Private Limited Company Compliances
Ask anyone with experience, and he’ll tell you running a company is no easy task, certainly not for the faint of heart. Besides all the business stress involved and all the financial pressure to handle, you have customers demanding payment, employees expecting salaries, clients pushing for performance, and that’s enough in itself to make anyone snap. But even all of this is perhaps not so much of a headache for entrepreneurs as the massive legal and regulatory requirements the government expects you to fulfill as a private limited company. Let’s look at a few of these.
Below are a list of just some of the compliances every private limited company is mandatorily required and expected by the law to fulfil.
At least four board meetings need to be held in a year and at least one meeting needs to be held every quarter. Presence of the directors is needed for the meeting. Quorum is 1/3rd or 2 Directors whichever is greater. The meetings need to be logged and the signed minutes need to be maintained at the Registered Office.
Annual General Meeting (AGM)
This is a shareholders meeting that needs to be held every year. Approval of financial statements, declaration of dividends, appointment of auditors, etc. is the primary agenda for this meeting. AGM needs to be held in the city where the registered office of the company is situated.
Annual Filing of Forms
There are a number of annual forms that need to be filed besides the annual financials. The information is quite detailed and talks about shareholdings, directors, financials, etc. All these forms are required to be certified by a practicing Chartered Accountant or practicing Company Secretary. Companies having paid up share capital in the range of INR 1 million to 50 million are required to file a Compliance Certificate from a practicing company secretary.
Yearly Forms by Directors
The directors are required to inform the company about their directorship in other companies every year.
Maintenance of Statutory Register & Minutes Book
A number of registers are required to be maintained, such as‐ Register of Member, Register of Directors, Register of Contracts, Register of Charges, etc. The registers are required to be kept at the registered office of the company.
EVENT BASED COMPLIANCES
These are triggered based on happening of certain events. Examples are:
- Receipt of share application money
- Allotment of shares
- Transfer of shares
- Appointment/Resignation of directors
- Appointment of Managing Director/ Whole Time Director
- Executing agreement with related parties
- Change in the Bank signatories
- Change in the statutory auditors
There is paperwork that needs to be done for the above and there are various deadlines for these tasks. In case, of noncompliance or even a missed deadline there can be penalties, additional fees or a compounding of offence, etc. Hence, it is necessary that the happening of such events be tracked and compliances met with on time.
Cost of Non‐compliance:
The Companies Act, 1956 provides for penalty/fine or imprisonment either of the officer in default and/or the company. The Managing Director, Executive Director are the “officer in default”. If there is no executive director, all the directors are treated as “officer in default”. For the procedural lapses such as late filing of forms, additional filing fees are required to be paid. In case of FEMA, the penalty for noncompliance can go up to thrice the amount involved. Private Limited Companies in general have more compliance requirements than LLP’s.
Clearly, then, running a business especially in the form of a private limited company is not something to be undertaken lightly, and requires both an ongoing investment of much time and effort, and significant knowledge of many financial and regulatory technicalities. Luckily, there are established and competent professionals in the market today ready and willing to help you at every stage of the business cycle, not only in incorporation but with all the compliance and regulatory requirements through the long life of your organization. For such help from the very best regarding your Private Limited Company compliance needs and necessities, contact constitutionalcounsels.in today.
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