Annual Compliance for Private Company - Overview

A Private Limited Company is a small business which is maintained privately, it is one of the highly recommended businesses in India especially for startups. The registration of the private limited company is governed by The Companies Act 2013 in India. According to the Companies Act, 2013, a minimum of 2 shareholders is needed to begin a private company, while a maximum of 200 members. In case a private limited company undergoes any financial risk, the personal assets of members or shareholders are not subject to sell, i.e. they ought to have limited liability.

A limited company allows limited liability to its proprietors and to its management team. But in the case of a public limited company, a firm can sell shares to investors which are considered as a beneficial act in raising the capital for the business. To establish a Public Limited Company, a minimum of three Directors are required and there is no cap on the maximum number of members. Importantly, it has more strict regulatory requirements when compared to a Private Limited Company.

Public Limited Company is a different type of company but holds most of the characteristics of a private limited company. It enjoys more benefits such as ease of transferability, borrowing capacity, limited liability, and perpetual existence. Like any other companies in India, Public Limited Company is also registered according to the rules and regulations of the Companies Act, 2013.

The separate identity of Private Limited Company requires to maintain its active status by the regular annual filing with MCA. For every private company, it is mandatory to file audited financial statements and an annual return with the Ministry of Corporate Affairs for every financial year. The RoC filing is compulsory irrespective of the annual turnover, whether it is in crore or nothing. Likewise, whether a single business deal is undertaken or more or none, annual compliances for the private limited company are compulsory for every registered company.

Both the forms are filed to submit the details of the business activities and financial date for referred Financial Year. The due dates mentioned in the annual filing of a Private Limited company are completely based on the date of the Annual General Meeting. If the company continuous fail to file the return it may lead to the removal of the company’s name from the register of MCA, that includes disqualification of company directors. Importantly, such com[anies should note that MCA has actively taken bold steps on companies that failing to file the annual returns regularly.

Benefits of Annual Compliance

Increase the Company’s Credibility

Compliance of law is the basic requirement for any company or business. The date of filing the company’s annual return is displayed on the Master Data on the MCA portal. This helps to increase the credibility of an organization and the regularity in compliance of the return is a major criterion such as Government tenders, loan approval or for similar other functions.

Attract Investors

While pulling capital or investment for a company from the creditors or investors, the first point the investors demand is for the financial records and date before settling the with an investment proposal deal. The investors will approach the private limited company directly or also they will check the financial records or annual returns from the MCA portal. Investors prefer the companies which have filed their regular compliance records.

Maintain active status

By filing the annual return regularly, the private company can avoid penalties and other legal issues. Whereas if the company fails to file the return continuously, the company status will be changed to default and charges for this failure will be heavy penalties. Not only that, but the company also be declared as inoperative or removed from the Register. The directors of such company are also debarred and disqualified from their further appointment. And, from July 2018, an additional penalty fee of ₹100 per day of delay will be levied and this will continue till the date of filing.

Checklist of Annual Compliance for Private Startups

It is considered that a private limited company has to follow certain terms while filing the return, The compliance of the company as laid down by different legislative act and other administrative bodies. These include but are not limited only to the periodical filing of returns, tax and other filings, adapting the board meetings and other meetings, keeping sanctioned books and accounts in a safe manner etc.

Payment of periodic filings and payments: TDS & TCS compulsory payment, GST Liability
Non-Registrar abidance of periodic returns – ( Annual returns, quarterly, monthly,- GST, TDS, and so on)
GST Returns - Monthly/Quarterly
TDS Returns - Quarterly
Evaluation and payment of advance tax periodically
Filing of Tax Audit Report done by authorized CA
Filing of Income Tax Returns at a flat rate of 30% addition to Education Cess
Administrative Assessment of trade as per different acts of law such as Environment and Protection Act, Competition Act, Money Laundering Act, Factory Act and so on.

Documents Required for Annual Filing of Company

Incorporation Document Certificate of Incorporation, PAN Card, and MoA and AoA of Private Limited Company
Audited Financial Statements Financial Statements should be audited by the independent auditor
Board Report and Audit Report Independent auditor’s report and Board report is also required
DSC or Digital Signature Certificate of Director Valid and active Digital Signature Certificate or DSC of one of the directors must be submitted

Mandatory Annual Compliances of a Private Limited Company

Here are some of the mandatory agreements that a private Limited company must insure:

First Meeting of Board

Along with all directors of the company, the first Meeting of Board is required to be held within 1 month or 30 days of Incorporation. Declaration of Board meeting must be informed formally or sent to each director of the company at least seven days before the meeting.

Subsequent Board Meetings

Minimum of 4 subsequent Board Meetings to be done every year within 120 days gap within two meetings. Filing of acknowledgement of interest by the company’s directors, Every director at:

The first board meeting in which he employs as director; or
The first meeting of Board members of the company in each FY; or
Whenever there is a need for the disclosures shall reveal in Form MBP 1 with a complete list of relatives and attending of relatives in the Company under RPT definition), his interest or interest in the body corporate, any company, organizers or firms or other organization of individuals that includes shareholding interest. Form MBP‐1 should be kept in the paperses or documents of the Company.

First Auditor

The Body of Directors shall delegate the first Auditor of the Company within the time period of 30 days of Incorporation who shall keep the office till the completion of 1st AGM. In the case of First Auditor, filing of ADT-1 is not mandatory.

Subsequent Auditor

The BOD shall assign the Auditor Auditor in the first AGM of a private limited company who shall stay in the position till the decision of 6th AGM and shall inform the same to ROC by filing ADT-1. The content to submit Form ADT 1 is that of the Private Limited Company and not of the Auditor Auditor within the time period of 15 days from the time of designation.

