Step-by-Step Process for Annual Compliance Filing for Private Limited Companies

It is important for any person to understand that the operation of a Private Limited Company in India comes with legal and regulatory compliance obligations. One of the most important components of the Private Limited Company is the annual compliance filing. There are consequences for noncompliance, and legal consequences are just one of these consequences. Here, we give you the best ways to follow to ensure that you go through the annual compliance filing and do not complicate your business.

Why is Annual Compliance Filing Important?

Filings made every year maintain the public record of accountability and operational integrity in a company. It also aids in the company being in the good books of the regulatory bodies and hence increases its creditworthiness to stakeholders, including investors both in capital and in products and services, clients and other partners in business. Failure to comply with the above leads to fines, damage to reputation or exclusion of directors where necessary.

Understanding the Necessary Compliance Function for Private Limited Companies

1. Annual General Meeting (AGM):

• This will be held during the six months after the end of the year in which the financial statements are prepared.
• Required in any case if the enterprise has been assigned more than one director.

2. Filing of Financial Statements (Form AOC-4):

• The companies’ financial statements are to be lodged with the Registrar of Companies (RoC) no later than 30 days after the AGM.

3. Filing of Annual Return (Form MGT-7):

• Must be lodged with the Commission within 60 days from the date of the AGM.
• Contains information on directors and shareholders of the existing and potential rivals, as well as other necessary data.

4. Income Tax Return Filing:

• That’s why the income tax return should be filed by September 30, the year following the end of the fiscal year, for the companies that do not require an audit or November 30, for the companies that require an audit.

5. Director KYC Compliance (DIR-3 KYC):

• The directors of such companies are required to file new KYC details every year.

6. Audit of Accounts:

• Make sure that the company’s statutory requirements are met by a qualified chartered accountant (CA).

Step-by-Step Process for Annual Compliance Filing

Step 1: Conduct the Board Meeting

The compliance process begins with a board meeting:

• To consider and approve the audited financial statements for a consolidated entity for the year ending December 31, 2017, together with the draft of the Board Report.
• Schedule the AGM date.

Step 2: Prepare Financial Statements

• In order to produce some of the final reports, I will prepare the balance sheet, profit and loss account, and cash flow statement.
• Make sure that the statements adhere to India’s accounting standards.

Step 3: Organise the Shareholders Annual General Meeting (AGM)

• The company must inform the shareholders and the directors of the AGM at least 21 days in advance.
• Bring along current audited financial statements, the board report together, and any other key resolutions for consideration.

Step 4: File Form AOC-4 (financial statements).

• Go to the Ministry of Corporate Affairs (MCA) website.
• You have to download Form AOC-4 to provide details of the company related to the financial statements.
• The board report, audited financial statements, and the auditor report, as well as the relevant documents that may be needed, must be attached.
• Complete this form, fill in the filing fees prescribed along with it, and file the form within 30 days of passing the AGM.

Step 5: File Form MGT-7 (Annual Return)

• Access Form MGT-7 on the MCA portal.
• Provide details such as:
  • Shareholding pattern
  • Information about directors and key managerial personnel
  • Company activities during the financial year
• Attach relevant documents and submit the form within 60 days of the AGM.

Step 6: File Income Tax Return

• Form ITR-6 should be used to attach the company’s income tax return.
• It is crucial to calculate income, deductions, and taxes correctly.
• The return should be filled out before the due date to avoid any penalty.

Step 7: Director KYC Compliance (DIR-3 KYC)

• Every director is required to update their KYC information at the end of each year.
• Visit the MCA website and fill out the DIR-3 KYC form.
• Complete the form before the due date, after which a penalty of INR 5,000 per director will be levied.

Step 8: Audit of Accounts

• Outsource an expert CA to conduct an audit of the company’s financial statements.
• The audit report is required to be annexed to the copies of the financial statements submitted in Form AOC-4.

Step 9: The Statutory Registers and Records should be kept.

• Update the statutory registers, among them the register of members, directors, charges, and loans.
• Keep these records at the company’s registered office for their inspection.

Step 10: Compliance Certificate from a Professional

• Get a compliance certificate from a practising Chartered Accountant, Chartered Secretary or Certified Management Accountant.
• This step is mandatory for companies that paid up capital of more than INR 10 crores or turnover of more than INR 50 crores.

Penalties for Non-Compliance

The Companies Act, 2013, imposes strict penalties for non-compliance:

• Failure to file the said forms, either Form AOC-4 or MGT-7, on time levies a penalty of INR 100 per day.
• Failure to follow Director KYC leads to the cancellation of the DIN (Director Identification Number).
• Consistent failure in executing the procedural requirements can result in a situation in which the company is categorised as ‘Dormant’ or ‘Struck Off.’

Some of the most helpful tips in the filing of compliance

1. Plan Ahead: Calendar with dates and times for the compliance programs compliance reviews.
2. Engage Professionals: Hire a company secretary or compliance expert if a sufficient level of compliance is needed.
3. Use Technology: Thus, it is advisable to make use of available software tools that can help simplify accounting and compliance exercises.
4. Regular Updates: Monitor the changes in compliance and related regulations.

Conclusion

Once a financial year is complete, every private limited company is required to file compliance to maintain sound legal and financial systems. Following the steps described above, any company can be fully compliant with the current legislation, not worry about possible penalties or legal problems, and concentrate on business development. Seeking help when managing this process can be easy, especially when one wants to keep your business affairs impeccable in the business circle.

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