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Private Limited Company Compliances

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  • Overview
  • Benefits
  • Compliances List
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  • Documents
  • FAQs

What are the Compliances of a Private Limited Company?

Thinking of starting a business enterprise in India? Then you can register your business either as a Private Limited Company, LLC or OPC. A good way for wannabe and budding entrepreneurs is to incorporate a Private Limited Company. A Private Limited Company Registration comes under the Companies Act, 2013. Registration of a private limited company is done by the Registrar of Companies (ROC) under MCA. Private Limited Company incorporation boosts credibility and has various advantages like asset protection, attracting more funding, visible branding, etc. 

It has a limited number of shareholders, and their liability is limited to the Company's obligations, thus protecting their assets if the business fails. This is why many startups prefer this incorporation or registration route when registering. These companies can raise capital by issuing shares. This makes them attractive for businesses seeking financial support. 

Depending on your business setup, you may get certain concessions and exemptions from the government. Registering a company is a tiresome hectic process and can be done online through the Ministry of Corporate Affairs website. There are also certain compliances for a private limited company that needs to be addressed after registration. Apart from all the mandatory compliance, some compliances of private limited companies need to be fulfilled annually.

Apkatax helps you with private limited company registration and annual compliance for private limited Companies at affordable prices. It is important to note that a private limited company is eligible for yearly compliance right from incorporation. Non-compliance results in various issues for the company, ranging from hefty penalties to legal issues. To avoid such situations, private limited companies need to be well-informed and compliant with the applicable regulations. 

 

What are the Benefits of Private Limited Company Compliances?

To boost investor confidence and increase their businesses, private limited companies must regularly comply with the Companies Act, Income Tax Act, GST and other regulations. Since 2018, there has been a requirement for annual compliance, compelling companies to submit annual filing forms by the 30th of September every year. Advantages of fulfilling Annual Compliances for the private limited Company include: 

  • Enhanced Company Credibility: Regular ROC compliance of a private limited company is a key criterion for the measurement of a company's credibility. It enhances business credibility and reflects seriousness from the owners, attracting more customers and resulting in more business. It also facilitates government tenders and loan approvals and opens new opportunities for financial support. 
  • Attracting More Investors: Investors largely focus on financial data and records of compliance of the Company before investing in any firm. Regular filing of annual returns on the MCA portal is crucial for investor confidence. They prefer companies with a consistent compliance record. Thus, consistent annual compliance for private companies is essential to attracting more investors and projecting itself as a hotspot of investments. 
  • Maintain Active Status and Avoid Hefty Penalties: Regular filing of annual compliance of private limited Companies is also necessary to avoid penalties. Failure to file ROC compliance for a private limited company can downgrade the Company's business status ratings. Non-compliance may also result in the Company being labeled as defunct or removed from the ROC. Directors may also be excluded and debarred from further appointments. Since July 2018, a supplementary fee of ₹100 is levied for each day of delay in filing.

 

What is List of Compliance for Private Limited Company?

Annual compliances for Private Limited Companies involve various steps:

A) Conducting Board Meetings and Annual General Meetings:

As per Section 173 & 96 of the Companies Act, 2013, a Private Limited Company should conduct at least four board meetings annually. Apart from board meetings, a Private Limited Company must also conduct one Annual General Meeting or AGM which is a mandatory yearly meeting of the shareholders of a company. AGM has many purposes but the main purpose of the AGM is to present the financial statements of the company infront of shareholders. Details like payment of dividends to shareholders, financial statements, and appointment of auditors are also discussed in the annual general meeting. Details pertaining to the company's operations and management are also discussed. During the AGM, the shareholders can ask questions, raise their concerns, and vote on the company's various proposals, including the election of directors, motion on dividend payments and appointment of auditors.

The AGM also serves as a meeting between management of the company and its shareholders. In AGMs shareholders can directly convey their valuable feedback about the company and its past year performance to the management. As per regulations of Companies Act, 2013, if a company fails to organize its AGM within the prescribed time, it is regarded as a violation and the company is liable for penalty. The penalty is levied both on the company as well as on its directors. The amount of fine is decided by the government. Both the companies and directors are advised to conduct regular AGMs to avoid penalties and legal repercussions.

