Mandatory Post Incorporation Compliance of Private Company

Consequently to the company be incorporated successfully, groups of other compliances are also required to be fulfilled by the company. Through this article, we try to cover details of those compliances and provisions that mandate them.

The Companies Act 2013 is a stringent act and leaves no room for any mistakes. “Ignorantia Juris non-excusat” means “ignorance of the law is not an excuse”. This is a legal maxim that goes on to say that one cannot escape liability on the pretext of unawareness of the law. Thus, the directors and shareholders will have to be aware of the legal compliance involved post-incorporation of the company.

So, below are several Mandatory Compliance that should be followed by every Private Company.

A. First Board Meeting and Director Disclosure

As per Section 173(1), of The Companies Act 2013, the company shall hold a meeting of the Board of Directors in less than 30 days from the date of its incorporation. Directors are permitted to attend the meeting either in person or through video conferencing. Minimum of 4 board meetings (with a maximum gap of 120 days between 2 such board meetings) At the First Board Meeting in which the person participates as a Director disclose his concern or interest in any company by filing Form MBP-1, to give notice to the Company as per section-184(1), Companies Act, 2013.

B. Bank Account Opening of the Company and Official Address

Companies need to have a bank account even before approaching the authorities for company incorporation. Since the company is an artificial entity, the transactions cannot be done in the name of any natural person.

As per Section 12(1), a company shall have a registered office within 30 days from the date of incorporation. This address shall be used to receive all official communication from the various authorities. The company shall inform the same to the registrar within 30 days from the date of incorporation through Form-INC-22, only if you didn’t attach proof of address during incorporation.

C. Statutory Registers and Records

All the Companies have to maintain statutory registers in the prescribed format such as the register of members, register of charges, register of directors and KMP, register of loan and guarantee, etc. Minutes of the Board meeting and general meeting, Attendance Register, Books of Accounts, etc. are to be maintained.

D. Appointment of the first statutory auditor

The First Auditor of the company shall be appointed by the BOD within 30 days of Incorporation who shall hold the office till the conclusion of 1st AGM. In the case of the First Auditor, filing ADT-1 is not mandatory.

In the case of failure of the Board to appoint such auditor, it shall inform the members of the company, who shall within ninety days at an extraordinary general meeting appoint such auditor and such auditor shall hold office till the conclusion of the first annual general meeting. However, the company is not required to file Form ADT-1 for the appointment of the first auditor.

E. Allotment of Shares and Issuance of Share Certificate

The company is required to allot the shares to its subscribers within 60 days from the date of incorporation of the company.

Within 2 months from the date of incorporation, the company needs to issue share certificates as per Form SH-1 as per section-56(4), Companies Act, 2013. After that, within 30 days from the issuance of the share certificate, the company made payment of stamp duty on the share certificate as per the applicable Stamp Duty Act.

F. RBI Reporting in case of Foreign Investment

Within 30 days from the date of allotment of subscription money in case of Foreign Investment the Form FC-GPR has to be filled as per Para 9, Schedule I, Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000.

G. Declaration of Commencement of Business

On the deposit of the subscription amount in the Bank account, the Company has to file a Declaration of Commencement of business with the Registrar of Companies (ROC) within 180 days in form INC-20A, which evidences that the subscribers have deposited the subscription money in the bank account of the Company.

H. Obtaining License from different Authority

Depending upon the nature of business, the Company is required to obtain licenses and registrations with different Government authorities viz. Shop Act License, Goods & Service Tax, Professional Tax, Importer Exporter Code, Start-up, etc.

I. Intellectual Property

The business idea, trade secrets, business and product names, logos, processes, designs, concepts, discoveries, inventions, technology, original works of authorship, know-how, databases, methodologies, software, computer programs, technical information, engineering and technical drawings, and other such knowledge or information developed must be protected from infringement.

J. Annual Compliances

• Form ADT 1: First Auditor of the company shall be appointed by the BOD within 30 days of Incorporation who shall hold the office till the conclusion of 1st AGM.

• ROC Form MGT 7/MGT-7A: which contains details of shareholding structure, change in directorship, and details of the transfer of shares during the year if any. The due date for ROC Form MGT 7 would be 28th November which is 60 days from the conclusion of AGM.

The Central Government has prescribed an abridged form of annual return i.e. MGT-7A, for “OPC and Small Company” by amending the provisions of Companies (Management and Administration) Rules, 2014 which shall come into force from 05th March, 2021. This form is applicable in respect of Annual Return for the F.Y. 2020-21 and onwards of OPC and small companies.

• ROC Form AOC4: It contains details and annexures relating to the Balance Sheet of the Company, Profit & Loss Account, Compliance Certificate, Registered Office Address, Register of Member, Shares and Debentures details, Debt details, and information about the Management of the Company. The due date for ROC Form AOC 4 would be 29th October i.e. 30 days from the conclusion of the AGM.

• E-form DIR 3 KYC: Every Director who has been allotted DIN on or before the end of the financial year, would be mandatorily required to file form DIR-3 KYC before 30th September of the immediately next financial year.

• FLA Return: The filing of the FLA annual return has to be done before the 15 of July of the respective year and must include data of FDI or ODI received or made by the company respectively for any previous year(s) and the current year.

K. Income Tax Return Filing

It is mandatory for every company (other than the companies claiming exemption under section 11) to file the return of income irrespective of the amount of income or loss in Form ITR 6. Also, Companies are required to file ITR in Form ITR 7 Under section 139(4A) or 139(4B) or 139 (4C) or 139 (4D).

L. FAQ’s – Frequently Asked Question related to Post Incorporation Compliances

1. Is it mandatory to appoint the auditor after registration of a Company?

Ans. Yes. it is mandatory to appoint a CA as the auditor of the company after registration of the Company. Filing of Form ADT-1 with the ROC office is not mandatory for the appointment of the first auditor.

2. Is it necessary to issue share Certificates to the first shareholders?

Ans. Yes. A Company has to issue share certificates to every subscriber within 60 days of incorporation.

3. What happens if the Commencement declaration is not filed in 180 days?

Ans. The company cannot start its business unless this declaration is filed with the ROC office. Also, the company shall be liable to a penalty of up to fifty thousand rupees and every officer who is in default shall be liable to a penalty of up to one thousand rupees for each day of delay in filing the declaration.