+91 7305 345 345Event-Based Compliance for Companies
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Event-based compliance refers to the mandatory filings and legal procedures that a company must follow in response to specific corporate events such as changes in directors, share allotments or changes to its office address. Kanakkupillai ensures timely and accurate filing of such events with regulatory bodies, helping businesses stay legally compliant and avoid penalties while focusing on their core operations.
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Event-Based Compliance for Private Limited Companies in India
Private limited companies in India operate under a well-established legal framework that promotes transparency and accountability. In addition to their regular statutory filings, companies must comply with various event-based compliances triggered by specific business events. These events include changes such as the appointment of directors, alterations in share capital, or a change in the registered office. If not filed on time with the Ministry of Corporate Affairs (MCA), these events can lead to penalties and legal complications.
Event-based compliances differ from routine annual filings as they are required only when specific corporate events occur. For instance, if a company appoints a new director or issues shares, it must file the relevant forms within the prescribed timelines. The Companies Act, 2013, along with other regulations from the MCA, RBI, and SEBI, governs these filings. Timely compliance with event-based requirements ensures the legality of corporate actions, enhances transparency, prevents penalties, and boosts investor confidence. Moreover, it facilitates smooth interactions with government bodies, which often require up-to-date filings for processes like securing licenses or participating in government tenders.
What are Event-Based Compliances?
Event-based compliances are legal requirements that a company must adhere to following specific corporate events. These are different from annual compliances that must be filed every year, regardless of any corporate activity. Event-based filings arise when there is a change in the company’s structure, operations, or ownership.
Legal Framework Governing Event-Based Compliance
In India, the legal framework governing event-based compliances for private limited companies is primarily derived from the Companies Act, 2013, and related regulations issued by the Ministry of Corporate Affairs (MCA).
Companies Act, 2013
The following provisions under the Companies Act, 2013 govern event-based compliances:
- Section 108: Governs the transfer of shares and provides the procedures and requirements for transferring shares between shareholders.
- Section 149: Specifies the provisions related to the appointment of directors and the removal of directors.
- Section 178: Deals with the appointment of key managerial personnel (KMP) and their remuneration.
- Section 62: Provides the procedures for increasing authorized share capital and the issuance of shares to new and existing shareholders.
Role of Other Authorities
- RBI: Oversees filings related to foreign investments.
- SEBI: Governs filings for listed companies, though private companies may refer to its guidelines for best practices.
Importance of Event-Based Compliance
The importance of event-based compliance cannot be overstated. They ensure:
- Legal Validity: Event-based compliances ensure that corporate actions, such as changes in directors or capital, are legally valid and recognized by authorities.
- Transparency: Event-based filings contribute to transparency within the organization. They ensure that all stakeholders, including investors, regulators, and employees, are aware of key corporate changes, which promotes good governance.
- Avoidance of Penalties: Delays or failure to comply with event-based filing requirements can attract significant penalties, interest, and legal action. Non-compliance can also result in the disqualification of directors and the strike-off of a company from the MCA’s register.
- Investor Confidence: Timely filing of event-based documents fosters investor confidence, which is crucial for attracting investments. Investors value companies that comply with legal obligations and maintain transparent operations, which directly impacts funding.
- Government Interaction: Many government processes, including obtaining licenses, loans, participating in tenders, or applying for government contracts, depend on the company having up-to-date records with the Ministry of Corporate Affairs (MCA). Non-compliance can hinder the company’s ability to engage in these vital activities.
- Ensure Smooth Business: Many government processes, including obtaining licenses, loans, participating in tenders, or applying for government contracts, depend on the company having up-to-date records with the Ministry of Corporate Affairs (MCA). Non-compliance can hinder the company’s ability to engage in these vital activities.
