liability Partnership (LLP) can change the LLP Agreement by filing Form 3 (Information with regard to Limited Liability Partnership Agreement and changes, if any, made therein). However, in case change in LLP agreement is due to change in partners/ designated partner, Form 4 has to be filed along with Form 3.
Close the LLP
An LLP can cease operations through either the voluntary declaration of defunct status or formally winding up. Declaring as defunct involves filing eForm 24 with the Registrar, who can also strike off defunct LLPs. Winding up, governed by LLP Act 2008, can be voluntary or compulsory through a tribunal, based on specified conditions.
Annual Compliance Services
Annual compliances are compulsory for every certified company, whether a single business is undertaken or none. The annual compliances for Private Limited companies include filing of various forms, such as Annual Return (Form MGT-7), Financial Statements (Form AOC-4), and Income Tax Returns (ITR). These are crucial legal and regulatory obligations that must be met every year. These compliances are prescribed under the Companies Act, 2013 and regulated by the Ministry of Corporate Affairs. Meeting these compliances within their due dates is essential to avoid penalties and maintain compliance with the law.
LLP Annual Filings
LLP Annual Filing involves the submission of two ROC forms to the Registrar of Companies annually. Statutory obligations include filing Annual Return (Form LLP 11) within 60 days and Statement of Account & Solvency (Form LLP 8) within 30 days. LLPs must adhere to statutory requirements like Annual Returns, Income Tax returns, Profit and Loss accounts, and Balance sheets, irrespective of business activities, following the financial year from 1st April to 31st March, similar to companies.
CFSS
The Companies Fresh Start Scheme (CFSS) aims to help companies that have suffered during pandemic times. It applies to those who have failed to submit documents with the company registers. It aims to safeguard entrepreneurs from prosecution for delayed document filing. Normal fees apply under Companies Rules, 2014, including MCA 21 registry filings. Companies with ongoing appeals against prosecutions must withdraw them before applying for CFSS. If no appeal exists, CFSS allows filing within 120 days, granting immunity for 6 months. Companies facing court cases or management disputes are ineligible for immunity.
Secretarial Audit
Secretarial Audit, a facet of overall compliance management, serves as a vital tool in identifying and rectifying noncompliance within an organization. Conducted by an independent professional, it scrutinizes adherence to legal and procedural requirements, ensuring compliance with laws and regulations.
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