Annual Compliance for One Person Company in Chennai

Annual Compliance for One Person Company in Chennai

In India, a one-person company (OPC) can be registered only as a private limited company, which is why all the legal provisions that apply to a private limited company are also applicable to an one person company. Certain provisions for annual compliance for an OPC need to be met every year.

In light of the above, we discuss the annual compliance requirements for an OPC in this blog for the benefit of interested readers.

Definition of an OPC

Section 2(62) of the Companies Act defines an OPC as a single company with a single member. The only people who are regarded as members of the company are stockholders or subscribers to the memorandum. An OPC is a company with only one stakeholder.

Why is it essential to comply with annual compliance in OPC?

The following are the advantages of performing annual compliances for an OPC:

• It is simple to raise support from financial speculators

Proper annual compliances of a company, including OPC, enhance the confidence of financial speculators and make it simple to raise support from a financial speculator.

• Provides active status

Proper and timely compliances help in maintaining the active status of the company.

• Assures the accuracy of the data gathered

Annual compliances by an OPC, ensures the data collected for the compliances are accurate and true.

• Avoids hefty penalties

Non-compliances often result in hefty penalties and fines. Proper annual compliances help in avoiding the hefty penalties.

The Registrar of Companies (RoC) imposes a number of one-person business compliance requirements. Now, let’s quickly describe these compliances:

1. Holding the annual general meeting and the board meeting
2. Auditor’s appointment and filing of Form ADT-1
3. Preparation and filing of the annual return
4. Disclosure of director’s interest
5. Filing DPT-3
6. Filing MSME-1
7. Preparing the statutory register and director’s report

Annual filing

• Every year, every OPC is required to submit annual returns to the RoC.
• Form MGT 7 must be filed as an attachment to the return.
• The corporate secretary must sign the annual report. Due to the fact that it consists of only one member, an OPC is not required to choose a company secretary. In this situation, the director must sign the return.

Financial statement

Financial statements that have undergone an audit must be filed online, per the Companies Act of 2013.

• The financial statement must be submitted to the RoC using Form AOC 4, and each director must sign it.
• 180 days after March 31—the end of the fiscal year—the statement must be presented.
• The financial statements should contain the balance sheet, profit and loss account, audit report, and account notes.
• After the firm is incorporated, the financial accounts must be provided within 30 days. The initial auditor of the OPC must be a licensed chartered accountant.
• There is no need to file Form ADT-1 for the auditor, who must serve until the first annual general meeting (AGM) of the corporation. For the appointment of the next auditor, the paperwork must be submitted, though.
• Within 15 days of the first AGM’s conclusion, the one person company must submit Form ADT-1 to name an auditorium.
• The auditor in question will serve in that capacity till the end of the sixth AGM.

Other compliances for an OPC

• Although an OPC is not required to host an AGM each year, the OPC must hold at least two board meetings a year.
• Yearly filing requirements include financial statements, Form DIR-3 KYC for director KYC, annual reports, and income tax returns.
• Each OPC is expected to abide by the norms and regulations pertaining to tax deduction at source (TDS), goods and services tax (GST), provident fund (PF), and the employees’ state insurance plan of India (ESI), depending on its requirements.
• 180 days after incorporation, Form INC-20A must be presented in order to launch a business.
• Share certificates that have stamp duty on them must be paid within 30 days of the shares being issued.
• If a corporation owes MSMEs money and it has been more than 45 days since the due date, an E-form MSME-I (half-yearly return) must be filed.
• Every year, an E-form DPT-3 (return of deposits) must be filed with information about all loans and payments that were outstanding as of the 31st of March in each fiscal year.
• Every director of the corporation must disclose their interests on Form MBP-1 before the first board meeting or whenever there is any change.
• Each financial year, Form DIR-8 requires a declaration that the director is not disqualified.

Conducting the board meeting

As per Section 173 of the Companies Act, 2013, at least one meeting of the Board of Directors shall be conducted every six months, and the gap between two meetings is not less than 90 days. Consequently, an OPC should conduct a minimum of two board meetings every year.

Penalty: The company shall be levied with a penalty of Rs. 25,000/- and the officer in default shall be levied with a penalty of Rs. 5,000/-.

Annual general meeting: Because there is just one member of the OPC, a membership general meeting cannot be held. The Companies Act of 2013’s Section 122 lays out a variety of conditions for the general meeting in the case of an OPC. Let’s analyze Section 122 of the 2013 Companies Act as well as a few additional provisions.

