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Important Post Incorporation Compliances for Your Business

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As part of its company incorporation process, companies must complete certain post-incorporation procedural formalities that must be fulfilled to avoid penalties and legal ramifications. If these formalities are neglected or fail to be completed within an acceptable timeline, penalties and legal issues could arise as a result. Business owners must ensure their companies comply with all regulations within an acceptable timeframe.

Post-Incorporation Compliances

  1. Statutory Register Maintenance

Every company is legally required to keep and update statutory registers or books that document its current constitution and history. Statutory registers consist of specific books containing records on directors, shareholders/members, share transfers, loans, guarantees, deposits, shares, and any other key data about your business. They can typically be found within loose-leaf binders or bound books but could take any other form, such as electronic record-keeping systems.

Maintaining statutory registers is a legal obligation that remains in effect throughout your company’s lifespan, and failure to do so could incur serious penalties for you as an offence. Furthermore, properly made-up and maintained statutory registers can prove invaluable in numerous situations, including validating ownership or share transfers, verifying officer misconduct/liability claims, securing investments or helping facilitate sales.

Statutory registers must be available for inspection at your company’s registered office or SAIL address upon request, in either hard copy or electronic format. Since 30 June 2016, private companies have also had the option to opt-in and maintain some information normally found within statutory registers at Companies House instead, subject to prior agreement from its Registrar.

Maintaining your statutory registers should be an ongoing task. It should include updating them whenever there are changes to information such as new Director appointments, shareholder shares or KMP holdings or changes to the name of the Company. Failing to stay up-to-date can result in costly errors and delays when trying to sell or resolve disputes related to your Company.

  1. Share Certificates

When shareholders buy shares in a company, the company gives them a share certificate as evidence of ownership. It includes pertinent details like their name, number, class of shares owned, and any restrictions restricting transfer or sale. These physical documents hold legal value and could come into play should any dispute arise between shareholders.

Not only does a share certificate serve as evidence, but it’s also essential for record keeping and regulatory compliance. Issuance and transfer are usually subject to specific rules that aim to protect investors’ interests while maintaining fair markets and increasing transparency during securities transactions.

Compliance with rules and regulations mandates that companies maintain comprehensive records of share issuances, transfers and ownership changes; these records help as an audit trail. Therefore, these important documents must remain protected against loss or theft, which could seriously affect the company and its shareholders.

Shareholders should notify their company within a specified period if their share certificate has been lost or stolen and follow a systematic procedure for replacing it.

Retrieving a replacement share certificate is a straightforward and effortless process for shareholders. Simply file a request with their company and provide enough evidence of ownership; once validated, the company will produce or print/electronic one for delivery – an essential step for keeping track of investments and staying organized.

  1. Annual General Meeting

An annual general meeting (AGM) is an essential statutory compliance obligation of all companies, providing shareholders an opportunity to raise issues or discuss financials with the board of directors and discuss company finances. AGMs also help foster relationships between the board of directors and shareholders, which is necessary for running successful businesses.

The initial annual general meeting must occur within nine months after the end of each financial year, while subsequent AGMs should occur every 15 months thereafter. A meeting’s date, time, and place must be specified in its memorandum of association.

At an AGM, the board of directors must present its annual report to shareholders. This should provide an overview of financial performance and company growth strategies. During this meeting, shareholders can ask questions and vote on resolutions; additionally, they can use this forum to voice any changes to laws or corporate policies that might impact their rights or interests.

For an AGM to run smoothly, its company secretary must create and distribute an agenda before the meeting day. This agenda may contain important details like the location and timing of AGM sessions and brief descriptions of items listed on the agenda. Furthermore, minutes should be recorded from AGM proceedings, with each shareholder receiving copies upon their return home.

As part of their strategy to mitigate COVID-19 pandemic risks, companies may elect to hold virtual AGMs using the Convene video-conferencing platform. They must ensure the meeting is recorded to avoid discrepancies; furthermore, they should consider allowing shareholders to assign proxy voting rights so others may attend on their behalf.

  1. Auditor Appointment

Compliance-related formalities that every business must fulfil after incorporation include maintaining statutory registers, holding annual general meetings and filing returns. Complying with these compliances helps companies operate legally while safeguarding them from penalties or legal repercussions; adhering to them is particularly critical for startups because it ensures all relevant data is recorded accurately while complying with state standards.

Failing to submit the verification of its registered office will incur penalties from the registrar of companies, such as suspension of activities and fines. By meeting all compliances promptly and ensuring they are fulfilled on time, startup owners can avoid such consequences and continue their growth journey.

Under Section 139(1) of the Companies Act, newly incorporated companies must appoint their first auditor within 30 days from the registration date and issue share certificates to all subscribers who contributed towards initial subscription capital within 14 days of the initial incorporation date as stated by Section 56(4).

Private limited companies must file Form INC-22 to notify the MCA about a change to their registered address, obtain PAN/TAN numbers, file quarterly GST returns and obtain FSSAI registration where applicable.

