There a lot of writeups and articles about all kinds of compliances under various acts post incorporation of the Company. However I did not see any write up which emphasised on the most important compliances which if not done could result in striking off the company by Registrar of Companies. While many young entrepreneurs who form their companies for their start ups are totally engrossed in the business aspect of the company and many ignore the compliance aspects and mainly one of reasons could be not assigning the company compliances responsibility to a dedicated professional who can ensure that the compliance aspects are taken care of right from its inception. Well non compliance of these forms can be a major red flag in the due diligence done by the companies for funding such startups and even for that matter in any future corporate restructuring, etc. Sadly in India there are many big corporates who still hold this mentality when it comes to compliances that “it’s better to ask forgiveness than permission”. But if you want to be successful in your business at whatever level you may be, its always recommended to try and comply with all the relevant laws ahead of time since that’s much easier than facing heavy fines and penalties and consequences of non compliances.
I have tried to summarize the provisions, penalty and timelines for these compliances in the below table for ease of reference.
|
Forms |
FORM ADT 1 | FORM INC- 20 A | FORM INC 22 |
| Purpose | Appointment of First auditor
Appointment to be made within 30days of incorporation at First Board meeting failing which within 90 days of EGM after incorporation. |
Declaration for commencement of business (includes a declaration that subscribers to MOA have paid subscription money) | Notice of Registered office |
| Applicable to | All companies and Section 8 companies. | All companies having share capital | All companies who have incorporated the companies with only correspondence address then after incorporation they must update its registered office address. Also applicable for change of Registered office. |
| Relevant section | Section 139(1) of the Companies Act, 2013 read with The Companies (Audit and Accounts) Rules 2014 | Section 10A(1)(a) of Companies Act, 2013 read with Rule 23A of the Companies (Incorporation) Rules, 2014. | Section 12 (2) & 12 (4) of the Companies Act, 2013 and rule 25 & 27 of the Companies (Incorporation) Rules, 2014 |
| Deadline for filing | To be filed within 15 days of appointment. | Within 180 days from the date of incorporation of the Company | Within 30 days of incorporation and within 15 days after change of registered office address |
| Penalty for non compliance & its Consequences | Fine which shall not be less than Rs.25000 but which may extend to Rs.5lacs and every officer of the company who is in default shall be punishable with fine which shall not be less than Rs.10000 but which may extend to Rs.1 lac. | 1.Penalty of Rs.50,000 on the company and Rs.1000 on every officer who is in default (if not designated than its directors) for each day of default upto Rs.1 lac.
2.Action by ROC for removal of the company from ROC by striking off ,if the company has failed to commence its business within one year of incorporation. 3.Disqualifying the company’s directors from holding office in any other company. |
1.Penalty of Rs.1000 on the company and every officer who is in default (if not designated than its directors) for every day during which the default continues but not exceeding Rs.1 lac.
2. Action by ROC in case it conducts physical versification of the registered office and find a default then it can remove the company’s name from ROC by striking off. |
The detailed narrative with applicable sections and rules for the above compliances are elaborated below.
FORM ADT 1
eForm ADT-1 is required to be filed pursuant to Section 139 and 140 of the Companies Act, 2013 and pursuant to rule 4(2) of the Companies (Audit and Auditors) Rules, 2014.
Section 139 of the Companies Act, 2013:
(1) Subject to the provisions of this Chapter, every company shall, at the first annual general meeting, appoint an individual or a firm as an auditor who shall hold office from the conclusion of that meeting till the conclusion of its sixth annual general meeting and thereafter till the conclusion of every sixth meeting and the manner and procedure of selection of auditors by the members of the company at such meeting shall be such as may be prescribed:
Provided further that before such appointment is made, the written consent of the auditor to such appointment, and a certificate from him or it that the appointment, if made, shall be in accordance with the conditions as may be prescribed, shall be obtained from the auditor:
Provided also that the certificate shall also indicate whether the auditor satisfies the criteria provided in section 141:
[Provided also that the company shall inform the auditor concerned of his or its appointment, and also file a notice of such appointment with the Registrar within fifteen days of the meeting in which the auditor is appointed.
