Annual Compliances of Private Limited Companies

Right from the moment of its incorporation, a startup becomes subject to the different statutory and regulatory compliances. A business registered in India is required to comply with the various annual legal compliances laid down by the corporate laws such as the Companies Act, 2013. Since a majority of startups are registered as companies, annual compliance of a Private Limited Company becomes the most asked issue faced by growing businesses. Often, businesses are unable to keep track of their annual compliance requirements and fall under the scrutiny of the Ministry of Corporate Affairs (MCA). This not only makes creates numerous hindrances for the business in the form of heavy penalties, but also reduces the chance of the startup’s survival in case of multiple violations. According to the report by MCA, more than 2 lakh companies were struck off from the MCA’s database, and more than 3.5 lakh directors were disqualified due to non-compliances with Annual ROC returns of the company. To prevent the same from happening to a new business, it is important to understand the different annual compliance requirements of a Private Limited Company that must be filed with the Registrar of Companies in India (ROC). SeekWiser’s business consultants have prepared a short guide to the different annual compliance requirements of a Private Limited Company in India.

Annual Compliance For A Private Limited Company

The annual compliances of a Private Limited Company are categorised as Mandatory Compliances and Event-Based Compliances that must be filed with the ROC in the prescribed format, along with the prescribed fees and before the deadlines set by the MCA.

Mandatory Annual Compliances For A Company

When it comes to compulsory annual compliance for a Private Limited Company, there are certain fixed annual ROC returns that must be filed by a company every financial year. In addition to these mandatory annual compliance requirements, the MCA may introduce new mandatory compliances, and a business needs to stay up-to-date to know about the latest MCA notifications for compulsory KYC or other form filings. A Easymantax can assist the startup in understanding whether the different annual compliances bet it the mandatory or event-based compliances, are applicable over the business or not. The mandatory annual compliance requirements of a Private Limited Company include the following:  

Auditor Appointment

Every company registered under the Indian Companies Act, 2013 needs to conduct its first Annual General Meeting (AGM) and appoint its auditor. Within 30 days of business incorporation, an auditor must be compulsorily appointed by the Board of Directors under the provisions of Section 139 of the Act. Additionally, the company is required to appoint an auditor every year, and a new auditor may be appointed in every AGM of the startup. However, if a company wishes to continue with the dame auditor, it can appoint an auditor for a maximum of 5 years.  

Board Of Directors Meeting

A Board Meeting must be head by the Private Limited Company’s Board of Directors within 30 days of its business incorporation. After the first Board Meeting, the Board must meet at least four times in a financial year, with a gap of a maximum of 120 days or a quarter between two meetings. For this meeting, each director of the Board must be notified via a notice seven days before the meeting. A minimum of 2 or ⅓ of the total number of directors must attend the Board Meeting, and the minutes of the meeting must be recorded and maintained at the registered office of the company.  

Annual General Meeting (AGM)

The shareholders of a Private Limited Company must meet once every year within six months from the date of closing of the financial year. The Annual General Meeting is required to be held at the company’s registered office or at some other place within the city, town or village in which the company’s registered office is situated. The agenda of the AGM can be issues relating to approval of financial statements, appointment or re-appointment of auditors, declaration of dividends, appointment and remuneration of directors, etc.  

Annual Return And Financial Statements

The Annual Return and Financial Statements of the Private Limited Company must be filed every financial year mandatorily by every registered company irrespective of its turnover or activities. The Annual Return details the information about the company’s shareholders, directors, members, etc. and must be filed within 60 days of holding the Annual General Meeting. The Financial Statements are different documents relating to the finances of the company and include the Balance Sheet, Statement of Profit and Loss Account and Director Report. The Financial Statements must be filed within 30 days of holding the Annual General Meeting.  

Maintainance Of Company’s Registers and Records

Th registers and records of a company must be carefully maintained and kept open for inspection at the company’s registered office. The Registers and Records of a company include the Register of shares, Register of Members and Register of Directors, resolutions of the meetings of the Board of Directors, Minutes of the board meetings and Annual General Meeting.  

Company Income Tax Return

A company must file its income tax return every financial year, along with the other tax compliances relating to Advance Tax, Professional Tax, TDS, etc. The requirements and due dates of all the tax compliances of a company are different, and the business can talk to a Easymantax for timely management of these compliance requirements. Additionally, when the annual turnover of a company is above INR 1 Cr, the company is mandatorily required to file its Tax Audit every financial year. Along with these annual compliance requirements, the MCA may notify new compliances for all the companies registered in India such as Director KYC, INC-22A (Active company return filing), INC-20A, etc.  

Event-Based Annual Compliance Of Company

There are different annual compliance requirements of a company that arise only when a certain event occurs. In such an occurrence, the company is required to file its ROC return and inform the ROC about such an event. These event-based compliances of a Private Limited Company include: 1. Loans to other Companies. 2. Loans to Directors 3. Appointment of managing or whole-time director. 4. Change in Authorised or Paid-up Capital. 5. Allotment of new shares or transfer of shares 6. Opening or closing of a bank account or change in signatories of Bank account. 7. Appointment or change of the Statutory Auditors.  

Non-Compliance With Annual Compliance Requirements

When a Private Limited Company fails to adhere to these annual compliance requirements, the company is penalised by the MCA for every day the default continues. In case of repetitive or consecutive defaults by the company, the MCA can strike off the business’s name of its database and penalise its directors and may initiate legal action. This makes it crucial for a new company to understand which compliances are applicable over it and when to file the annual compliance returns to avoid unwanted penalties.

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