B) Appointing Auditor:

Appointment of an auditor via FORM ADT-1 is compulsory for a Private Limited Company under Section 139 of the Companies Act. The Company must inform ROC regarding this. The Company must have its accounts audited by a Chartered Accountant firm, and the auditor shall verify the books of account and issue an Audit report. According to the Companies Act, the appointment of the first auditor of a company is done by the Board of Directors within 30 days of the date of company incorporation. An auditor must be appointed at each Annual General Meeting (AGM). In case a company fails to appoint an auditor during an Annual General Meeting (AGM), the current auditor shall remain in office until a new auditor is appointed. If the current auditor fails to continue, the company must notify the matter to the Registrar of Companies (ROC) within 7 days of the AGM.

In such a case ROC has the authority to appoint a new auditor. After the company has appointed an auditor in the AGM, it must file Form ADT-1 with the Registrar of Companies within 15 days of the AGM. Form ADT-1 contains details of the auditor and their appointment, and serves as a notification of the auditor's appointment to the ROC. The company is also required to file its audited financial statements enclosed with the auditor's report, with the ROC within 30 days from the AGM. Filing these details is mandatory and failure to comply with these requirements may attract hefty fines as well as invite legal action. Failure to file form ADT -1 with the ROC attracts a penalty as per Section 450 of the Companies Act. If a company fails to file ADT-1 within the due time, the company and its officials responsible for non-filing of ADT-1 are liable for a fine. The government decides the amount of the fine. An additional fee may be levied for delayed filing.

C) Filing the Annual Income Tax Return:

Every private limited company is required to file income tax return with the government. It contains information of their income and taxes paid during a financial year. Private Limited Companies are required to file the Annual Tax Return with ROC within 60 days from the date of the AGM. The particulars of the Annual Return must include information about the Company’s members/shareholders and directors. Form MGT-7 is required to be submitted to file the annual return. The ITR is to be filed in the prescribed format and must have details of the company's income, deductions claimed, taxes paid and any tax liability for the financial year. Income tax returns filing is mandatory for companies, irrespective of any profit made or losses incurred during the financial year.

Failure or delay in filing income tax returns can result in penalties and interest payments. The last date for filing the Income Tax Return (ITR) for domestic companies is 31st October 2024.  However, if the company is involved in international transactions or specified domestic transactions and is required to furnish a report in Form No. 3CEB u/s section 92E, the due date to file ITR shall be 30th November 2024. The last date to file late or revised returns is 31 December 2024. The government may declare extensions on the due date. It is therefore advised to keep a check on the latest updates from the Income Tax Department.

D) Filing of Financial Statement:

Financial statements are formal records and reports that present the financial performance, standing and position of a company. They provide in-depth information on the company’s financial activities, its expenses, revenue, assets, liabilities, and equity. Three main financial statements need to be prepared and published annually by an organization as part of its financial reports:

  1. Income Statement/Profit and Loss Statement: The income statement or P&L statement provides information about the company's total revenues, its expenses and net profit or loss for a given period, for example, an year.

  2. Balance Sheet: The balance sheet reflects the company's assets, liabilities, and equity at a particular point, usually at year’s end.

  3. Cash Flow Statement: It reflects the inflow and outflow of cash during a specific period, typically a year. It gives details on the investing, operating and financing activities of the company. Releasing financial statements is very important as it impacts a lot of stakeholders in and outside the company. They are important for investors, creditors, credit rating agencies and government authorities, as they provide deep insights into a company's financials and its annual performance.

E) Due Date of Financial Statement:

All companies are required to prepare their financial statements within 6 months from the end of their financial year. For example, if the financial year of a company ends on September 30, then the due date for the preparation of its financial statements would be March 31 of the next year. The financial statements must be prepared in conformity with the accounting standards and procedures notified from time to time by the Ministry of Corporate Affairs.

F) Filing of Financial Statement with the ROC:

Every company must file its financial statements with the Registrar of Companies (ROC) within 30 days of the Annual General Meeting (AGM). The financial statements that need to be filed must include cash flow statement, balance sheet, profit and loss account, statement of equity changes and any other document that needs to be attached in financial statements. The financial statements must be audited by a qualified auditor, who after completing the audit shall issue an audit report attached with financial statements.

The auditor's report shall serve as independent evidence of whether the financial statements were prepared in accordance with prescribed accounting standards or not. They portray a true and fair view of the company's financial position and performance. Non-compliance in filing financial statements with the ROC within the due date can lead to fines and penalties. The penalty may vary depending on the delay and the type of company. It is therefore important to ensure timely filing of their financial statements with the ROC to avoid any penalties or legal consequences.

G) Disclosure of Interest:

Every financial year, the directors of the Private Limited Company, in its first Board meeting, need to disclose their interest in other entities using form MBP-1. The Director in default may face imprisonment for up to 1 year.