Explanation.—For the purposes of this Chapter, “appointment” includes reappointment.
(6) Notwithstanding anything contained in sub-section (1), the first auditor of a company, other than a Government company, shall be appointed by the Board of Directors within thirty days from the date of registration of the company and 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.
Rule 4(2 ) of the Companies (Audit and Auditors) Rules, 2014:
Conditions for appointment and notice to Registrar. —
(1) The auditor appointed under rule 3 shall submit a certificate that –
(a) the individual or the firm, as the case may be, is eligible for appointment and is not disqualified for appointment under the Act, the Chartered Accountants Act, 1949 and the rules or regulations made thereunder;
(b) the proposed appointment is as per the term provided under the Act;
(c) the proposed appointment is within the limits laid down by or under the authority of the Act;
(d) the list of proceedings against the auditor or audit firm or any partner of the audit firm pending with respect to professional matters of conduct, as disclosed in the certificate, is true and correct.
(2) The notice to Registrar about appointment of auditor under fourth proviso to sub-section (1) of section 139 shall be in Form ADT-1.
Penalty for non compliance
147. Punishment for contravention
(1) If any of the provisions of sections 139 to 146 (both inclusive) is contravened, the company shall be punishable with fine which shall not be less than twenty-five thousand rupees but which may extend to five lakh rupees and every officer of the company who is in default shall be punishable with fine which shall not be less than ten thousand rupees but which may extend to one lakh rupees.
FORM INC 22
The company is required to furnish to the Registrar verification of its registered office in eForm INC-22 within a period of thirty days from the date of its incorporation. The company can also specify the address of registered office at the time of filing incorporation eForms and any change in situation of the registered office thereafter, the company is required to notify to Registrar in eForm INC-22 within fifteen days of such change.
Section 12 of the Companies Act, 2013:
(1) A company shall, within thirty days of its incorporation and at all times thereafter, have a registered office capable of receiving and acknowledging all communications and notices as may be addressed to it.
(2) The company shall furnish to the Registrar verification of its registered office within a period of thirty days of its incorporation in such manner as may be prescribed.
(4) Notice of every change of the situation of the registered office, verified in the manner prescribed, after the date of incorporation of the company, shall be given to the Registrar within fifteen days of the change, who shall record the same.
Rule 25 of the Companies (Incorporation) Rules, 2014
Verification of registered office.-
(1) The verification of the registered office shall be filed in Form No. INC-22 along with the fee and
(2) there shall be attached to said Form, any of the following documents, namely –
1. the registered document of the title of the premises of the registered office in the name of the company; or
2. the notarized copy of lease / rent agreement in the name of the company along with a copy of rent paid receipt not older than one month;
3. the authorization from the owner or authorized occupant of the premises along with proof of ownership or occupancy authorization, to use the premises by the company as its registered office. and
4. the proof of evidence of any utility service like telephone, gas, electricity, etc. depicting the address of the premises in the name of the owner or document, as the case may be, which is not older than two months.
Rule 27 of the Companies (Incorporation) Rules, 2014
Notice and verification of change of situation of the registered office.-
The notice of change of the situation of the registered office and verification thereof shall be filed in Form No. INC-22 along with the fee and shall be attached to said Form, the similar documents and manner of verification as are prescribed for verification of Registered office on incorporation as above in terms of sub-section (2) of section 12.
Penalty for non compliance
Section 12(8) of Companies Act 2013, If any default is made in complying with the requirements of this section, the company and every officer who is in default shall be liable to a penalty of one thousand rupees for every day during which the default continues but not exceeding one lakh rupees.
If the Registrar has reasonable cause to believe that the company is not carrying on any business or operations, he may cause a physical verification of the registered office of the company in such manner as may be prescribed and if any default is found to be made in complying with the requirements of sub-section (1), he may without prejudice to the provisions of sub-section (8), initiate action for the removal of the name of the company from the register of companies under Chapter XVIII.
FORM INC 20A
10A of the Companies Act, 2013. Commencement of business etc.