Forms Related to Event-based Compliance
There are various compliance forms that a private limited company is expected to submit to the ROC to inform them about modifications, alterations, or changes made within the Company. Some of the event-based tractability is mentioned below with the relevant form to be filed:
|
S. No. |
Event |
Trigger |
Form(s) |
Timeline |
Action to be Taken |
|
1 |
Change in Directors or KMP |
Appointment, resignation or removal of directors or KMP. |
DIR-12 |
Within 30 days of the event |
Report any change in the composition of the board or KMPs to the MCA within 30 days. |
|
2 |
Increase in Authorized Share Capital |
Decision to issue new shares beyond the existing authorized capital. |
SH-7 |
Within 30 days of shareholders' approval |
File a special resolution for increasing authorized capital with the MCA within 30 days of approval. |
|
3 |
Allotment of Securities/Buyback of Shares |
Issuance of new securities to investors or existing members,/Repurchase of shares from shareholders. |
PAS-3 |
Within 15 days of allotment/ Various steps within 30–60 days of the buyback |
File Form PAS-3 to report the number of securities allotted and the names of Allottees/ buyback details to the MCA. |
|
6 |
Change in Registered Office |
Shift of the registered office to a new address. |
INC-22 |
Within 15 days of the event |
File Form INC-22 within 15 days of changing the registered office. If moved between states, also file Form INC-23. |
|
7 |
Alteration of MOA or AOA |
Changes in the company's Memorandum or Articles of Association. |
MGT-14 |
Within 30 days of the resolution |
File Form MGT-14 within 30 days after the special resolution is passed by the shareholders. |
|
8 |
Creation, Modification, or Satisfaction of Charge |
Creation or modification of a charge on assets or satisfaction of an existing charge. |
CHG-1 (Creation/Modification), CHG-4 (Satisfaction) |
Within 30 days (extendable with late fees) |
Report creation, modification, or satisfaction of charges within 30 days, using Form CHG-1 or CHG-4. |
|
10 |
Investments/loans exceeding the provisions of the Companies Act, 2013, issue of securities or buy-back related party transactions, and the appointment of a Manager or Managing Director/CFO. |
NIL |
MGT-14 |
Within 30 days of the passing of the resolution |
Report to ROC regarding Investments/loans exceeding the provisions of the Companies Act, 2013, issue of securities or buy back, related party transactions, and the appointment of Manager/Managing Director or CFO |
|
11 |
Declaration and Payment of Dividend |
Declaration and payment of dividends to shareholders. |
No separate filing for declaration |
Dividend payment within 30 days; unpaid dividend within 7 days |
Pay dividends within 30 days of declaration. Transfer unpaid dividends to the unpaid dividend account within 7 days. |
|
13 |
Transfer of shares from one shareholder to another. |
SH-4 |
Within 60 days of transfer |
The SH-4 form will be stamped and executed, and a Board resolution will be passed to formally acknowledge the transfer as soon as the transfer request is made by the member. |
|
|
15 |
Reporting of Significant Beneficial Ownership (SBO) |
When an individual holds more than 10% of the company's shares indirectly. |
BEN-1 (Declaration), BEN-2 (Filing) |
Within 30 days of receiving knowledge |
Individuals must declare indirect shareholding over 10% to the MCA using Forms BEN-1 and BEN-2 within 30 days. |
|
16 |
Filing of Beneficial Interest in Shares |
When shares are held on behalf of another person. |
MGT-4, MGT-5, MGT-6 |
Within 30 days |
Report if shares are held in trust or on behalf of others within 30 days. |
|
17 |
Removal of Auditor Before Expiry of Term |
Removal of an auditor before the completion of their term. |
ADT-2 |
Within 30 days of the removal resolution |
File Form ADT-2 within 30 days after the resolution to remove the auditor before their term ends. |
|
18 |
Application for Strike-Off |
Voluntary decision to shut down the company. |
STK-2 |
After all liabilities are cleared |
File Form STK-2 with the resolution to close the company once all liabilities are settled. |
|
19 |
Appointment of Cost Auditor |
Companies meeting specific thresholds for turnover/production must appoint a cost auditor. |
CRA-2 |
Within 180 days of the start of the financial year |
Appoint a cost auditor within 180 days of the financial year’s start if required. |
|
20 |
Compounding of Offences/Condonation of delay/Adjudication |
Admitting non-compliance |
GNL-1/CG-1/ADJ and other forms as directed |
As per the order of the competent authority |
Seek compounding of offences by paying a penalty and filing the necessary forms as directed by the authorities. |
Common Mistakes to Avoid
- Filing DIR-12 without a prior board/shareholder resolution or with incorrect DIN details.