Annual filings for an OPC compliance include the following:

1. MBP 1
   Directors of an OPC are required to file Form MBP-1 declaring their ownership interests in other firms at the first board meeting of each year or whenever an OPC director changes.
2. DIR-8
   To affirm that they are not prohibited or ineligible to serve as directors of a company, each director must submit Form DIR-8 to one individual in business compliance at the time of appointment.
3. DIR-3 KYC
   Directors who have an active director identification number (DIN) are required to submit DIR-3 KYC every year by the Companies Rules of 2014. If DIR-3 KYC is not filed, the Ministry of Corporate Affairs (MCA) portal will indicate an inactive DIN status. Please be informed that if DIR-3 is turned off, OPC annual compliances cannot be submitted in any way.
4. ADT-1
   A one-person corporation must appoint an auditor within 15 days of the AGM for a term of five years.
5. MGT-7
   All one-person firms are required to submit their annual returns within 60 days of the AGM. To accomplish this, file MCA Form MGT-7. The fine for failing to file annual returns is Rs. 100 for each day beyond the due date.
6. AOC-4
   Within 60 days following the AGM, OPCs must use Form AOC-4 to provide their financial statements, including their balance sheet, profit and loss statement, and director report. Failure to file Form AOC-4 results in a fine of Rs. 100 per day.

Appointment of an auditor:

Under Section 139 of the Companies Act, auditor appointment is compulsory for an OPC. It shall get its accounts audited by a chartered accounting firm, where the auditor shall verify the books of account and issue an audit report.

Note: The provisions relating to the rotation of auditors do not apply to OPC.

The director shall hire an auditor within 30 days after the company’s establishment for the purpose of complying with the OPC. An OPC who neglects to appoint an auditor is subject to a monthly punishment of Rs. 300. Also, the company won’t be allowed to open. He or she must stay in the position until the first AGM is over. Form ADT-1 does not need to be submitted in order to appoint the first auditor.

The following consequences result from non-compliance with an OPC:

Fines

Avoiding financial penalties is a top issue for many firms. The largest penalties for GDPR infractions to date are a startling 746 million euros (US$847 million), demonstrating the tremendous cost of breaching the regulation.

Imprisonment

Prison penalties for violating legal or regulatory requirements are not unheard of, as was already stated. You could receive a five-year prison sentence if you knowingly lied on your EEO-1 report.

A prison sentence may also result from breaking certain environmental laws and health and safety regulations.

Reputational damage

Your reputation can suffer if there is a compliance breach. Potentially one of the most severe effects of non-compliance is reputational damage. It has numerous negative consequences, including the depreciation of your brand, diminished profits, difficulty acquiring investment, a greater cost of capital, and the inability to recruit or retain talent. The absolute failure of the company is the worst-case scenario for reputational harm.

Financial reporting and statutory auditing

The balance sheet, the statement of profit and loss account, and the director’s report are among the financial statements that must be filed by the firm and pertain to its finances.

Before an OPC’s financial statement is presented to the auditor and approved by the board, a single director must sign it. A cash flow statement is optional for OPC to include in its financial statement. A copy of such a financial statement, together with other supporting documents, shall be filed with the RoC within 180 days after the end of the fiscal year.

In the event of an OPC, a report including explanations or comments by the board on each qualification, reservation, or critical comment or disclaimer provided by the auditor in his report is required to be included in the financial statement.

As per Section 88 of the Companies Act, 2013, an OPC shall also maintain the statutory registers.There are also certain event-based compliances that are required to be followed by an OPC:

• Transfer of share
• Director’s resignation or appointment
• Change in nominee or bank signatories
• Change in auditor

Maintenance of books of accounts

Every firm is required to maintain their books of accounts for at least eight financial years prior to a financial year under Section 128(5) of the Companies Act of 2013. Minutes and statutory documents are the most important company records that have needed to be protected ever since they were created.

Auditor appointment and resignation

• The initial auditor of the OPC must be named within 30 days of the company’s incorporation by a practicing chartered accountant.
• For the auditor who has to serve until the 1st AGM, there is no need to file Form ADT-1. However, the form has to be filed for the appointment of the subsequent auditor.
• To appoint an auditorium, the OPC must file Form ADT-1 within 15 days of the conclusion of the first AGM.
• The auditor so appointed shall hold office till the conclusion of the 6th AGM.

Annual return

Preparation and filing of annual return

The balance sheet of the firm, the profit and loss account, the OPC compliance certificate, the registered office address, the member registration, the share and debenture details, debt details, and information about the management of the company are all included in the annual report. The company’s shareholding structure, changes in directorship, and specifics of securities transfers would all be disclosed in the annual report.

