Annual Compliance for Private Limited Company in India
In India, a type of business entity which is found on a substantial basis can be said to be a private limited company making the registration of a private limited company in our Country, an important element. It is simple to operate and raise funds, along with providing minimal responsibility to its members, flexibility, and quick access to bank loans or other credit related funds.
A private company is a legal entity with its own personality that must maintain its active status by filing documents with the Ministry of Corporate Affairs or MCA on a regular basis. Every fiscal year, every firm is required to file an annual return and audited financial records with the MCA. Regardless of the turnover, whether it is zero or in crores or much more than that, the Registrar of Companies or ROC must be filed with the Annual Compliance. Annual compliances for private limited companies are required for all certified or registered companies, whether they conduct a single business or none at all.
Both forms are used to report the activities as well as the financial dates for the respective Financial Year. The timing of the Annual General Meeting or the AGM determines the due date for a company’s annual filing. Incompetence of directors might lead to the company’s name being removed from ROC’s registration if it continues to fail. It has also been noted that MCA has made proactive steps to address any such shortcomings. The company’s compliances might be divided into two categories: mandatory compliances and event-based compliances.
But it shall be noted that the event-based compliances are those that are triggered when particular events occur, such as a change in directors, a change in registered office, or a change in permitted share capital, for example. As a result, it’s critical that such incidents are documented and docility is satisfied on time to prevent fines or additional expenses, due to which we cannot say that these are Annual Compliances in particular.
What is the Mandatory Annual Compliance’s of a Private Limited Company?
Certain mandatory annual compliances which should be complied with by the Private Limited Company are enlisted below:
- First Board Meeting
Within 30 days of the company’s registration or incorporation, the first meeting of the board of directors with directors is expected. At least seven days before the meeting, each director must receive a declaration of the Board Meeting to be held.
- Subsequent Board Meetings
Every year, at least four board meetings must be monitored, with no more than a gap of 120 days between the meetings held.
- Acknowledgement of Interest Filing by Directors
Each and every director of the company shall at:
- The first meeting where he takes on the role of director; or
- The first Board meeting of each fiscal year; or
- Whenever there is a discrepancy in disclosures identified by him, he shall disclose his interest or interest in any company, body corporate, organizers/firms, or other organization of individuals in Form namely, MBP 1, along with a list of relatives and attention of relatives in the Company as per the definition provided by the RPT, including shareholding interest. Form MBP1 is to be preserved in the Company’s records.
- First Auditor
Within 30 days of incorporation, the BOD or the Board of Directors will appoint the Company’s first auditor, who will serve until the 1st Annual General Meeting or the AGM. The submission of ADT-1 is not required in the case of the First Auditor.
- Subsequent Auditor
In the first AGM of the Company, the BOD shall assign the Auditor, who shall hold the post until the end of the sixth AGM, and shall inform the ROC by submitting ADT-1. The Company, not the Auditor, has the ability to file Form ADT 1 within 15 days after appointment.
- AGM or Annual General Meeting
Every company must convene an Annual General Meeting or an AGM during business hours on or before September 30th of each year between the timings of 9 AM to 6 PM. On a day that is not a national holiday, and at the Company’s certified or registered office in the city, town, or village where the certified or registered office is duly located. It is necessary to offer a 21-day notice for the same.
- Filing of Annual Return i.e. Form MGT – 7
Within 60 days after the AGM or the Annual General Meeting, every Private Limited Company is required to file its Annual Return. The annual return will cover the period from April 1 to March 31.
- Filing the Financial Statements in Form AOC – 4
Every private Limited Company is required to file its ‘Balance Sheet’, as well as a statement of ‘Profit and Loss Account’ and a ‘Director Report’, in this Form within 30 days of the ‘Annual General Meeting’ being conducted by the company.
- Statutory Auditing of the Accounts
Every company should prepare its financial statements and have them audited by a professional/Chartered Accountant at conclusion of the fiscal year. To be filed with Registrar, Auditor must supply an Audit Report as well as the Audited Financial Statements.
E-Form Filing Requirements
- INC – 20A
This form basically is a declaration which is filed by a Private Limited Company within a period of 180 days from the date of incorporation of a company stating the commencement of business by the company.
- AOC – 4
This form will be used for filing the financial statements which include the Balance Sheet, Statement of Profit and Loss along with the Directors Report with the ROC, within a maximum of 30 days from the date of holding the AGM.
- MGT – 7A
This form is utilized for filing the Annual Return which should be filed by the Private Limited Company with the ROC within a maximum of 60 days of the holding of AGM.
- DIR – 3 KYC
This form shall be filed by a Private Limited Company in case of the directors whose DIN or the Director Identification Number has been allotted on or before the date of 31st March. And the filing should be done within the maximum of 30th September every year.
- DPT – 3
This form shall be filed by a Private Limited Company for providing or declaring the information pertaining to the deposits and also the outstanding receipt of money or loan (if any) other than the deposits within a maximum of 30th June every year.
Advantages that will be Enjoyed by Private Limited Company
There are certain general advantages or benefits which a Private Limited Company shall be enjoying due to the adhering of Annual Compliance on time. And this shall include the following:
- Helps in Establishing a Reputation for the Company
The date of the firm’s annual return filing completed on the Master Data on the MCA or the Ministry of Corporate Affairs official portal—compliance with the law is a vital obligation for each company. Consistency in compliance is a crucial factor to gauge an organization’s trustworthiness whether it comes to ministry bids, loan support, or other comparable goals.
- Helps in Staying Active and Keep Fines or Penalties at Bay
Failure to file the return on a regular basis result in the company’s failure and the imposition of severe fines. It’s also possible that the corporation will be declared defunct or removed from the ROC. The directors in question are also prevented from being appointed in the future. Since July 2018, an extra cost of INR 100 has been charged for each day of late submission till the due date.
- Helps in Attracting Investors
When a firm seeks funding from investors, the investors want all financial histories and dates before agreeing to the plan. Investors can either contact the firm directly or use the MCA site for economic reports. Investors also prefer firms that provide frequent compliance reports.
With the non-compliance of the company with the Annual Compliance, it is not only attracting fines and penalties that will add up the legal cost of the company but also puts it on the Annual Compliance Defaulter radar or list. This will increase the difficulty for a private limited company in getting approvals for certain mandatory items like passing of loans or credits.