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Overview of Annual Compliance for Pvt Ltd Company
As per data till October 2022, there were 1.49 million private companies registered in India, and almost 1.28 lakh companies were struck off from records due to non-compliance in 2023. Registration is not an end for the companies. Whether it is a public company or a private one, companies registered in India have several post-registration compliances. Private limited businesses registered in India have to follow a set of regulations every year in order to maintain their existence. These include hiring accountants, having AGMs, submitting every year reports and economic statements, and following tax policies. You have to hold your private limited business's first AGM within 18 months of its formation or 9 months after the end of the financial year. Every private limited company needs to submit income tax papers showing the income made in the duration of the economic year by July 31 of the following year.
It is important for private limited companies to ensure quick and accurate compliance with these standards to avoid fines and legal risks. Annual compliance is a needed requirement for private limited businesses to ensure regulatory compliance and keep their legal status. It consists of several steps, including making annual reports and financial statements, having AGMs, keeping professional documents and information, and meeting with tax guidelines. Failure to meet annual safety requirements can bring penalties and legal obligations for the enterprise and its leaders.
Mandatory Compliances for Private Limited Company
- Statutory Audit Compliance: Preparing and releasing yearly economic information of the company including balance sheet, profit and loss account, cash flow statement, and statement of change in ownership. These have to be checked by a trained inspector who will release an audit file with the financial statements.
- Yearly ROC Filing: It is mandatory to file yearly returns (MGT-7) and economic statements (AOC-4) with the Registrar of Companies (ROC) within 30 days from the date of the Annual General Meeting (AGM).
- Auditor Appointment: Appointing an auditor for five years or until the end of the next AGM. The name of the authorized inspector is required and can't be taken as part of annual compliance.
- Annual General Meeting (AGM): Holding an AGM within six months from the end of the financial year, with a gap of not more than 15 months between 2 straight AGMs.
- Board Meeting: Conducting at least four board conferences in a year, with a gap of not more than 120 days between two conference meetings.
- Director Report: Submitting a director report for each economic year to the Ministry of Corporate Affairs (MCA) as a report for the MGT-7 form.
- Income Tax Compliance: Filing income tax returns (ITR) for the financial year by the due date, October 31 of the next economic year.
- Other Events Based Compliance: Filing paperwork for modifications in administrators, capital structure, return of allotment, creation and amendment of charge, appointment of statutory auditor, removal of statutory auditor, shifting of registration office, and return of deposits with the business enterprise.
- Updating Statutory Registers and Records: Managing statutory registers and information, which include the register of directors, members, allotment, share transfer, split of shares, related party transactions, and share certificate.
- Renew and Update All Agreements, Contracts, Licenses, and others: It is mandatory for all businesses to renew and revise contracts, agreements, and licenses (if they exist).
- Consequences of Non-Compliance: Failure to meet the statutory compliances has dire consequences and perpetual failure to meet annual compliance requirements can lead to the removal of the name of the company from the ROC
- Mandatory Compliances: AOC-4 & MGT-7- ROC Filings, ADT-1 – Auditors Appointment, DIR-3—Filing of Directors KYC, MBP-1—Notice of Interest by Director, DIR-8—Intimation by Director, Financials preparation (B/S, P/L etc.), Statutory Audit, Filing of Income tax Return, Annual Report & Director’s Report, Return on Foreign assets & liabilities.
- Statutory Registers & Minutes: Minimum Four Board Meetings, Hold an Extra General Meeting (EGM), Annual General Meeting (AGM), and Operational Day-to-Day Compliances.
- Event-Based Compliances: DIR-12 for Change in Directors, SH-7 for Change in capital structure, MGT-14, PAS-3 for Return of Allotment, CHG-1 for Creation and modification of Charge, ADT-1 for Appointment of Statutory Auditor, ADT-3 for Resignation of Statutory Auditor, INC-22 for Shifting of Registered Office without Change in the jurisdiction of ROC, INC-23, INC-28, MGT-14, INC-22 for Shifting of Registered Office with Change in the Jurisdiction of ROC, Form MSME for Return for the delay in payments to MSMEs, DPT-3 for Return of Deposits with the Company, MGT-14 for Filing of Resolutions & Agreements with ROC, AOC-5 for Additional place other than the registered office where books of accounts and statutory registers are being kept, BEN-2 for Disclosure of Substantial Beneficial Ownership (SBO), and DIR-9 (in case company fails to file the financial statements, annual returns, deposits, interest dividends etc.).