Due dates for filing

Usually, a company is required to file three forms with ROC:

• ROC Form MGT 7: The ROC Form, MGT 7, is due on November 28th. As an OPC does not require to hold an AGM, the due date for filing Form MGT 7 shall be 60 days from the completion of the six months from the end of the financial year.
• ROC Form AOC4: The due date for ROC Form AOC 4 would be 180 days from the close of the financial year. That means the due date for AOC 4 for OPC shall be September 27 (if we count 180 days from April 1st).
• ROC Form ADT 1: To appoint an auditor, this form is submitted. The ROC Form ADT 1 is due on October 14th, or within 15 days of the end of the AGM.

Income tax calculation and payment

OPCs must deliver Form ITR-6 to the income tax division. The form ITR-6 must be submitted by September 30th of the assessment year. A tax audit is necessary if turnover, total sales, or gross receipts exceed Rs. 1 crore.

TDS filing and payment

Tax deducted at source (TDS) rules are applicable on a transaction basis. Like: if an OPC is paying salary to any employee that is more than the basic exemption limit and tax is applicable, TDS is required to be deducted from the salary and paid to the government on a monthly basis.

There is no specific tax advantage to an OPC over any other form. The tax rate is flat at 30%, and other tax provisions like MAT and dividend distribution tax apply as they do to any other form of company.

Advance tax payment

When an OPC’s tax burden for a year exceeds Rs. 10,000 after decreasing TDS, the OPC is responsible for paying advance tax.

Non-payment of advance tax could result in the taxpayer being liable for interest under the income tax law. Hence, timely payments of advance taxes should be made.

GST

List of documents required for an OPC’s GST registration:

• PAN card
• OPC certificate
• AOA and MOA
• PAN andaddress proof of director
• Cell numberandemail ID of the authorized person
• Bank details: a copy of canceled cheque or bank statement
• Board resolution for appointing theauthorized person

GST compliance requirements

GST registration is mandatory for OPCs in India if their annual turnover exceeds the threshold limit of Rs. 20 lakhs. The process of GST registration for OPCs involves visiting the GST portal, filling in the required details, uploading the necessary documents, and paying the registration fee online. Once the application is approved, the OPC will receive a GSTIN, which can be used to file GST returns and comply with other GST regulations. It is important for OPCs to ensure timely GST registration and compliance to avoid penalties and legal complications.

Monthly ESI and EPF return

In a nutshell, every factory or business engaged in the business as per the act and employing 20 or more persons is required to register under the act. Monthly payment of PF contributions and filing of returns are mandatory.

Penalties for non-compliance

Late filing of fees

The MCA portal will display an inactive DIN status if DIR-3 KYC is not filed. Please be aware that if DIR-3 is deactivated, no annual compliances for OPCs may be submitted.

Within 60 days of the AGM, all OPCs are expected to submit their annual reports. You can do this by submitting MCA Form MGT-7. Annual returns that are not filed are subject to a penalty of Rs. 100 each day after the due date.

A fine of Rs. 100 per day is assessed for failure to submit Form AOC-4.

If the company does not file a financial statement and annual return with the ROC for a period of two years and if the ROC believes that the company is not carrying on any business or operation, then it shall send a notice to the company and its directors and remove its name from the ROC.

If an OPC does not file a financial statement and annual report for a continuous period of 3 years, then the directors of such company shall be disqualified from being appointed as directors in any company for a period of 5 years.

As per income tax laws, if an OPC files an ITR after the due date, then a penalty of Rs. 5000 to Rs. 10,000 shall be payable by the company. Further, the company won’t be able to carry forward or set off its losses for subsequent years.

Interest on late payment

Interest on late payment of GST is charged as follows:

Conclusion

Recap of key compliance requirements and penalties

• Monthly or quarterly GST return (if registered under the Goods and Services Tax)
• Monthly TDS payment and quarterly TDS return
• Monthly ESI and EPF returns
• Preparation of financial statements as per the Companies Act, 2013
• AGM
• ITR filing
• Form MGT-7
• Form AOC-4
• Audit report certified by CA

Advantages of consulting a professional for compliance

One can always seek professional help for compliance. You may also choose Kanakkupillai.com, the web portal of Govche India Pvt. Ltd., in this regard.

You may get thorough, hassle-free OPC compliance from Kanakkupillai, and their experts will do it in a short amount of time. Their team handles the paperwork and assists in giving you an accurate estimate of the fees associated with OPC compliance. There is no chance your OPC compliance could go wrong with a team of highly qualified individuals at your disposal.

For more questions and queries, feel free to contact them.

Based on everything we’ve covered so far, we believe that this blog will be helpful to any readers who are interested in learning more about the annual compliance requirements for an OPC.

FAQ on One Person Company Registration in India

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