Compliance Calendar LLP’s compliance management firm can assist newly incorporated companies with adhering to all necessary obligations, such as labour laws, intellectual property rights and workplace safety regulations expediently. If required for your industry sector, Compliance Calendar LLP offers expert assistance to help ensure all the mandatory requirements are fulfilled on schedule.

  1. Bank Account Opening

No matter the form of business registration – be it sole proprietorship with DBA, LLC, C-Corp or S-Corp – opening a bank account is an integral step towards conducting commercial transactions successfully. When selecting the bank for your company, it’s essential to consider its features and services, such as multiple debit cards for employees or integration with accounting/budgeting software; additionally, inquire about the paperwork/document requirements before opening an account.

Establishing a business bank account can demonstrate to potential customers that your business is legitimate and help keep personal and business expenses separate, simplifying budgeting. Furthermore, opening one will help build your credit history when applying for loans or lines of credit.

In India, directors of companies must abide by post-incorporation compliances to avoid penalties and fines by the Ministry of Corporate Affairs. Failure to fulfil these obligations could result in the closure of their company, so entrepreneurs need to understand which obligations must be fulfilled after incorporation. These requirements could include maintaining their statutory register, share certificates, annual general meeting attendance, auditor appointment and bank account opening – meeting these compliances will help their company run smoothly going forward.

Significance of Post-Incorporation Compliances

Articles allow businesses to expand on a subject, educate their target audience and demonstrate expertise in an industry or niche. Articles can be powerful ways for businesses to bring new customers on board while strengthening relationships with existing ones.

However, businesses must also comply with post-incorporation regulations. Failing to do so could result in fines.

Statutory Register Maintenance

Statutory registers (or statutory books) are mandated by law for all companies and contain essential data like share capital, directors and members. Failure to keep such registers up-to-date carries penalties, while inaccurate registers could incur substantial financial and reputational harm if found inaccurate or unreliable.

Companies may choose whether to keep their statutory registers at either their registered office or at one alternative inspection location notified to Companies House; either location should allow inspection upon request. Private companies also now have the option of keeping information usually found within their own statutory registers at Companies House instead, where it will be available online and viewable by members of the public.

Questions regarding the location of a company’s registers often surface before selling a business when potential buyers require access to its statutory records as part of their due diligence process. A lack of clarity over where these records are kept may delay sales and result in lost opportunities.

Share Certificates

Forming a private limited company involves more than simply filing documents with the Registrar of Companies; business owners should also ensure all internal requirements are fulfilled. Otherwise, their enterprise risks could include investor confidence erosion, banker’s trust issues, reputational damage to authorities’ outlooks, and loss of loyal associates, among many others.

First and foremost, in this process, access the SECP Services Portal and obtain digitally certified true copies (CTC) of all company documents at an appropriate fee level for bank account opening purposes. CTCs are essential when opening bank accounts in the name of the Company.

CTC must also be used for printing the company’s letterhead, invoices, notices and other official documents such as letterhead. Furthermore, companies must apply for PAN, TAN and GST where applicable; additionally, a Shop Act License may also be obtained depending on the nature of the business activity and having its initial auditor appointed within 30 days of incorporation.

Auditor Appointment

Under Section 139 of the Companies Act 2013, any newly incorporated company must appoint its first auditor within 30 days after incorporation and hold a board meeting to record this appointment. If this fails to happen within 90 days, members must convene an EGM where members will select one and hold it themselves.

Following an initial audit, companies must conduct regular statutory audits by independent and qualified auditors to ensure their accounts are correctly recorded and accurately portray their company’s financial position.

Companies must establish good relations with their auditors to keep them happy, as the Act prohibits relatives of auditors from being appointed as auditors to avoid potential conflicts of interest. Auditors’ terms may last up to 5 years but must be changed annually.

Bank Account Opening

Opening a bank account is integral to running any successful business if you operate as a corporation, LLP, or S-Corp. Establishing this relationship will establish trust with financial institutions and lay down a solid foundation for establishing business credit should your company need one in the future. Furthermore, keeping personal and professional finances separate is key for maintaining the credibility of any enterprise.

The following documents and information will be necessary to open a business bank account: Articles of Organization or Incorporation, an Employer Identification Number or Federal Tax ID, and a Certificate of Good Standing from your state. Before visiting any financial institution for an appointment, ensure you’ve prepared all this material – it will save time, effort, and hassle down the road!

Supreena

Welcome to www.kanakkupillai.com! Hello there, I'm Supreena, a legal advisor deeply passionate about entrepreneurship and dedicated to helping business owners and startup enthusiasts navigate the complex landscape of business formation, growth, and success. My profound understanding of the intricate aspects of various industries, legal frameworks, and strategies for sustainable growth makes me your trusted partner in achieving your business goals. With a commitment to promoting diversity and inclusivity in the business world, I firmly believe that every entrepreneur, regardless of their background, should have access to the legal expertise and guidance needed to thrive in the competitive startup ecosystem. I am honored to be part of your journey toward entrepreneurial success through this blog, where I'll provide valuable legal insights and strategies tailored to your business needs. Thank you for entrusting me with the opportunity to contribute to your path to business prosperity. For more information and resources, please visit www.kanakkupillai.com.