Annual Compliance Checklist for Private Company
The plan for annual compliance of private limited companies includes:
- Appointment of Auditors: Ensure auditors are picked within 30 days of creation and their yearly reappointment.
- Holding of AGMs: Conduct AGMs within 18 months of creation and quarterly thereafter.
- Filing of every year's Returns and Financial Statements: Submit every year's returns and monetary statements to the ROC within 60 days of the AGM.
- Compliance with Tax Regulations: File income tax returns and stick to tax regulations.
- Maintenance of Statutory Registers and Records: Keep correct statistics of statutory registers, financial accounts, and minutes of conferences to ensure compliance with legal requirements.
Benefits of Filing Annual Compliance for Private Limited Company
Compliance with annual compliances for private limited businesses gives several perks, including:
- Maintain Legal Status and Avoid Fines: Compliance with annual compliances guarantees that a private limited company continues its legal status and avoids fines, legal problems, and damage to its reputation. Failure to satisfy annual compliance requirements can result in heavy fines, court action, and the company's name being struck off the ROC record.
- Ensure openness and Accountability to Stakeholders: Compliance with annual compliances ensures openness and accountability to stakeholders, along with owners, employees, customers, and officials. It gives partners an accurate and up-to-date understanding of the corporation's economic success, management, and compliance state.
- Compliance with Laws and Regulations: Compliance with annual compliances guarantees that a private limited agency meets with vital laws and rules, along with the Companies Act 2013, the Income Tax Act 1961, and distinctive, relevant laws. It helps the organization stay away from legal obligations and maintain its legal status.
Requirements for Annual Compliance Filing
To meet annual compliance requirements, private limited companies must stick to specific obligations:
- Appointment of Accountants: Private limited companies must appoint accountants within 30 days of creation and repeat their appointment yearly to ensure accurate financial reporting and compliance with auditing standards.
- Holding of Annual General Meetings (AGMs): AGMs must be held within 18 months of formation and later at least once every year, with no more than a 15-month gap between two straight meetings. AGMs provide a stage for owners to talk about business problems and pass financial records.
- Filing of Annual Returns and Financial Statements: Private limited companies are predicted to file annual returns and economic statements with the ROC before 60 days of the AGM. These papers provide a structure of the business's financial health and compliance state.
- Compliance with Tax Regulations: Private limited companies in India have to comply with tax regulations by filing income tax returns on time and sticking to tax responsibilities to remain compliant with tax laws.
Documents Required for Filing Annual Compliance for Private Limited Company
Annual compliance for private limited businesses needs the filing of specific papers with the Registrar of Companies (ROC) and other agencies. These papers include accepted financial reports, yearly return forms, tax returns, and board decisions.
- Audited Financial Statements: These statements provide a whole image of an organization's financial achievement, such as the balance sheet, profit and loss account, and cash flow report. They must be made yearly and checked by an experienced inspector to make sure they are clear and agree with economic standards.
- Board Resolutions: Board resolutions record key choices made by the board of directors, such as clearing financial accounts, picking lawyers, and giving awards. These choices are crucial for showing compliance with law requirements and government standards.
- Annual Return Forms: Annual return forms, like MGT-7 and AOC-4, are filed with the Registrar of Companies (ROC) to offer details about the firm's financial function and compliance state. They include statistics on companies, leaders, and economic achievement.
- Tax Returns: Filing tax returns are required for companies to record their income, fees, and tax payments. Failure to report tax forms or delays can lead to fines and interest in payments. It is vital for corporations to comply with tax legal guidelines to keep away from legal consequences and maintain economic openness.
Process of Annual Compliance Filing for Private Limited Company
The annual compliance process for private limited companies includes several steps that must be taken to ensure official compliance and keep the company's legal standing. The process includes:
- Role of auditors: Appoint an auditor within 30 days of establishment and ensure their role is renewed every year. The auditor is known for checking the corporation's monetary information and ensuring compliance with accounting standards.
- Holding of AGMs: Hold an AGM within 18 months of creation and, after that, at least 1 in 12 months, with a break not greater than 15 months among 2 AGMs. The AGM is a chance for proprietors to talk about the corporation's economic progress, approve economic records, and make key choices.
- Filing of annual returns and financial statements: File annual returns and economic statements with the ROC within 60 days of the AGM. The annual return provides information about the company's monetary activities and compliance status, while the financial details provide an overview of the corporation's economic stability.
- Compliance with tax regulations: File income tax returns and meet with other tax regulations. Private limited companies are needed to make income tax reports and comply with other tax rules to ensure compliance with tax laws.
