A company’s existence in India begins when it is incorporated. Incorporation is, however, not the end. To be in a good legal position, any company must comply with or have complied with some post-incorporation compliances as outlined in the Companies Act, 2013. Non-compliance can lead to fines, the disqualification of company directors, or even the business’s winding up by the Registrar of Companies (ROC). This paper provides a comprehensive review of the key post-incorporation compliances, their schedules, and their importance for new companies in India.
Understanding Post-Incorporation Compliances
The legal and procedural requirements that a firm must meet after incorporation. The following measures will ensure that the company starts operating legally and does not breach the Companies Act, 2013, or other statutory regulations administered by the Ministry of Corporate Affairs (MCA).
Significance of Post-Incorporation Compliance
It is important since post-incorporation compliance follows:
- Creates legal integrity and clarity of the company.
- Develops credibility with shareholders, investors and stakeholders.
- Eschews capital punishment, interest, or criminal charges by authorities.
- Secures flawless running of the business without legal challenges.
Good corporate governance and accountability do not merely exist as a legal requirement but rather as a matter of compliance.
Key Post-Incorporation Compliances as per Companies Act, 2013
The Companies Act, 2013, and the Company Incorporation Rules, 2014, list several steps that must be completed immediately after incorporation. The following are the key compliance requirements for any new company.
1. Opening of Bank Account
After a company has been issued its Certificate of Incorporation, the initial step is to open a current bank account in the firm’s name. All financial transactions will be conducted through this account, including subscription payments collected from shareholders.
2. Share Capital Money Deposit
Section 10A of the Companies Act, 2013 states that all subscribers of the Memorandum of Association (MoA) are supposed to transfer an amount of subscribed share capital to the bank account of the company within 180 days after incorporation.
The company must then file Form INC-20A (Declaration for Commencement of Business) with the ROC. The inability to file this form may result in penalties and even the dissolution of the enterprise by the ROC.
3. First Auditor (Form ADT-1) Appointment
The first auditor of the company is supposed to be appointed by the Board of Directors within 30 days of the incorporation of the company, according to the provisions of section 139(6) of the Act.
Failure by the Board to appoint the auditor at this time would entail the shareholders appointing the auditor at an Extraordinary General Meeting (EGM) within 90 days. Form ADT-1 should be used to notify the ROC regarding the appointment.
4. First Board Meeting
Section 173(1) of the Companies Act, 2013 states that every company must hold its first Board Meeting within 30 days of incorporation. During this meeting, the directors deliberate on important business issues, authorize initial contracts, use the common seal, and sanction the opening of the bank account. The meeting records should be duly documented and stored.
5. Issue of SH-1 Share Certificates
According to Section 56(4) of the Act, the company is to issue share certificates to the shareholders within 60 days after the company’s incorporation.
Two directors or a director and the company secretary (where applicable) must sign the share certificates, and these must be signed using the common seal of the company (where applicable).
6. Registered Office Check (Form INC-22)
In case the company failed to specify its address at the time of incorporation, it should complete Form INC-22 with the ROC within 30 days of incorporation as a way of ensuring that the address is legitimate.
The form should also contain evidence of address, like an electricity bill, a rent agreement or a property ownership document.
7. Statutory Records and Registers
In accordance with sections 85, 88 and other sections of the Companies Act, 2013, every company should keep statutory registers and records. These include:
- Register of Members
- Register of Directors and Key Managerial Personnel.
- Register of Charges
- Register of Share Transfers
It is a requirement for keeping such records, and it assists in corporate transparency.
8. Display of the Company’s Details
According to Section 12(3) of the Act, all companies are to put the following information in their registered office and business communications:
- Company’s full name
- Corporate Identity Number (CIN)
- Registered office address
- Email ID
- Contact number
Failure to do so can attract penalties from the ROC.
9. PAN, TAN, and GST Registration
Once the company is incorporated, it should ensure it has obtained its Permanent Account Number (PAN), Tax Deduction and Collection Account Number (TAN), and GST registration (where applicable).
Whereas PAN and TAN are automatically assigned at incorporation, GST registration is required separately if the company’s turnover exceeds the recommended limit.
10. Annual Compliance Filings
The annual returns are also to be filed by the company after meeting the initial requirements after incorporation. These include:
- Form AOC-4: Filing financial statements.
- Form MGT-7: To provide annual returns with shareholder and director information.
- Form DPT-3: To disclose deposit.
Proactive compliance will make the company active with the MCA, and penalties will be avoided.
Punitive Measures in case of Non-Compliance
The cost of failing to comply with the post-incorporation provisions may be high. A few of the consequences are:
- Financial fines to the company and its directors.
- Failure to start doing business.
- Freezing of the bank account of the company.
- Cancellation of the name of the company under the ROC register under Section 248.
Therefore, compliance timelines are very important in ensuring unhindered business operations.
Conclusion
To keep the company in a legal position and maintain its reputation, it is necessary to comply with the post-incorporation requirements under the Companies Act, 2013. From opening a bank account to submitting the declaration on commencement of business, every compliance step ensures the company is functioning within the legal framework.
By complying with statutory requirements and submitting documents on time, companies can avoid fines and build a reputation as a responsible, well-governed company.
Regardless of whether you are a new business person or a business expanding, meeting your post-incorporation requirements is the initial step towards a clear, successful, and legal business experience.
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