Introduction:

It is rightly said that “Compliance” is just a subset of “governance” and not the other way around.” ― Pearl Zhu.

This quote simply states that governance is a wider concept than compliance, however, in order to achieve ethical governance, one should first achieve ethical compliance.

In general, compliance means conforming to a rule, such as a specification, policy, standard or law. Regulatory compliance describes the goal that organizations aspire to achieve in their efforts to ensure that they are aware of and take steps to comply with relevant laws, policies, and regulations. Further, corporate compliance is defined as the way that a company ensures that it is following all the laws and regulations that apply to their business. This generally involves the design, implementation, and monitoring of policies, trainings, procedures and practices.

Compliance Folder Register Index

The role of Company Secretary is of utmost importance in compliance mechanism. A Company Secretary as a governance professional should ensure that it is his/her duty to always comply with various laws applicable to his/her organization in the day to day affairs of managing compliance. It is his/her responsibility to keep maximum transparency as it is a vital factor while ensuring compliance. Compliance of laws can be monthly, quarterly, half yearly and annual as per the requirement of a specific act, rule and regulation. These compliance have to be adhered to as and when depending upon the law applicable to companies. There are various annual compliance under corporate and securities laws. Each head is separately explained as under:

1. Annual Compliance under Corporate Laws:

Companies in India are governed by The Companies Act, 2013 (“the Act”) which is more of a compliance model. It has enumerated strict compliance as compared to the erstwhile Companies Act, 1956. The Act states various annual compliance that are required to be adhered to by companies as stated hereinbelow[1]:

Sr. No. Compliance Section/Rule/ Regulation Time limit for compliance  Applicability
1. Disclosure of Interest by Directors of the Company in Form MBP-1 Section 184(1) read with rule 9(1) of The Companies (Meetings of the Board and its Powers) Rules, 2014 In the first board meeting of the financial year and then after upon every subsequent change in interest. Listed Company Public Company Private Limited Company
2. Disclosure of Non – Disqualification by Directors in Form DIR-8 Section 164(2) read with rule 14(1) of The Companies (Appointment and Qualification of Directors) Rules, 2014 Upon appointment/re-appointment of a Director Listed Company Public Company Private Limited Company
3. Annual Filing in Forms AOC-4, AOC-4 XBRL, AOC-4 CFS Section 137 read with rule 12(1) of The Companies (Accounts) Rules, 2014 and Rule 3(1) of The Companies (Filing of Documents and Forms in XBRL) Rules, 2015 Within 30 (thirty) days from the date of Annual General Meeting Listed Company Public Company Private Limited Company 

For XBRL:

(i) companies listed with stock exchanges in India and their Indian subsidiaries;

(ii) companies having paid up capital of five crore rupees or above;

(iii) companies having turnover of one hundred crore rupees or above;

(iv) all companies which are required to prepare their financial statements in accordance with Companies (Indian Accounting Standards) Rules, 2015.

4. Annual Filing in Form MGT-7 and extract of Annual Return in Form MGT-9 Section 92 read with Rule 11(1) and 12(1) of The Companies (Management and Administration) Rules, 2014 Within 60 (sixty) days from the date of Annual General Meeting Listed Company Public Company Private Limited Company
5. Certificate in Form MGT-8 Section 92 read with Rule 11(2) of The Companies (Management and Administration) Rules, 2014 Within 60 (sixty) days from the date of Annual General Meeting along with Form MGT-7 Listed Company, or

A Company  – having Paid up share capital of rupees 10 Crore or more, or – turnover of rupees 50 Crore or more

6. Report on AGM in Form MGT-15 Section 121 (1) Within 30 (thirty) days of Annual General Meeting Listed Company
7. Maintenance of Registers and Records Section 88 and Secretarial Standard on Meetings of Board of Directors As applicable from time to time Listed Company Public Company  Private Limited Company
8. Maintenance of Minutes of Board and General Meetings Section 118, Secretarial Standard on Meetings of Board of Directors and Secretarial Standard on General Meetings Board Meeting Minutes:

To be entered in the minutes book within 30 (thirty) days from the conclusion of the meeting 

General Meeting Minutes:

To be entered in the minutes book within 30 (thirty) days from the conclusion of the meeting

Listed Company Public Company Private Limited Company

In addition to the above compliance, as per section 173(1) of the Act, every company shall hold a minimum number of 4 (four) meetings of its Board of Directors every year such that not more than 120 (one hundred and twenty) days shall intervene between two consecutive meetings of the Board.