Annual General Meeting

Every Private Limited Company is required to organise an Annual General Meeting on or before 30th September every financial year during office working hours. On a day if it is not a general public holiday and either at the registered office of the private limited company within the village/town/ city where the registered office is positioned. A 21 bright days' notification is needed to be given for the same.

Filing Of Annual Return (Form MGT-7)

All the Private Limited Companies are expected to file their Annual Return within the time period of 60 days of the functioning of Annual General Meeting. Annual Return of the company will be filled between' 1st April to 31st March' of every year.

Filing Of Financial Statements In (Form AOC-4)

Every private Limited Company is required to file their 'Balance Sheet' with a statement or report of 'Director Report' and 'Profit and Loss Account' in this Form in 30 days of holding off the 'Annual General Meeting'.

Statutory Audit Of Accounts

Every Private Limited Company should prepare its reports of accounts and obtain the proper audited mandatorily by a Professionals/Chartered Accountant at the every Financial Year-end. The Auditor must provide an Audit Report and the Audited Financial Statements of the company to submit it to the Registrar.

Other Requirements of Annual Compliance

Directors Report

This should be filed by the Private Limited Company ensuring that it covers all the relevant information required to be filed in by a Small Company as per Section 134.

Maintaining of the Books of Accounts and Statutory Registers

Statutory Registers, such as the Directors and KMP or the Register of Members or Shareholders or the Beneficial Owners or the Loans, Contracts and Arrangements or Deposits or Related Parties Transactions, and so forth. Along with this also the minutes of board meetings, AGM or annual general meetings, and other meetings, as well as the books of accounts, financial statements, and the ROC file, must all be preserved and updated on a regular basis.

Annual Financial Statements and the Other Documents

At the end of the financial year, prior to at least 21 clear days of holding the AGM, the Private Limited Company should ensure that it has circulated or send the annual financial statement along with other documents like the Directors Report and the Auditors Report to the members.

What happens if there is a Non-Compliance by the Private Limited Companies?

If a firm or the company which is a private limited company, for that matter refuses to comply with any of the administrative requirements, the company and any officer who is in default will be fined for the period in which the default continues. As a result, the fines will continue to rise as the time of non- compliance lengthens.

Event-Based Compliances of a Private Limited Company

Event-based compliances of a Private Limited Company are those who get activated upon following certain steps or consequences or events such as a change in directors, change in approved share capital, change of registered office, etc. Therefore, it is essential that the events get tracked, and tractability met with on time to additional fees or avoid penalties. Some of the Event-based compliances or agreements with the time limit are mentioned below:

Actions	Phase Limit	Form No.
Change in registered office	Within 15 days from the date of such change	INC-22
KMP or Change in Directors	Within 30 Days of such change	DIR-12
Increase in Authorized Share capital or investment	Within 30 days of authorizing Ordinary Resolution	SH-7
Filing of resolution and agreements	Within 30 days from date of authorizing the resolution	MGT-14
Increase in Paid-up share capital or Issue of security	Within 15 days from the date of the allotment	PAS-3
Application for KYC of Directors of the company	On or before 30th April of immediate next Financial Year or Annual Compliance	DIR-3 KYC
Change in secured borrowing (Creation, satisfaction and modification of charge)	All types of Charges within 30 days of its creation	CHG-1
ACTIVE (Active Company Tagging Identities and Verification)	On or before 25th April 2019 (Applicable to all companies filed before 31st December 2017)	INC-22A
Declaration of Commencement of Business	Within a time period of 180 days of the date of incorporation. (Applicable to companies incorporated after 2nd November, 2018.)	INC-20A

Essentials	Phase Limit	Form No.
Change in Directors or KMP	Within the time period of 30 Days of such change	DIR-12
Increase in Authorized Share capital	Within the time period of 30 days of passing OR	SH-7
Increase in Paid-up share capital or Issue of security	Within 15 days of time from the date of the allotment	PAS-3
Change in secured obtaining funds or borrowing (Creation, modification and satisfaction of charge)	All types of Charges within 30 days of its creation	CHG-1
Conversion of company	-	INC-27
Change in the registered office	Within 15 days from the date of such change	INC-22
Filing of resolution and agreements	Within 30 days from date of authorizing the resolution	MGT- 14
Change of name of the company	Within 60 days of time from the date of applying reservation of company name in INC-1	INC-24
Removal of Auditor before Expiry	Within 30 days from date of passing SR	ADT-2
Report for Disqualification of the Director	To be filed by the company within the time period of 30 days of such disqualification	DIR-9
Application for KYC of Directors	On or before 30th April of next Financial Year or Annual Compliance	DIR-3 KYC

Frequently Asked Questions

Which form gets submitted for the appointment of Auditor?

Form ADT-1 is needed to be filed for appointment or removal of Statutory Auditor.

Does the designation of Auditor fall under annual compliance of the company?

A company can prefer to designate a statutory auditor for five sequential years or till the end of next AGM. However, a designation of the statutory Auditor does not fall under the 'annual compliance'.

Is an audited financial statement essential for annual filing?

Yes, audited financial statements are essential for each and every company after its incorporation. The company must file the audited financial/administrative records only. Also, non-audit of the financial statement is not an excuse to delay the annual filing.

What does the registration process should contain?

All the private limited companies are expected to have sanctioned records shelved safely updated for the following members, loans, charges and investments.

Is the Annual Filing mandatory for all companies?

Yes. RoC compliance for 'Private Limited Companies' is compulsory for every registered company. Irrespective of the annual turnover or the capital amount, the entity should comply with the annual abidance mandates. The 'annual compliance' is due after the AGM of the entity every financial year.

Annual Compliance

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