Annual Compliance Checklist Private Limited Company

Narendra Kumar

28 Nov, 2020

Every Private Limited company should file annual compliance by 30th September of the following financial Year. Non-Compliance may lead to 12 times penalty than regular MCA fees. In this article, we will discuss Annual Compliance for Private Limited Company.

What is a Private Limited Company?

The Companies Act, 2013 defines a private company, its company managed by family, friends & relatives and the liability of members are limited to their shares in the company. The Pvt. Ltd. company restrict the right to transfer the Company’s share & also limits the number of members to two hundred

Advantages of Private Limited Company Registration

Private Limited Company is one of the most popular means of initiating a business. The following are some of the advantages of a private limited company:-

• Separate Legal identity
• Stability due to Limited Liability of members
• Greater flexibility in the management of business affairs.
• Only two members and two shareholders are required to incorporate a private limited company
• The minimum number of directors required to form a private limited company is two as compared to a public Limited Company where the minimum requirement is three.
• Business can be immediately commenced after receiving a certificate of incorporation.

Required Annual Compliance for Private Limited Company

With various advantages & benefits given to private limited companies, it is necessary for them to prove that they are worthy of these advantages & benefits by complying with the provisions and rules of the Companies Act, 2013 right from the date of incorporation.

Following are the common Annual compliances of the private limited company:

• Appointment of Auditor

The appointment of an auditor is mandatory in every company, public as well as private. The Companies Act, 2013 provides that the company is required to appoint an auditor within one month from the Date of incorporation. The act also provides that, an Auditor can be appointed for a period for 5years.

• Statutory Audit of Financial Statements

Every Private Limited Company is required to prepare its Accounts for the Financial Year and mandatorily get them audited by a Chartered Accountant at the end of the Financial Year compulsorily. The Auditor is required to provide an Audit Report for the Audited Financial Statements as they are required to be filed with the ROC.

• Annual returns

Every Private Limited Company is required to file its An  Annual Return in Form MGT-7 is Required to be filed within 60 days of Annual General Meeting. Annual Return will be for the period 1st April to 31st March. The annual returns will be calculated from 1st April to 31st March.

• Filing of Financial Statements

The Balance Sheet, Statement of Profit and Loss Account and the Director Report are required to be filed by the private limited company within 30 days of Annual General Meeting with the ROC in Form AOC-4.

• Holding of AGM

An annual general meeting is mandatorily required to be held in every calendar year. However, it is required to be held within six months from the closing of the financial year.

Also, the act says the AGM should not be held on public holidays.

• Meeting of Board of Directors

Just like AGM, Board meetings are essential for a private limited company. The first board meeting of a company is to be conducted within a period of 30 days from the date of incorporation. Minimum four board meetings are required to be conducted during the year and the time gap between two board meetings should not exceed 120 days.

However, for small start-up private limited companies, there is an exception. They are allowed to conduct, a minimum of two board meetings instead of four.

The notice of the Board meeting is required to be sent to every director at least 7 days before the date of the board meeting.

Minimum 2 directors or where there are more than 2, 1/3rd of the total number of directors, whichever is greater, should be present at the Board meeting. The Minutes of the Board Meeting is required to be made in the prescribed format & maintained at the Registered Office of the Company.

• Directors Report

The Companies Act, 2013 provides that a Directors’ Report is required to be prepared to mention all the information that is required under Section 134. Also, every director is under an obligation to provide the details about all the directorships held in other companies every year. This is required to be made in writing and in a prescribed format.

• Income Tax Compliances

  1. Calculation and Quarterly Payment of Advance Tax
  2. Filing of Income Tax Returns(Companies are Taxable at a flat rate of 30%)
  3. Tax Audit is Mandatory where the sales, turnover or gross receipts exceed Rs. One Crore in the previous year.
  4. Filing of Tax Audit Report.

•  Maintenance of Statutory Registers and Records

  The Company is required to maintain the statutory registers and records as mentioned in Act. Following are important Registers are required to be maintained by the private limited Company:

  1. Register of Directors and KMP’s and their Shareholding
  2. Register of Members
  3. Register of Charges
  4. Register of Loans, Guarantee, Security and Acquisition
  5. Register of Investments
  6. Register of Contracts
  7. Minutes of the Board Meetings and Annual General Meeting

Such records are to be maintained at the Company’s registered office or any other place in India as approved by the Board and shall remain open for inspection to its members during business hours. Also, the Company is required to preserve the books of accounts for at least eight financial years.

•   Event-Based Filings

  There are many other compliances which need to be done on happening of the following events in the Company:

  1. Change in Authorized or Paid-up Share Capital of the Company.
  2. Transfer of shares
  3. Appointment or Change of Directors.
  4. Appointment or Change of Auditors.
  5. Loans are given to other Companies.
  6. Loans to Directors (only if the company complies with Section 185)
  7. Opening or closing of bank accounts or change in authorized signatories.
  8. Creation or satisfaction of Charges.

The respective forms are required to be filed with the ROC within the specified time for all such events. Delay in such filings attracts the penalty or additional fees which keep on increasing as long as the non-compliance continues.

Non-compliance

If the Private limited Company fails to comply with the rules and regulations of the Companies Act, then the Company and every officer in default are punishable with fine as provided by the Act for the period during which the default continues.

Hence, the private limited companies should ensure that they remain compliant since “it takes less time to do things right than to explain why you did it wrong”.