All the Companies Registered in India are governed by the provisions of Companies Act, 2013 (An act of Parliament which regulates the working of Companies and legal limits within which companies may do their business). Recently, Government strike off more than 2 Lakh companies and disqualified more than 3 Lakh directors for non-compliance of various provisions of Companies Act. Such type of historic action came at the time when government came to know about the various techniques used by corporate entity to evade taxes.
Company law provides legal compliance that are required to be followed by every company like reporting of financial results, reporting of changes in management, maintenance of statuary registers, auditing of accounts etc.
All the compliances provided under the Company Law may be divided in 2 parts for making it easy to understand Mandatory Compliances and Event Based Compliances.
After registration following are the mandatory compliances for every company:
Meeting of Board of Directors: First Meeting of Board of Directors is required to be held within 30 days of Incorporation of Company and thereafter 4 meetings are required to be held in every financial year in such a manner that the gap between 2 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 paid up capital less than Rs. 50 lakh AND turnover less than Rs. 2 Crore. It is sufficient to conduct only 2 board meeting for a small company.
In First Board meeting, Company has to approve pre-incorporation expenses, authorize anyone director for issuing share certificate and bank account opening, appoint first auditor of the company etc.
- Issuing of Share Certificate: The Company is required to issue Share Certificates to the subscribers of memorandum within 60 days of Incorporation of Company.
- Filling of Disclosure of interest by Directors: Director of every company are required to give disclosures about their interest in any other business entity in first Board Meeting in which they participate as a Director and thereafter in First Board Meeting of every financial year in FORM MBP-1 to the Company.
- Annual General Meeting: A company may hold its first AGM within a period of 18 month from the date of incorporation. However, this should not be more than 9 months from close of financial years. There must be one meeting held in each year and the gap between two AGM must not be more than 15 months. Meeting must be held not later than 6 months from close of financial year.
- Minutes of proceedings of Meeting of Board of Directors, General Meeting: It is mandatory for every company to cause minutes of the proceedings of every meeting of Board of Directors, General meeting within 30 days of conclusion of meeting concerned. Minutes shall be preserved permanently and shall act as evidentially value in case of any dispute.
- Approval and Signing of Financial Statements: The financial statement shall be approved by the Board of Directors and signed by 2 Directors out of which one shall be managing director and the chief executive officer, if he is a director in the Company, Chief Finance officer and the Company Secretary of the Company, wherever they are appointed for submission to the auditor for his report thereon.
- Report by Board of Directors: Every Company has to prepare a board report in which details of the state of the company, operations during the year, net profit, dividend declaration and its compliance with a set of financial, accounting and corporate social responsibility standards contains.
- Filling of Financial Statements or Financial Results: Every Company is required to file its Financial Statements within 30 days of its Annual General Meeting with Registrar of Company in E-FORM AOC-4 available at mca.gov.in which shall be digitally signed by at least one Director and is required to be certified by A Company Secretary in Practice/Chartered Accountant in Practice/ Cost Accountant in Practice if the Company is not a Small Company.
- Filling of Annual Return: It is mandatory for every company to file its Annual Return with Registrar of Companies within 60 days of Annual General Meeting in E-FORM MGT-7 available at mca.gov.in which shall be digitally signed by at least one Director and is required to be certified by A Company Secretary in Practice if the Company is not a Small Company.
The annual return of a listed company or a company having paid-up capital of Rs. 10 Crores or more OR turnover of Rs. 50 Crores or more shall be certified by a Practicing Company Secretary in Form No. MGT-8 stating that the annual return discloses the facts correctly and adequately and that the company has complied with all the provisions of this Act.
♣ Maintenance of Statuary Registers: Following registers are 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
EVENT BASED COMPLIANCES
|Change in Directors or KMP
|Increase in Authorized Share capital
|Increase in Paid up share capital (Issue of security)
|Change in registered office
|Change in secured borrowing (Creation, modification and satisfaction of charge)
|Change of name of company
|Conversion of company
|Filing of resolution and agreements
Compliance is a business asset that, if used in the right way, can bring companies competitive advantage, customer trust and ultimately return on investment. Compliance is not only ‘doing the right thing’, or ‘ticking a box’ but it is the way of working, part of the business, investor confidence, transparent and open culture. Remember, Cost of non compliance is always more than cost of compliance.