The Government of India has taken remarkable steps whether be it rolling out of GST (ONE NATION ONE TAX) or introduction of SPICE form for incorporation of Companies in shorter period of time hassle free, This sentiment reflects the mood of Government of India in making "INDIA business Hub" and Generating Employment. Private Companies are one of the most popular forms OR ways of doing business in India. As per details available on data.gov.inas on 31st march 2014 there were 888,430 No. of Private limited and 64,003 of Public Ltd. which rose to to 15.27 lakh in No. as per the report published on 17th Feb 2016 in Economic Times (Mostly private limited companies.)
After the Companies (Amendment) Act, 2015, followed by Exemptions to Private Companies under section 464 of CA 2013 G.S.R. 466(E). it removed many restriction from private limited Company as managing the day to day operations of business along with complying the corporate laws can be little taxing for any Entrepreneur.
Hence, it is essential to take help of a professional and also understand such legal requirements to ensure timely fulfillment of compliances, without any levy of interest or penalty.
The list of the compliance for Private limited Companies is highlighted below:-
Description and Timeline
Appointment of Auditor
Auditor will be appointed for 5 (Five) years and form ADT-1 will be filed for 5-year appointment.
The first Auditor will be appointed within 30 days from the date of incorporation of the Company.
Note: Rotation of Auditors on Private Company not applicable unless fall under Class or Classes of Companies prescribed in Rule 5 of Companies (Audit and Auditors) Rules, 2014
Section 139(2) of the Act prohibits the following categories of companies from appointing / reappointing an audit firm for more than 2 terms of 5 consecutive years, i.e. 10 consecutive years, after which such company would be required to mandatory rotate its auditors in accordance with the Act:
(i) listed companies;
(ii) unlisted public companies having a paid-up share capital of INR 10 crores or more;
(iii) all private limited companies having a paid-up share capital of INR 20 crores or more; and
(iv) all companies (private and public) which do not meet the thresholds mentioned in (ii) and (iii) above, but have public borrowings from banks / financial institutions or public deposits of more than INR 50 crores.
Statutory Audit of Accounts
Every Company shall prepare its Accounts and get the same audited by a Chartered Accountant at the end of the Financial Year compulsorily. The Auditor shall provide an Audit Report and the Audited Financial Statements for the purpose of filing it with the Registrar.
Filing of Annual Return (Form MGT-7)
Every Private Limited Company is required to file its Annual Return within 60 days of holding of its Annual General Meeting. Annual Return will be for the period 1st April to 31st March.
Filing of Financial Statements (Form AOC-4)
Every Private Limited Company is required to file its Balance Sheet along with statement of Profit and Loss Account and Director Report in this form within 30 days of holding of Annual General Meeting.
Holding Annual General Meeting
It is mandatory for every Private Limited Company Company to hold an AGM in every Calendar Year. Companies are required to hold their Subsequent AGM within a period of six months, from the date of closing of the Financial Year.
Preparation of Directors’ Report
Directors’ Report will be prepared with a mention of all the information required under Section 134.
The purpose of a statutory audit is the same as the purpose of any other audit – to determine whether an organization is providing a fair and accurate representation of its financial position by examining information such as bank balances, bookkeeping records and financial transactions.
After Demonetization G.S.R. 307(E).—In exercise of powers conferred by section 143 read with sub-sections (1) and (2) of section 469 of the Companies Act, 2013 (18 of 2013) the Companies Act has provided more responsibility to Auditors of the company as highlighted in italics.
Appointment of the Statutory Auditors of the Company;
Finalise Annual Accounts with the Auditors of the Company;
whether the company had provided requisite disclosures in its financial statements as to holdings as well as dealings in Specified Bank Notes during the period from 8th November, 2016 to 30th December,2016 and if so, whether these are in accordance with the books of accounts maintained by the company;
Annual RoC Filings
Private Limited Companies are required to file its Annual Accounts and Returns disclosing details of its shareholders, directors etc to the Registrar of Companies. Such compliance's are required to be made once in a year.
As a part of Annual Filing, the following forms are to be filed with the ROC:
Form MGT-7 (Annual Return) : Every Private Limited Company is required to file its Annual Return within 60 days of holding of Annual General Meeting. Annual Return will be for the period 1st April to 31st March.
Form AOC-4 (Financial Statements) : Every Private Limited Company is required to file its Balance Sheet along with statement of Profit and Loss Account and Director Report in this form within 30 days of holding of Annual General Meeting.
Annual General Meeting
Every Private Limited Company is required to hold a meeting of its shareholders once in every year within a period of six months from the date of closing of the financial year.
The primary agenda of an AGM includes approval of financial statements, declaration of dividends, appointment or re-appointment of auditors, appointment and remuneration of directors etc which is also known as ordinary business of company.
The Annual General Meeting shall be held during business hours on a day which is not a National holiday and shall take place at the registered office of the company or such other place within the city, town or village in which the registered office of the company is situated.