2. Annual Compliance under Securities Laws:

The Companies listed on the stock exchanges are governed by Securities and Exchange Board of India (SEBI) through various securities laws. Now, let us understand the annual compliance provided under each such securities laws which every listed company is bound to follow:

a. SEBI (Listing Obligations and Disclosures Requirements) Regulations, 2015 (“LODR Regulations”):

The LODR Regulations came into effect eradicating the erstwhile Listing Agreement. These regulations are more complex in nature and more compliance based which every company listed on stock exchange is bound to comply with. Few annual compliance enumerated under these regulations are as follows:

♦ As per Regulation 17(2) of LODR Regulations, the board of directors of all listed entities shall meet at least four times a year, with a maximum time gap of 120 (one hundred and twenty) days between any two meetings.

♦  Submission of Annual audited standalone and consolidated financial results along with the audit report and statement  on  impact  of  audit  qualifications  to the stock exchange within 60(sixty) days from the end of the financial year under Regulation 33 of LODR Regulations.

♦  Sending of Annual Report to the shareholders, not less than 21 (twenty -one) days before the annual general meeting regulation 36(2) of LODR Regulations and submission of Annual Report to the stock exchange along with notice of general meeting not later than the day of commencement of dispatch to its shareholders as per regulation 34(1)(a) of LODR Regulations. (In case of top 500 listed entities based on market capitalization (calculated as on March 31 of every financial year), Business Responsibility Report should be included in the Annual Report)

b. SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (“SAST Regulations”):

The SAST regulations rule the corporate actions of a company like acquisition and takeovers. Following are few of the annual compliance listed under these regulations:

♦Regulation 30(3): The disclosures required under sub-regulation (1) and sub-regulation (2) of Regulation 30 of SAST Regulations shall be made within 07 (seven) working days from the end of each financial year to every stock exchange where the shares of the target company are listed and the target company at its registered office. (Regulation 30(1): Every person, who together with persons acting in concert with him, holds shares or voting rights entitling him to exercise twenty-five per cent or more of the voting rights in a target company, shall disclose their aggregate shareholding and voting rights as of the thirty-first day of March, in such target company in such form as may be specified. Regulation 30 (2): The promoter of every target company shall together with persons acting in concert with him, disclose their aggregate shareholding and voting rights as of the thirty-first day of March, in such target company in such form as may be specified.)

c. SEBI (Prohibition of Insider Trading) Regulations, 2015 (“PIT Regulations”):

Pursuant to the amendment in the Insider Trading law, the new regulations came to be known as SEBI (Prohibition of Insider Trading Regulations, 2015. The new regulations created a robust compliance mechanism with strict penalty enforcement for the insiders breaching the provisions of these regulations. It replaced the earlier Insider Trading Regulations and brought a new perspective to this law. Few annual compliance that form part of these regulations are as below:

♦  As per Regulation 14 of the PIT Regulations, all the Designated persons shall be required to disclose names and Permanent Account Number or any other identifier authorized by law of the following persons to the company on an annual basis and as and when the information changes:

i. immediate relatives;

ii. persons with   whom   such   designated   person(s) shares   a   material   financial relationship. (The term “material financial relationship” shall mean a relationship in which one person is a recipient of any kind of payment such as by way of a loan or gift from a designated person during  the  immediately  preceding  twelve  months,  equivalent  to  at  least  25% of the annual income of such designated person but shall exclude relationships in which the payment is based on arm’s length transactions.); and

iii. Phone, mobile and cell numbers which are used by them and the names of educational institutions from which designated persons have graduated and names of their past employers shall also be disclosed on a one-time basis.

[1] Companies Act, 2013 and Rules made thereunder

*****

Disclaimer: The contents of the material hereinabove mentioned have been prepared keeping in view the relevant provisions of the act, rules, regulations etc. and are basis of my personal views, judgements and expressions purely in a professional capacity. Nothing contained in this material shall be treated as a legal advice or a recommendation to be acted upon. I assume no responsibility for any reliance on the material contained herein.

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Qualification: CS
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Location: Mumbai, Maharashtra, IN
Member Since: 10 Sep 2020 | Total Posts: 1

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