Once a company is registered, we can run the company, starting operations under its name. Running a company also requires us to meet certain Compliance under the applicable laws. So, here are the most important & common Compliance one needs to take care of while running a private limited company in India. There could be several other situational Compliance depending upon the event, nature of business & scale of operations.
Emphasis of this write up is acquainting one with the Compliance that are required to be fulfilled under the Companies Act, specifically and several other common Compliance under the Income tax Act and Goods & Service tax Act.
So, let’s have a look!
A. Compliance to be met by a company under the Companies Act
1. Board meetings: Holding a board meeting is one of the first thing a company is required to do after incorporation. A company is required to hold its first board meeting within 30 days of incorporation. A company is required to hold 2#/4 board meetings every year. It needs to send the notice of meeting to each director, 7 days prior to the meeting either through email or in physical form.
# Private limited company having paid up capital less than Rs. 50 lakh and turnover less than Rs. 2 Crore is required to hold only 2 board meetings.
2. Appointment of Auditor: Next comes the appointment of statutory auditor, so this becomes one of the agendas of the first board meeting. A company is required to appoint its first statutory auditor in the board meeting within 30 days of incorporation.
Subsequent auditors will be appointed in AGM for 5 years by filing Form ADT-1.
3. Issuance of Share certificate: There are shareholders in the company. So, it’s important for the company as well as the shareholders to have the share certificates. Company is required to issue share certificates within 60 days of incorporation.
4. Annual General meeting: A general meeting is the meeting of members of the company. A company is required to hold an Annual general meeting every year. This meeting should be held within 6 months of the close of financial year.
# A newly formed company might hold its first AGM within 18 months of incorporation. However, it should be held within 9 months of closure of financial year
5. Minutes of meeting: Since the meetings are important, their proceedings are vital enough to be recorded. A company is required to prepare minutes of proceedings of every board & general meeting within 30 days of conclusion of the meeting.
6. Books of accounts: Needless to emphasise of the importance of accounting in a business, being a company, it has several stakeholders for whom financial data is of key importance. Every company is required to prepare and keep books of account and financial statement for every financial year, including that of its branch office or offices, if any. These financial statements are required to be approved by the Board of Directors.
7. Audit of books of accounts: The accounting books should be reliable enough for the stakeholders to analyse the progress of the company. Reliability comes with assurance; hence auditing is pivotal. It is mandatory for the companies to have their books of accounts audited by a Chartered Accountant. These audited accounts are to be filed with the Registrar of companies.
8. Circulation of financial statements: Members of the company are one important bunch of stakeholders. Thus, every Company is required to send to its members, approved Financial Statement, Directors’ Report and Auditor’s’ Report at least 21 clear days before the Annual General Meeting.
9. Report of Board of directors: Every Company is required to prepare and file a board report stating all the information required u/s 134.
10. Annual E-filing forms with ROC:
- Annual Return MGT-7: A company is required to file its Annual return for 1st April to 30th March within 60 days of holding AGM.
- Filing of financial statements AOC-4: A company is required to file its financial statements within 30 days of holding AGM.
11. Maintenance of Statutory Registers: A company is required to maintain and keep certain registers as applicable to it, in its registered office. Though there could be a variety of registers. Following are the most common:
- Register of members
- Register of Directors and Key Managerial Personnel
- Register of charges
- Register of Shares
- Register of Deposits
- Register of loan, investments & guarantee
B. Other compliance to be met by a company under Income tax Act and GST
I.Income tax Act
1. Payment of advance tax Instalments: Every company is required to assess its advance tax liability and make payment of advance tax periodically as follows:
1st Instalment= 15% of estimated advance tax liability by 15th June
2nd Instalment= 45% of estimated advance tax liability by 15th Sep
3rd Instalment= 75% of estimated advance tax liability by 15th Dec
4th Instalment= 75% of estimated advance tax liability by 15th Mar
2. Filing Income tax return & Tax audit report: Every company is required to file it’s ITR by 30th of September. Under the income tax act, any person with its turnover exceeding Rs 1 crore is also required to get the audit done under Income tax Act by a practicing CA, commonly known as Tax Audit. The tax audit report must be e-filed by 30th of September.
3. TDS Compliance & Reporting: A company needs to withhold tax at applicable rates on specified payments as per the income tax act. This amount must be deposited with the government by 7th of the succeeding month in which tax was withheld. Company is also required to file the Quarterly TDS returns reporting the amounts withheld.
II. Goods & Service tax Act
1. GST return filing: Currently, there are two regular returns that are required to be filed.
- GSTR 3B: GSTR3B is a summary return for reporting the outward supplies, ITC details, payment of taxes etc. It is required to be filed by every company on a monthly basis by 20th of the subsequent month.
- GSTR 1: GSTR 1 is a detailed return for reporting the outward supplies. It requires a company to file the invoice level details. It is required to be filed on monthly basis by those companies, whose annual turnover exceeds 1.5 crore, other companies can file it on quarterly basis.
- GST Annual return: Annual return is a reconciliation return. It is required to be filed annually by all the companies. The due date to file annual return for FY 2017-18 has been extended to 30th June 2019.
2. GST Audit: GST Audit is required by those companies, whose annual turnover has exceeded Rs 2 crores. It is required to be filed annually by all the companies. The due date to file audit report for FY 2017-18 has been extended to 30th June 2019.
Comments: This article does not give an exhaustive list of compliance to be met by a company after incorporation. An exhaustive compliance checklist derivation needs complete understanding of the business of the company.
(The author is a CA in practice at Delhi and can be contacted at: E-mail: email@example.com, Mobile: +91-9811741451)
Disclaimer: The above article is only for the purpose of academic discussion and should not be construed as any legal opinion in any matter whatsoever.