Annual compliance for private company

Annual Compliance Requirements for a Private Limited Company

A Private Limited Company is a distinct legal entity that must maintain its active status by regularly filing statutory documents with the Ministry of Corporate Affairs (MCA). Filing annual returns and audited financial statements with MCA is mandatory for every company, irrespective of turnover—whether the figure is nil or in crores. Compliance requirements apply even if the company has not conducted any business during the year.

Both forms are used to report the company’s activities and financial data for the relevant financial year. The due dates for annual filings are determined based on the timing of the Annual General Meeting (AGM). Persistent failure to comply may result in removal of the company’s name from the RoC register and disqualification of directors. The MCA has adopted strict measures to address non-compliance effectively.

Company compliances fall into two categories:

• Mandatory Compliances: Regular filings and statutory requirements every company must fulfill.

• Event-Based Compliances: Additional filings required based on specific corporate events or changes occurring during the year.

                            Essential Annual Compliance Requirements

Mandatory Agreements and Compliance Requirements for a Private Limited Company :

• Subsequent Board Meetings:
  The company must conduct a minimum of 4 Board Meetings annually, ensuring that no more than 120 days elapse between two consecutive meetings.

• Filing of Acknowledgement of Interest by Directors (Form MBP-1):
  Each director is required to disclose their interest or interest of their relatives in any company, body corporate, firms, or other entities in Form MBP-1:

  1. At the first board meeting after their appointment as director;

  2. At the first board meeting of each financial year; or

  3. Whenever there is a change in disclosures.
     This form must include a list of relatives and their interests as per the Related Party Transactions (RPT) definition, and it should be maintained with the company records.

• Appointment of Auditor:
  The Board of Directors shall appoint the auditor in the first Annual General Meeting (AGM). The auditor holds office until the conclusion of the 6th AGM, after which reappointment or change may occur. The company is responsible for filing Form ADT-1 with the Registrar of Companies (ROC) within 15 days of auditor appointment. This filing is a company obligation, not the auditor’s.

• Annual General Meeting (AGM):
  The Board must organize the AGM, during which the auditor’s appointment is confirmed, and essential company business is discussed.

• Filing of Annual Return (Form MGT-7):
  Every Private Limited Company must file its Annual Return with ROC within 60 days of the AGM. The Annual Return covers details for the financial year running from 1st April to 31st March.

• Filing of Financial Statements (Form AOC-4):
  The company’s Balance Sheet, Profit and Loss Account, and Director’s Report must be filed within 30 days of the AGM using this form.

Compliances Triggered by Specific Events

Event-based compliances arise when specific corporate events occur, such as changes in directors, registered office, authorized share capital, or other significant company actions. It is crucial to track these events and complete the associated filings within prescribed timelines to avoid penalties or additional fees.

                          Stipulations of Non-Compliances

If a company declines to follow any of the administrative compliances, then the Company and every officer who is in arrears shall be guilty with a fine for the period for which default remains. Hence the penalties will keep on escalating as the period of non-compliance increases.

                        Importance and Benefits of Annual Compliance

• Establishing Company Credibility:
  Compliance with legal requirements is fundamental to the credibility of any company. The timely filing of annual returns on the MCA portal serves as an official record of the company’s compliance status. Government tenders, loan approvals, and similar opportunities often require proof of consistent compliance, making it a key factor in assessing the reliability of a business.

• Attracting Investors:
  Prospective investors typically review a company’s financial history and compliance records before making investment decisions. These records are accessible on the MCA portal, enhancing transparency. Companies with a strong track record of regular compliance filings are preferred by investors, as it reflects sound governance and financial discipline.

• Maintaining Active Status and Avoiding Penalties:
  Repeated failure to file returns can lead to the company being marked as inactive or defunct by the Registrar of Companies (RoC), along with substantial penalties. The company’s name may be removed from the RoC register, resulting in termination of business operations. Directors may also be disqualified from future appointment. Since July 2018, a penalty of Rs. 100 per day is imposed for late filings until the compliance is completed.