- Maintenance of regulatory files and records: Maintain correct and up-to-date records of all business actions and processes. This includes keeping formal records, financial accounts, and minutes of meetings to ensure compliance with legal requirements.
Penalties for Non-Compliance
When companies in India do not have post-incorporation obligations under the Companies Act 2013, they can face the mentioned range of penalties:
- Missing Board Meetings: If a company does not hold Board meetings at least once every three months, a fine of ₹1 lakh can be imposed on the Company, plus an extra fine of ₹5,000 is also imposed for each day it continues to miss meetings.
- Not Holding Annual General Meetings (AGM): Companies that don’t hold AGMs the end of financial year, then it could face fines of up to ₹1 lakh, along with ₹5,000 for each day delay.
- Not Filing Financial Statements (Form AOC-4): Companies can be fined ₹1 lakh for not filing their financial statements within 30 days of filing the Annual General Meeting, plus ₹5,000 for each for late filing. Even the Directors can also face penalties of up to ₹25,000.
- Neglecting Statutory Registers: Companies failing to maintain required statutory registers can face fines of ₹25,000, with an additional ₹1,000 for each day of non-compliance.
- Failure to Disclose Director’s Interest (Form MBP-1): If directors don’t disclose their interests, they could be fined between ₹50,000 and ₹1,00,000.
- Not Paying Annual Fees to the Registrar: Companies can be fined with penalties ranging from ₹1,000 up to ₹10,000, with extra charges for delay in filing the annual fees to the Registrar.
- Non-Compliance with E-Voting Requirements: Companies that skip e-voting obligations can have penalties ranging from ₹1 lakh, plus ₹5,000 for each day they make non-compliance.
- Failure to File Other Forms (e.g., INC-22, DIR-12): Companies have to file the DIR-12 form within 30 days of the appointment or resignation of the Director and INC-22 within 30 days of a change in the registered office of the company. Failure to file these forms can result in fines of ₹1 lakh, plus ₹5,000 for each day of delay.
- Not Maintaining a Registered Office: Every company in India is required to have a registered office that is the official address of the company. If a company fails to maintain its registered office, it faces a fine of ₹1,000 for each day it remains non-compliant. However, the total fine cannot exceed ₹1 lakh, i.e., even after the calculation, if the fine exceeds ₹1 lakh, then the Company shall be fined with ₹1 lakh only.
Why Choose Kanakkupillai?
Kanakkupillai is a known provider of business compliance services, giving expert help and assistance for yearly compliances of private limited companies. With a focus on improving the compliance process, Kanakkupillai provides full solutions that help businesses maintain legal compliance and avoid fines.
Kanakkupillai's knowledge goes to giving monthly reports on law changes and compliance requirements, ensuring that businesses stay aware and up-to-date with the latest requirements. The company's focused support team is dedicated to helping businesses keep compliance and avoid legal risks, giving a reliable partner for businesses seeking quick and effective compliance solutions.
In addition to its compliance services, Kanakkupillai also gives expert advice on the benefits and downsides of different business types, including private limited companies, single proprietorships, and business partnerships. This complete approach to business services makes Kanakkupillai a useful partner for companies wanting full help for their legal and regulatory needs.
Frequently Asked Questions
What are annual compliances for private limited companies?
Annual compliances for private limited companies are mandatory requirements enforced by the MCA and ROC to ensure regulatory compliance and maintain the company's legal status.What are the consequences of non-compliance?
Non-compliance with annual compliances can result in penalties, legal action, and damage to the company's reputation.Who is responsible for ensuring compliance?
The board of directors and the company secretary are responsible for ensuring compliance with annual compliances.What is the role of auditors in annual compliances?
Auditors play a crucial role in ensuring the accuracy and transparency of financial statements and ensuring compliance with tax regulations.How often are annual compliances required?
Annual compliances are required annually and need to be renewed each year.What are the consequences of not filing annual returns and financial statements?
Failure to file annual returns and financial statements can result in penalties, legal action, and the company's name being struck off the ROC register.How can I ensure compliance with annual compliances?
You can ensure compliance by regularly reviewing and updating your compliance processes, seeking expert guidance, and staying up-to-date with regulatory changes and compliance requirements.What is the role of the ROC in annual compliances?
The ROC is responsible for enforcing annual compliances and maintaining a register of all companies in India.What is the role of the MCA in annual compliances?
The MCA is responsible for formulating and implementing the Companies Act, 2013, which governs annual compliances for private limited companies.Can I outsource annual compliances?
Yes, you can outsource annual compliances to a professional service provider like Kanakkupillai to simplify the compliance process and ensure compliance with regulatory requirements.We Provide Best Quality
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