In India, starting your business and setting up your own company comes with a lot of new opportunities and challenges. As per the article published in The Hindu, over 3.96 lakh companies in India were removed from the official records for non-compliance with the provisions of the Companies Law of India. The company requires a lot of compliance before and after incorporation. Technically, after successfully incorporating your company, the real work begins. Understanding and following post-incorporation compliance is essential for the functioning of business. This guide will highlight the key post-incorporation requirements every business owner in India should know, including important statutory laws. By adhering to the regulations, you can ensure your business remains compliant and paves the way for future growth and success.
Post-Incorporation Compliance
Post-incorporation compliance includes the statutory obligations that a company has to adhere to after its incorporation in India. These requirements are established by the Ministry of Corporate Affairs (MCA) of India, the Securities and Exchange Board of India (SEBI), the Reserve Bank of India (RBI), Tax Authorities, etc. They are designed to promote transparency and responsible business practices. By complying with the regulations set forth by the law governing bodies of India, the companies can operate within the legal framework. Compliance ensures that the company follows the laws of the country and maintains a healthy relationship with the company’s stakeholders and investors.
Post-Incorporation Compliances for Companies in India
Post-incorporation compliance means the statutory obligations companies must fulfil after their registration in India. Below are the essential requirements that every company has to fulfil in India:
1. Statutory Requirements
1.1. Board Meetings: Every company has to hold its first Board Meeting within 30 days of its incorporation. After the first board meeting, the company has to hold a minimum of 4 board meetings, which are e required to be held every year with a gap of at least 120 days between two meetings.
- Exceptions:
- A One Person Company (OPC) with only one director is exempt from holding board meetings.
- Small companies and dormant companies need to hold only two board meetings in a financial year, with a minimum gap of 90 days between them.
1.2. Appointment of Auditor: Within 30 of incorporation of the company, the Board of Directors of the company are mandated to appoint a statutory auditor. If the Board fails to appoint the auditor, the members of the company have to appoint a statutory auditor within 90 days in an Extraordinary General Meeting (EGM).
2. Filing of Statutory Forms and Returns
2.1. Form INC-20A (Declaration of Commencement of Business): Newly incorporated companies have to file Form INC-20A within 180 days of its incorporation with the Registrar of Companies (RoC). The form declares that the company has received the subscription money from the shareholders.
- Exceptions:
- This general rule does not apply to the companies incorporated before the Companies (Amendment) Ordinance, 2018.
- Companies limited by guarantee and Non-profit companies are exempted from filing this form.
2.2. Annual Return Filing (MGT-7): Every company has to file its annual return in Form MGT-7 with the RoC within 60 days from the date of the Annual General Meeting (AGM).
3. Maintenance of Statutory Registers and Records
Companies are required to maintain statutory registers, such as the Register of Members (Form MGT-1), Register of Charges (Form CHG-7), and Register of Directors and Key Managerial Personnel (KMP) post its incorporation.
4. Compliance for Share Capital and Allotment
4.1. Issuance of Share Certificates: Share certificates of the Companies have to be issued share certificates to the shareholders of the company within two months from the date of its incorporation or allotment of shares.
Exception: There is an exception to this general rule, which is that public companies are required to follow the SEBI guidelines for dematerialization (converting physical share certificates and securities into electronic forms).
4.2. Filing of Return of Allotment (PAS-3): Companies have to file the Return of Allotment (Form PAS-3) with the RoC within 30 days from the date of allotment of shares. However this general rule does not apply to private companies that have no change in shareholding patterns.
5. Directors’ Disclosure of Interest (Form MBP-1
Directors are required to disclose their interests in other entities using Form MBP-1 at the first Board Meeting of the Company they attend.
6. Tax and Regulatory Compliances
PAN, TAN, and GST Registration: Newly incorporated companies have to apply for a Permanent Account Number (PAN), Goods and Services Tax (GST only if applicable) Tax Deduction and Collection Account Number (TAN), and of the company. Joint ventures of the Company may also require additional registrations depending on the nature of the business.
7. Other Compliances
Bank Account Opening: Companies have to open a new bank account in the name of the company within 30 days of its incorporation.
8. Filing of Financial Statements (AOC-4)
Financial statements, the company’s profit and loss accounts, and the balance sheet have to be filed in Form AOC-4 within 30 days of holding the Annual General Meeting (AGM).
Conclusion
In summary, ensuring post-incorporation compliance is vital for the health and success of businesses in India. Their obligations include conducting the board of directors’ meeting, fixing the registered office of the company, arranging for an auditor, filing statutory records, and maintaining the official record of the Company. It is pertinent to note that compliance after the incorporation of a company is equally important as it is pre-incorporation; when the company is incorporated, it is bound to comply with the statutory requirements even after its dissolution. Non-compliance is not an option but rather a punishable offence that includes the penalty ranging from fine to imprisonment. Private companies can take advantage of these statutory obligations and build healthy, transparent relationships with the company’s stakeholders as well as investors. These obligations act as a performance report for the company each financial year that can help the management of the company identify challenges and explore new opportunities for growth.
Related Service
- Annual Compliance Filing for Private Limited Company
- Annual Compliance Filing for Limited Liability Partnership
- Annual Compliance Filing for One Person Company
Frequently Asked Questions
- What are the consequences of not complying with the mandatory post-incorporation compliance?
Ans. Non-compliance of mandatory requirements is a breach of statutory obligation that can lead to penalties, legal actions, and reputational damage. In the most serious cases, directors of the company can also face imprisonment.
- Who regulates post-incorporation compliance in India?
Ans. The Ministry of Corporate Affairs (MCA), SEBI, and RBI regulate post-incorporation compliance in India.
- Is it necessary for a company to hold board meetings?
Ans. Yes, all companies are mandated to hold a minimum of 4 board meetings in each year with a maximum gap of 120 days between the two consecutive meetings.
- Can directors be penalized for non-compliance?
Ans. Yes, directors can be penalized for not fulfilling their obligations. For example, if they do not disclose their interests in transactions of the company, a fine of ₹50,000 to ₹1,00,000 can be imposed on them.
- What is the penalty for not maintaining the company’s statutory registers?
Ans. Companies can be fined with ₹25,000, and penalty of ₹1,000 can be imposed on the companies for each day due to non-compliance.