(1) A company incorporated after the commencement of the Companies (Amendment) Ordinance, 2019 and having a share capital shall not commence any business or exercise any borrowing powers unless—
(a) a declaration is filed by a director within a period of one hundred and eighty days of the date of incorporation of the company in such form and verified in such manner as may be prescribed, with the Registrar that every subscriber to the memorandum has paid the value of the shares agreed to be taken by him on the date of making of such declaration; and
(b) The company has filed with the Registrar a verification of its registered office as provided in sub-section (2) of section 12.
Rule 23A of the Companies (Incorporation) Rules, 2014
Declaration at the time of commencement of business.- The declaration under section 10A by a director shall be in FormNo.INC-20A and shall be filed as provided in the Companies (Registration Offices and Fees) Rules,2014 and the contents of the said form shall be verified by a Company Secretary or a Chartered Accountant or a Cost Accountant, in practice : Provided that in the case of a company pursuing objects requiring registration or approval from any sectoral regulators such as the Reserve Bank of India, Securities and Exchange Board of India, etc, the registration or approval, as the case may be from such regulator shall also be obtained and attached with the declaration.
Penalty for non compliance:
10A. Commencement of business etc.
(2) If any default is made in complying with the requirements of this section, the company shall be liable to a penalty of fifty thousand rupees and every officer who is in default shall be liable to a penalty of one thousand rupees for each day during which such default continues but not exceeding an amount of one lakh rupees.
(3) Where no declaration has been filed with the Registrar under clause (a) of sub-section (1) within a period of one hundred and eighty days of the date of incorporation of the company and the Registrar has reasonable cause to believe that the company is not carrying on any business or operations, he may, without prejudice to the provisions of sub-section (2), initiate action for the removal of the name of the company from the register of companies under Chapter XVIII.
164. Disqualifications for Appointment of Director
(f) he has not paid any calls in respect of any shares of the company held by him, whether alone or jointly with others, and six months have elapsed from the last day fixed for the payment of the call( share application/subscription money);
TABLE OF FEES
I – Normal filing fees
| Sr.no | Nominal Share Capital (INR) | Fee applicable (INR) |
| Fees to be charged in case company is having share capital | ||
| 1 | Less than 1,00,000 | 200 |
| 2 | 1,00,000 to 4,99,999 | 300 |
| 3 | 5,00,000 to 24,99,999 | 400 |
| 4 | 25,00,000 to 99,99,999 | 500 |
| 5 | 1,00,00,000 or more | 600 |
| Fees to be charged in case company is not having share capital | 200 | |
II- Additional fees in case of delay in filing of forms
| Sr.no | Period of delay | Additional fee applicable (INR) |
| 1 | Up to 30 days | 2 times of normal fees |
| 2 | More than 30 days and up to 60 days | 4 times of normal fees |
| 3 | More than 60 days and up to 90 days | 6 times of normal fees |
| 4 | More than 90 days and up to 180 days | 10 times of normal fees |
| 5 | More than 180 days | 12 times of normal fees |
#Corporate compliances #starup compliance #ADT1 #INC 20A #INC 22 # Post incorporation compliances
Conclusion: Ensuring compliance with post-incorporation regulations is critical for the long-term viability of startups. By prioritizing these essential compliances, businesses can avoid penalties, regulatory issues, and potential company striking off. For further guidance or assistance with corporate compliances, reach out to us. Remember, proactive compliance is always preferable to facing hefty fines and legal consequences later on.
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Disclaimer: This content is meant for information only and should not be considered as an advice or legal opinion, or otherwise. The Author does not in any way take responsibility & guarantee towards the 100% accuracy of the information provided in this article. The Author has tried to prepare the article based on the relevant information available & is a mere opinion of author. Other views are most welcome for the suggestions or improvements to be done in the article.
The Author is a Sports lawyer and Company Secretary in practice & for any query/suggestion can be reached at +91-9769131756 or Email at heema.cs@gmail.com, linkedin https://www.linkedin.com/in/heema-pithadia-542b4415/
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