Following up on the last 2 articles where I have detailed the Incorporation formalities required for private limited companies (Article 1, Article 2), this article deals with company law compliances post incorporation:
- Conducting of Board Meetings and Committee Meetings
As per the Companies Act, 1956, at least four Board meetings should be held each year and the gap between two Board meetings should not exceed 120 days.
- Conducting of Shareholders Meetings
As per the Companies Act, 1956 at least one meeting of shareholders should be held each year. Last date for convening AGM is 30th September.
- Registered Office
The Company has to maintain a Registered Office in the state where it is registered. All the statutory records, registers and books of accounts would be maintained at that office. The company has flexibility to shift its registered office after compliance of the relevant provisions of the Companies Act, 1956.
- Head Office
Apart from the Registered Office, the Company may maintain a Head Office in India and the books of accounts may be kept there at with the approval of Board of directors. However, the company is required to
intimate to the ROC within seven days of the decision.
- Share Certificates
Every Company is required to issue share certificates to its shareholders in compliance of companies (Issue of Share Certificates) Rules. These share certificates are to be issued after taking note of the allotments made by the Company and shares transferred from time to time.
- Share Transfer
The shares of the Companies are freely transferable unless the company has any preemption clause in its Articles of Association. In case of transfer, the buyer & seller are required to execute share transfer deed and after being stamped as per Stamp Act, it would be submitted to the company along with share certificate and if all the documents are in order, the company would transfer these shares.
- Books of account
Every company is required to maintain the books of accounts either at Registered Office or Head Office as mentioned above with respect to:
1. all sums of money received and expended by the company and the matters in respect of which the receipt & expenditure take place;
2. all sales & purchases of the goods by the Company;
3. the assets & liabilities of the Company; and
4. in case of company engaged in production, processing, manufacturing or mining activities, such particulars relating to utilization of material or labour or other items of the cost as may be prescribed by the Central Government to be included in the books of accounts.
- Minutes Book
Minutes are to be drafted for every meeting of the Board of Directors and shareholders. Thereafter,
the same need to be signed by the Chairman of the meeting. Following Minutes are to be drafted:
1. Minutes of Board Meeting and its committees
2. Minutes of Extra Ordinary General Meeting [EOGM]
3. Minutes of Annual General Meeting [AGM]
These minutes are drafted considering the decisions taken by the Board and its committees in day to day working of the Company.
- Other Statutory Registers
Companies Act, 1956 specifies the following Statutory registers to be maintained by every Company:
1. Register of Members
2. Register of Directors
3. Register of Transfers
4. Register of Director’s Shareholding
5. Register of Contracts in which Directors are
6. Register of Charges
7. Meetings attendance register
- Audit Requirements
- Statutory audit is mandatory in case of every private limited company. In other words, book of accounts are required to be audited under the Companies Act, irrespective of quantum of revenue, losses, profits, capital expenditure.
- Tax Audit is mandatory in case sales, turnover or gross receipts of a business exceed Rs 1 crore (from A.Y. 2013-14) in the previous year relevant to the assessment year.
- The due date of getting the books of accounts audited is September 30 with duly filled up and signed form No. 3CD and 3CA by Chartered Accountant.
- Every private limited company is compulsorily required to maintain books of accounts to show the true and fair view of the financial statements.
- If a company liable to audit fails to get his accounts audited before the specified date or fails to furnish a tax audit report to the proper tax officer, penalty u/s 271B is attracted. The amount of penalty shall be one-half per cent of total sales / gross turnover or Rs.150000/- whichever is lower.
- Annual compliance filing – includes the following e-forms:
- Form 23AC : For filing Balance Sheet by all Companies, within 30 days of AGM.
- Form 23ACA : For filing Profit & Loss Account by all Companies, within 30 days of AGM.
- Form 20B : For filing Annual Return by Companies having share capital, within 60 days of AGM.
- Form 66 : For filing Compliance Certificate by Companies having paid up capital of Rs.10 lakh – 2crore
- Form 21A : For filing Annual Return by Companies not having share capital, within 60 days of AGM.
- Other Compliance filing required from time to time are:
- Change in Authorized / Paid up Capital of the Company.
- Allotment of new shares / transfer of shares / invitation to subscribe for shares.
- Issue of shares to the Directors / employees of the Company.
- Change in composition of the Board of Directors.
- Appointment of Managing / whole time Director and payment of remuneration.
- Payment of remuneration to Director / his relative / firm of the Director etc. are contracting with any of the above.
- Loans to Directors / Members or to firms / companies where they are partner / members respectively.
- Appointment of Company Secretary (Sec 383 A of Companies Act): Provisions relating to appointment of CS are governed by paid up capital of company:
Every Company having a paid up Capital of Rs. 5, 00, 00,000/- (Rupees five crores only) or more shall have a whole time company secretary holding a membership of the Institute of Company Secretary
- Appointment of MD or whole time Director or Manager is applicable if paid up capital of company is Rs. 500 lakh or above.
- EPF (Employee Provident Fund) compliance by company is mandatory where number of employees exceed 20 any time during the financial year and remains applicable for subsequent years even when employee count falls below 20. A company needs to file Monthly Returns and Annual Returns for EPF. It needs to submit every month a duly paid P.F challan, Form 12A, Form 5 (additions) and Form 10 (deletions) and Nomination form 2 (for newly joined employee details). It also needs to file Form 3A and 6A along with the details of Annual PF Challan payment details in annual return. The company/employer needs to collect, certify and submit the Nomination and Declaration Form in Form-2 of every new joinee to the scheme along with the monthly report.
The monthly payment due date for Provident Fund is 15th of every month (with grace period up to 21st) and the due date for Annual Return is 30th April of every year. It is to be noted that P.F authorities treat one year as starting from 1st March and ending on 28th February.
- ESI (Employees State Insurance) compliance by company: If a company has below 20 employees, it is not liable to pay E.S.I. A company needs to file Half Yearly Returns for the period of
- 1st April to 30 September – submitted by November 15th
- 1st October to 31st March – submitted by May 15
There are no monthly returns for ESI.. The company/employer must pay the ESI amounts every month on 15th of every month(with grace period upto 25th).
Next article, I will be writing on the various taxation requirements for Pvt. ltd. companies.