Once a company is incorporated, there are a set of compliance procedural formalities which must be completed to maintain compliance as per the Companies Act, 2013.
All the Incorporated companies needs to mandatorily comply with the provisions applicable and there upon start the business operations of the company.
Hence, it is important for those incorporating a company to be aware of the post-incorporation compliance requirements of a company.
All the post-incorporation compliances required by a company like statutory register maintenance, share certificates, auditor appointment, bank account opening and more are explained in detail in this presentation.
The post incorporation compliance can be bifurcated in Mandatory compliance and Event based Compliance. The following are explained in detailed below:
We have elaborated some of the mandatory compliances that a private Limited company must ensure:
|Mandatory Compliances||Description and Timeline||Penalty on non compliance|
|First Board Meeting||First Meeting of Board of Directors is required to be held within 30 days of Incorporation of Company. Notice of BM must be send to every director at least 7 days before the meeting.||There is no penalty mentioned in act for not conducting first BM, however Every officer of the company whose duty is to give notice under this section and who fails to do so shall be liable to a penalty of twenty-five thousand rupees.|
|Subsequent Board Meetings||Minimum 4 Board Meetings to be held every year with not more than 120 days gap between two meetings.||Every officer of the company whose duty is to give notice under this section and who fails to do so shall be liable to a penalty of twenty-five thousand rupees.|
|Filing of Disclosure of interest by Directors||Every director at:
Form MBP‐1 shall be kept in the records of the company.
|If a director of the company contravenes the provisions of sub-section (1) or subsection (2), of section 184 of companies act, 2013, such director shall be liable to a penalty of one lakh rupees.|
|First Auditor||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 case of First Auditor, filing of 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, company is not required to file Form Adt-1 for appointment of first auditor. So, in case if you want to know, you can show its appointment within time. Else, it will remain non-compliance.|
|Subsequent Auditor||The BOD shall appoint the auditor in first AGM of company who shall hold the office till the conclusion of 6th AGM and shall inform the same to ROC by filing ADT-1. The responsibility to file Form ADT 1 is that of the company and not of the auditor within 15 days from the date of appointment.||If any of the provisions of section 139 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.|
|Annual General Meeting||Every Company is required to hold an Annual General Meeting on or before 30th September every year during business hours (9 am to 6pm), on a day that is not a public holiday and either at the registered office of the Company or within the city, town or village where the registered office is situated. A 21 clear days’ notice is required to be given for the same.||If any default is made in holding a meeting of the company in accordance with section 96 or section 97 or section 98 or in complying with any directions of the Tribunal, the company and every officer of the company who is in default shall be punishable with fine which may extend to one lakh rupees and in the case of a continuing default, with a further fine which may extend to five thousand rupees for every day during which such default continues.|
|Filing of Annual Return (Form MGT-7)||Every Private Limited Company is required to file its Annual Return within 60 days of holding of Annual General Meeting. Annual Return will be for the period 1st April to 31st March.||If any company fails to file its annual return before the expiry of the period specified therein, such company and its every officer who is in default shall be liable to a penalty of ten thousand rupees and in case of continuing failure, with further penalty of one hundred rupees for each day during which such failure continues, subject to a maximum of two lakh rupees in case of a company and fifty thousand rupees in case of an officer who is in default.|
|Filing of Financial Statements (Form AOC-4)||Every 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 30 days of holding of Annual General Meeting.||If a company fails to file the copy of the financial statements under as the case may be, before the expiry of the period specified therein, the company shall be liable to a penalty of ten thousand rupees and in case of continuing failure, with a further penalty of one hundred rupees for each day during which such failure continues, subject to a maximum of two lakh rupees, and the managing director and the Chief Financial Officer of the company, if any, and, in the absence of the managing director and the Chief Financial Officer, any other director who is charged by the Board with the responsibility of complying with the provisions of this section, and, in the absence of any such director, all the directors of the company, shall be shall be liable to a penalty of ten thousand rupees and in case of continuing failure, with further penalty of one hundred rupees for each day after the first during which such failure continues, subject to a maximum of fifty thousand rupees.|
SOME OF THE ADDITIONAL MISCELLANEOUS MANDATORY COMPLIANCE WHICH ARE AS FOLLOWS:
1. OPENING OF BANK ACCOUNT OF THE COMPANY:
To transact the business of the company, it is required to open and maintain a current account with any bank in India through which all the receipts and payments of banking nature shall be transacted.
Selection of the Bankers is very crucial since day to day operations of the Company are dependent upon the bank account operations. It is strongly recommended to open the current account in a Bank, whose branch is situated near the office of the Company.
In the first board meeting of the Company, the Board approves and passes a resolution for the opening of the Bank account.
2. DECLARATION OF COMMENCEMENT OF BUSINESS:
Immediately on the opening of the Bank account and before the commencement of any business operations, the Company has to ensure the deposit of the subscription amount by the subscribers as agreed and provided in the Memorandum of Association of the Company.
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) in form INC-20A, which evidences that the subscribers have deposited the subscription money in the bank account of the Company.
As per the provisions of Companies Act, 2013, the Company has to file such form INC-20A within 180 days of its incorporation. However, until such declaration of commencement is filed with the ROC, the Company cannot commence any of its business operations.
Accordingly, the following chain of events is to be followed to in compliance with the provisions of the Act:
Also, once the subscription amount is deposited by the subscribers in the Bank account, the Company can proceed to allot the subscribed shares to the members. Thereafter, the Company shall issue duly stamped and signed share certificates within 60 days of such allotment.
3. Authority to obtain licenses required for the running of business:
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.
The Company authorizes any Director or other signatory to obtain such registrations in its First Board meeting.
4. Obtain corporate stationery:
In the First Board meeting of the Company, the Directors have to decide on the following corporate stationery required in the day-to-day business operations and also for the Companies Act compliance:
However, the requirement for embossing seal for a company has been removed in the Companies Amendment Act, 2015.
EVENT BASED COMPLIANCES:
Even based compliances are those which gets triggered upon happening of certain events like change in directors, change of registered office, change in authorized share capital etc. Hence, it is necessary that the happening of such events get tracked and compliances met with on time in order to avoid penalties or additional fees. Some of the Event based compliances are mentioned below along with the time limit:
|Events||Form No.||Time Limit|
|Change in registered office||INC-22||Within fifteen days from the date of such change|
|Change in Directors or KMP||DIR-12||Within 30 Days of such change|
|Increase in Authorized Share capital||SH-7||Within 30 days of passing Ordinary Resolution|
|Filing of resolution and agreements||MGT-14||Within 30 days from date of passing resolution|
|Increase in Paid up share capital (Issue of security)||PAS-3||Within fifteen days from the date of the allotment|
|Change in secured borrowing (Creation, modification and satisfaction of charge)||CHG-1||All types of Charges within 30 days of its creation|
|Application for KYC of Directors||DIR-3 KYC||On or before 30th April of immediate next Financial Year (Annual Compliance)|
|ACTIVE (Active Company Tagging Identities and Verification)||INC-22A||On or before 25th April 2019 (Applicable to all companies registered before 31st December 2017)|
|Declaration of Commencement of Business||INC-20A||Within a period of 180 days of the date of incorporation of the company. (Applicable to companies incorporated after 2nd November, 2018.)|
CONSEQUENCES OF NON-COMPLIANCES:
If a company fails to follow any of the regulatory compliances then the Company and every officer who is in default shall be punishable with fine for the period for which default continues. Hence the penalties will keep on increasing as the time period of non-compliance increases.