                    Latest Annual Compliance Requirements for Private Startups

Startups functioning as Private Limited Companies must adhere to several compliance requirements as mandated by various statutes and regulatory authorities. These encompass periodic filings, corporate governance, and maintenance of statutory records, among others.

• Payment of Periodic Dues:
  Timely payment of GST liabilities, Tax Deducted at Source (TDS), and Tax Collected at Source (TCS) is mandatory.

• Non-Registrar Compliance:
  This includes filing periodic tax returns such as:

  • Monthly/Quarterly GST Returns

  • Quarterly TDS Returns

• Advance Tax:
  Periodic evaluation and payment of advance tax liabilities as per applicable laws.

• Income Tax Return Filing:
  Filing of income tax returns is mandatory, with applicable tax levied at a flat rate of 30%, plus education cess.

• Tax Audit:
  Undertaking and filing of tax audit reports if applicable based on turnover or other criteria.

• Administrative Assessments and Compliance Under Other Laws:
  Compliance and assessments under various other laws such as the Environment Protection Act, Prevention of Money Laundering Act, Competition Act, Factory Act, etc., as applicable to the business.

• Board and Other Meetings:
  Regular convening of board meetings and other management committees as stipulated by the Companies Act, 2013.

• Maintenance of Statutory Books and Records:
  Keeping accounts and records as required under applicable laws and regulations.

              Documents Needed for Annual Filing of a Company

• Incorporation Certificate:

• Audited Financial Statements:

• Audit Report and Board Report:

• Digital Signature Certificate (DSC) of Directors:

• Permanent Account Number (PAN) and Tax Deduction Account Number (TAN)

• Goods and Services Tax (GST) Registration

• Annual General Meeting (AGM) Records

• Statutory Registers and Records

• Filing of Annual Returns and Financial Statements with RoC

• Compliance with Other Applicable Laws:

• Director Identification Number (DIN)

• Other Licenses and Permits

Annual Compliance Filing Process for Private Limited Companies

• Monitrix acknowledges your request for Private Limited Company compliance services. We will assign a skilled resource who is professionally equipped in business compliance to support you throughout your compliance journey.

  • The assigned resource will assist you in managing all compliance requirements for your Private Limited Company, ensuring smooth and timely adherence to statutory obligations.

  • You can reach out to the authorized resource anytime for consultation and assistance related to compliance matters.

  • Our support includes maintaining your company’s financial statements and preparing year-end financial reports.

  • We will collect all necessary documents and information and undertake the following compliance activities on your behalf:

    • Managing accounts and preparing financial statements

    • Filing annual returns

    • Organizing and recording Annual General Meetings (AGMs)

    • Conducting board meetings

    • Annual filing of required forms

    • Filing yearly forms by directors

  • Additionally, we will prepare minutes of meetings, official announcements, and manage statutory registers.

  • After gathering the required information, we will file your company’s Income Tax Return with the Registrar of Companies (RoC), with final approval from your finance team if necessary.

  By completing these steps, Monitrix ensures your Private Limited Company remains compliant under the Companies Act, 2013.

                                           Conclusion

A Private Limited Company is a legal entity with a separate identity that must maintain its active status through regular filings with the Ministry of Corporate Affairs (MCA). For every business, it is mandatory to file an annual return and audited financial statements with the MCA for each financial year. This filing is required regardless of turnover, whether it is zero or in crores, and irrespective of whether any business activity was conducted.

The filings include two key forms used to report the activities and financial data for the concerned financial year. The due dates for annual filing are based on the timeline of the company’s Annual General Meeting (AGM).

Continuous failure to comply with these filings may lead to severe consequences such as removal of the company’s name from the Registrar of Companies (RoC) register and disqualification of directors. The MCA has been proactive in enforcing compliance and taking strict action against defaulters.

Compliance obligations for a Private Limited Company are generally categorized into:

• Mandatory Compliances: Regular filings and statutory requirements such as annual returns, financial statements, and meetings.

• Event-Based Compliances: Filings triggered by specific events like changes in directors, registered office location, share capital, etc.