- Filing SH-7 without altering the MOA or omitting the resolution copy.
- Delaying the PAS-3 filing or missing the board resolution and share allotment register.
- Violating conditions under Section 68 during buyback, skipping the extinguishment record.
- Submitting INC-22 without proof of new address or owner NOC.
- Filing MGT-14 with unsigned or incorrect resolution copies.
- Filing CHG-1/CHG-4 with missing bank consent or incorrect asset/charge details.
- Exceeding Section 186/188 limits without board/shareholder approval or filing MGT-14 late.
- Not transferring unpaid dividends within 7 days or failing to maintain a separate account.
- Using an incomplete or unstamped SH-4 for share transfers.
- Ignoring indirect holdings under SBO rules, leading to late BEN-1/BEN-2.
- Skipping MGT-6 filing after receiving beneficial interest declarations.
- Removing an auditor without Central Government approval or a justifiable reason.
- Filing STK-2 before settling dues or without a final ITR and bank closure letter.
- Appointing a cost auditor without checking the applicability under the Cost Records Rules.
- Filing compounding/condonation without a professional assessment or legal basis.
Why Choose Kanakkupillai for Event-Based Compliance for Private Limited Companies in India?
Event-based compliance is crucial for ensuring that your company complies with legal and regulatory requirements. At Kanakkupillai, we offer comprehensive support for timely and accurate filings with the Ministry of Corporate Affairs (MCA). We:
- Expert Knowledge of Event-Based Filings: We have in-depth expertise in handling various event-based compliances, from changes in directors to alterations in share capital. Our team ensures that all filings are done in strict accordance with the Companies Act, 2013, and other relevant regulations.
- End-to-End Documentation Support: We take care of the entire process, including drafting necessary documents, completing forms (such as DIR-12, PAS-3, SH-7, etc.), and submitting them on time. We ensure that every filing meets the legal requirements and is submitted correctly to the Registrar of Companies (RoC).
- Tailored Solutions for Your Business: Every business has unique needs. Whether you're a private limited company, a public limited company, or a subsidiary, we offer customized support to address your specific corporate structure and requirements.
- Ongoing Compliance Assistance: Our services extend beyond just filing. We provide continuous assistance to ensure your company’s records are up-to-date and help with any additional filings or changes required by the MCA.
Frequently Asked Questions
What are event-based compliances?
Event-based compliances are legal filings that must be done when significant corporate events occur, such as changes in directors, share capital, or registered office.What happens if event-based compliances are not filed on time?
Non-compliance can lead to penalties, disqualification of directors, and even the striking off of the company's name from the registrar.When should I file the change in the registered office address?
You must file the change within 15 days of the event using Form INC-22.Is there compliance with issuing bonus shares?
Yes, after the board's approval, you need to file Form PAS-3 to report the allotment of bonus shares.What is the timeline for reporting the allotment of shares?
Form PAS-3 must be filed within 15 days of the allotment.What is an SBO?
A Significant Beneficial Owner (SBO) is an individual who holds significant shares in the company indirectly and must report the beneficial ownership.Is an auditor appointment form required when appointing a new auditor?
Yes, you need to file Form ADT-1 after the appointment.How do I apply for a company's voluntary closure?
You need to file Form STK-2 with the necessary documents.What makes Us Different
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