Private Limited Company Compliance
Although Private Limited Company is the most popular form of starting a business, there are various compliances which are required to be followed once your business is incorporated.
Private limited companies come under the Companies Act and incorporating it requires many legal procedures to be followed. After its incorporation, here are some of the common compliance every private limited company is mandatory required and obliged to fulfill under law:
- Appointment of Auditor
- Issue of Share Certificate
- Board Meetings
- INC-22A
- Annual General Meeting
- Statutory Audit etc
Appointment of Auditor
Auditor will be appointed by the company for the tenure of 5 years by filing s form ADT-1 within 15 days for 5-year appointment. In case of a new business, the first Auditor will be appointed within one month from the date of incorporation of the Company and He can hold the post till the end of the first annual general meeting.
If the board fails to appoint the auditor within 30 days, they can call for an extraordinary general meeting within 90 days and appoint their auditor. He will also hold the post till the end of the annual general meeting.
Issue of share certificates
The share certificates issued should be delivered within 2 months from the date of allotment. If the shareholders surrender their allotted letters, the company should send share certificate to those members by registered post.
Board Meetings
The first board meeting of a company should be held within a period of 30 days from the incorporation of the company. At least 4 board meetings should be conducted each year and the interval between two board meetings should not exceed a period of 120 days.
In order to commence board meeting, two directors should be present at the board meeting or if there are more than two directors, 1/3rd of the total directors should attend the board meetings (conditions of Quorum). Directors should be given at least 7 days notice prior to the date of the board meeting.
However, For Small Companies, 2 board meetings will be sufficient instead of 4.
A detailed discussion of the meeting should be recorded and drafted as a file, and that file should be sustained at the registered office of the company.
Annual General Meeting (AGM)
An annual general meeting of the shareholders of a private company, is mandatory to be held within a period of 1 year. But it should be held six months before the closing of the financial year.
Approval of financial statements, declaration of dividends, appointment of auditors, etc. is the primary agenda for this meeting. AGM needs to be held in the city where the registered office of the company is situated and should not be held on public holidays.
Statutory Audit of Accounts
Every Company shall prepare its Accounts and get the same audited by a Chartered Accountant at the end of the Financial Year compulsorily. The Auditor shall provide an Audit Report and the Audited Financial Statements for the purpose of filing it with the Registrar.
Annual ROC filing
Every private company is under an obligation to file details of annual accounts and returns of its shareholders, directors, etc. to the Register of the enterprise. This compliance is to be fulfilled once in a year in the below-mentioned ways-
Annual returns (Form MGT – 7)
It is mandatory for every private company to file its annual returns within a period of 60 days of holding of Annual General Meeting. The annual returns will be filed for the period from 1st April to 31st March.
Financial statements (Form AOC- 4)
Very Private Limited Company is required to file its Balance Sheet along with statement of Profit and Loss Account and Director Report in this form within a period of 30 days from the last annual meeting held.
Yearly reports by Directors:
Every director is required to submit reports containing details about the directorship in other companies every year.
Maintenance of Statutory Register & Minutes Book
A number of registers are required to be maintained, such as‐ Register of Member, Register of Directors, Register of Contracts, Register of Charges, etc. The registers are required to be kept at the registered office of the company.
Hence, 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 |
Form INC-22A – ACTIVE Company Tagging
All companies registered before 31st December 2017 are required to file e-Form ACTIVE (Active Company Tagging Identities and Verification) – INC-22A on or before 25th April 2019. Failure to file e-Form Active will lead to a penalty of Rs. 10,000.
Requirements for Filing ACTIVE Form
- DIN of all the directors shall be active while filing form INC-22A
- Form ADT-1 for appointment of auditor should have already been filed.
- Annual filing (Form AOC -4 and MGT – 7) of the company shall be complete till F.Y. 17-18.
- Email ID which will be verified by OTP
- Photograph of Registered office showing external building and inside office also showing therein at least one director KMP who has affixed his/her DSC to this form.
Other Compliances – Event based
Apart from the above-mentioned agreements, there are some events based compliances which are to be followed based on happening of certain events, such as
- Giving loans to other companies
- Receipt of share application money
- Providing loan to directors
- Allotment of shares
- Transfer of shares
- Appointment/Resignation of directors
- Appointment of Managing Director/ Whole Time Director
- Executing agreement with related parties
- Change in the Bank signatories
- Change in the statutory auditors.
Non-Compliance (Private Limited Company Compliance)
If a Company fails to comply with the rules and regulations of the Companies Act, then the Company and every officer who is in default shall be punishable with fine for the period for which default continues.
If there is delay in any filing, then additional fees is required to be paid, which keeps on increasing as the time period of non-compliance increases. It should be noted that some of the Annual Filing Forms can also be revised but the fees for subsequent revised filing shall be charged, assuming it as a new filing.