F) KYC of the Company Director:

For completing KYC of directors, all directors holding DIN as of March 31st of the financial year are required to to submit Form DIR-3-KYC for the respective financial year on or before September 30th of the upcoming financial year with the MCA. DIR-3-KYC includes details such as the director's name, address, Aadhaar number, PAN and mobile number. This filing must be completed before the due date. Not filing or late filing of DIN KYC can lead to penalty or deactivation of the director's DIN. Two types of forms are used to file KYC of directors that hold DIN.

The first is Form DIR-3 KYC, which is filed by DIN holding directors who have never filed DIR-3 KYC before or want to make changes in their KYC details. The second is Form DIR-3 KYC Web, which is an online form to file KYC details for persons who have filed DIR-3 KYC anytime earlier and do not have any changes to make in their KYC details. If Form DIR-3 KYC is not filed before the due date, the DIN of holders is deactivated due to non-filing of DIR-3 KYC. It is only reactivated after the form is filed and submitted along with rupees 5000 as late fee.

H) Filing Form DPT-3:

Form DPT-3 shall be filed every year on or before June 30th concerning the return of Deposits and particulars not considered Deposits as of March 31st. 

I) Preparing the Statutory Register:

As per Section 88 of the Companies Act 2013, Private Limited Companies are required to maintain statutory registers. Additionally, certain event-based compliances must be followed by Private Limited companies, including transfer of shares, appointment or resignation of directors, change in nominee or bank signatories, and change in auditors.

  • Apart from the above-mentioned compliances, every Private Limited Company has to follow regulations related to GST, PF, ESI, and TDS depending on its requirements.

  • Apart from this, payment of stamp duty on share certificates is to be made within 30 days of share issuance.

 

What is Online Process for Private Limited Company Compliance?

All necessary forms like AOC4, MGT7, and ADT-1 can be submitted online through the following process:

  • First of all, open the MCA portal
  • Download the e-form you want to file
  • Fill up the form carefully
  • Now click on the button “Upload e-form”
  • Upload your duly filled e-form
  • After successfully uploading the form, you will be prompted to pay a fee
  • Pay the fee online.

 

What are the Documents Required for the Annual Compliance of Private Limited Company?

Several documents are required for the annual compliance of a Private Limited Company, including:

  • Sales and purchase bills of expenses done during the year.
  • Particulars of Bank Statements are to be fetched from April 1st to March 31st of all bank accounts in the name of the Company.
  • Particulars of GST returns filed (if any).
  • Particulars of both TDS Returns filed and TDS Challans Deposited. 
  • Balance sheet and Profit & Loss Account.
  • Financial statements.
  • Directors report.
  • Details of the Member.
  • Details of Directors.

 

FAQs

Answer: Annual Compliance for Private Limited Companies includes filing financial statements, appointing auditors, annual returns, and conducting annual general meetings.
 

Answer: The annual return for a Private Limited Company must be filed within 60 days from the date of the Annual General Meeting (AGM).
 

Answer: Private Limited Companies are required to prepare and file audited financial statements, including the balance sheet, profit and loss account, and cash flow statement.
 

Answer: Yes, a Private Limited Company must conduct an AGM every year. The main purpose of the AGM is to share the financial statements of the company with the shareholders. Details like dividend payment to shareholders and appointment of auditors are also discussed in the AGM.
 

Answer: Non-compliance with the deadline for filing annual returns can result in penalties, legal consequences, and a negative impact on the company's compliance record.
 

Answer: Yes, there are statutory fees associated with filing annual returns. The amount of fees may vary based on factors such as authorized capital and the period of delay in filing.
 

Answer: Private Limited Company compliance procedure is carried out online. It includes filing of forms like AOC4, MGT7, and ADT-1 on the Ministry of Corporate Affairs (MCA) portal. 
 

Answer: The documents required for filing Private Limited Company Compliance include Purchase and Sales records along with invoices of expenses done during the year, Particulars of Bank Statements, Details of GST returns filed (if any), Details of TDS Challans Deposited ,TDS Return filed, Details of Balance sheet, Details of Profit & Loss Account, Financial statements. Details of theDirectors/Members and Directors report.
 

Answer: Yes, appointing an auditor via FORM ADT-1 is mandatory for a Private Limited Company compliance. It comes under Section 139 of the Companies Act. The Company must inform ROC regarding this. The Company accounts must be audited by a Chartered Accountant firm, and the auditor must verify the books of account and issue an Audit report.
 

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