The First meeting of the Board of Directors of a Private Limited Company shall be conducted within 30 days from the date of Incorporation of company.
Further, minimum Four Board Meetings shall be held in a calendar year MAXIMUM gap 120 days between 2 meetings;
Minimum 2 directors or 1/3rd of the total number of directors, whichever is greater, are required to be present in meeting of the Board of Directors. The discussions of the meeting need to be drafted and recorded in the form of “Minutes of the Meeting” and maintained at the Registered Office of the Company.
Directors should be intimated about the date and purpose of the meeting by giving a notice(by hand delivery, post or electronic means) atleast 7 days in advance from the date of the meeting.
Disclosure of interest as per section 184
Every director shall at the first meeting of the Board in which he participates as a director and thereafter at the first meeting of the Board in every financial year or whenever there is any change in the disclosures already made, then at the first Board meeting held after such change, disclose his concern or interest in any company or companies or bodies corporate, firms, or other association of individuals which shall include the shareholding, in such manner as may be prescribed by Companies(Meetings of Board and its powers) rules, 2014 – Rule 9.
Income Tax Compliance
Calculation and Quarterly Payment of Advance Tax
Income tax for small companies with an annual turnover upto 50 crore, now to pay 25%, a 5% reduction
Filing of Income Tax Returns (Tax will be payable at a flat rate of 30% plus Education Cess) if turnover exceeds 50cr.
Tax Audit – Mandatory in case sales, turnover or gross receipts of a business exceed Rs. One Crore in the previous year relevant to the assessment year.
Filing of Tax Audit Report
Maintenance of Statutory Registers and Records
A Private Limited Company has to maintain various statutory registers and records as required by the Company law such as Register of Members (MGT 1), Register of debenture holder and other securities (MGT 2) Register of Directors etc. Form MBP 2 Register of loans, guarantee, security and acquisition made by the company. MBP 4, Register of contract or arrangement in which directors are interested.
Besides, Incorporation documents of the company, Resolutions of the meetings of the Board of Directors, Minutes of the Board Meetings and Annual General Meeting/Extraordinary General Meetings are also required to be preserved by the Company.
Such records are to be kept at the registered office of the company and shall be open for inspection to its members during business hours. Also, the books of account of every company relating to a period of at least eight financial years should be preserved and kept in good order.
Other Event Based Filings
Besides Annual Filings, there are various other compliance which need to be done as and when any event takes place in the Company. Instances of such events are:
Change in Authorized or Paid up Capital of the Company.
Allotment of new shares or transfer of shares
Giving Loans to other Companies.
Giving Loans to Directors
Appointment of Managing or whole time Director and payment of remuneration.
Loans to Directors
Opening or closing of bank accounts or change in signatories of Bank account.
Appointment or change of the Statutory Auditors of the Company.
Related Party Transaction
Different forms are required to be filed with the Registrar for all such events within specified time periods. In case, the same is not done, additional fees or penalty might be levied. Hence, it is necessary that such compliances are met on time.
Compliance with regard to ESI and EPF
At present, provident fund is mandatory in establishments hiring 20 people or more, and employees and employers contribute 12 per cent each of a worker's salary.
The contributions are payable on maximum wage ceiling of Rs 15000/-by employee and employer.
The employee can pay at a higher rate and in such case employer is not under any obligation to pay at such higher rate.
To pay contribution on higher wages, a joint request from Employee and employer is required [Para 26(6) of EPF Scheme]. In such case employer has to pay administrative charges on the higher wages (wages above 15000/-)
For an International Worker, wage ceiling of 15000/-is not applicable.
It is applicable to “any premises including the precincts thereof whereon ten or more persons are employed or were employed on any day of the preceding twelve months, and in any part of which, a manufacturing process is being carried on or is ordinarily so carried on, but does not include a mine subject to the operation of Mines Act 1952, or a railway running shed.”
It is the statutory responsibility of the employer under Section 2-A of the Act read with Regulation 10-B, to register the Factory/Establishment under the ESI Scheme within 15 days from the date of its applicability to them. The contribution payable to the Corporation in respect of an employee shall comprise of employer's contribution and employee's contribution at a specified rate. The rates are revised from time to time. Currently, the employee's contribution rate (w.e.f. 1.1.97) is 1.75% of the wages and that of employer's is 4.75% of the wages paid/payable in respect of the employees in every wage period
Professional tax is a tax that is levied by a state government on all individuals who earn a living through any medium. This should not be confused with the definition of professionals that indicates people such as doctors. This is a tax that is to be paid by every single earning individual. The calculation and amount collected may differ from one state to another but it has a limit of Rs. 2500 per year. Private Limited company needs to deduct certain amount of money as per the slab applicable to the state, towards payment of professional tax. Since it is a tax that is levied by the state government, it tends to differ from one state to another. Each state has a slab that it declares and the professional tax is deducted based on these slabs. There are some states and union territories that do not charge professional tax too
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