Annual Compliance of Company
Why company compliance is important
Compliance is mainly done to identify and avoid red flags in business. Failure to comply may cause a hefty penalty and fine in future. It is mandatory by the government of India to have company compliance. Further it also helps employees to act responsibly and maintain the records properly which will give clarity in the production of the business.
Benefits of Company Compliance
- Raising the company’s credibility as the annual data of the company is displayed on the Master Data on the MCA portal.
- In India the Registrar of companies requires a strict record of compliance, companies failing to comply will face consequences that can be a hefty
- It assists organisations in controlling the company’s budget while monitoring marginal managerial policies and goals.
- Helps in evaluating the business performance in terms of key measures such as net profit, sales growth and so on.
- Provides financial information of investors and shareholders, which gains the better understanding of a business’s financial health, including its insolvency, creditworthiness, liquidity, stock, and bond
- Managing the cash flow that comes into the business on a regular basis, helps in projecting patterns, paying employees and suppliers, repaying debts etc.
- Attracts investors, as the investor demands financial records of the company before finalising the deal.
Mandatory annual compliance
- Board Meeting
Every company needs to conduct a first meeting after the commencement of the company within thirty days. And the declaration for the board meeting shall be sent a week prior the meeting. Subsequent board meetings shall be conducted atleast 4 times and the gap between the meetings should not be more than one twenty days with a quorum of 2 directors or the 1/3rd strength of directors, whichever is greater, shall be required.
- Acknowledgement of Directors Interest
All the directors need to disclose the details about their directorship in other companies, if any and other financial details. Disclosure is submitted at the time of commencement of the business and at the end of every financial year.
Whenever there is a variety in disclosures, it shall be revealed in form MBP-1.
- Statutory Audit
The board appointed the auditor at the time of incorporation of the company for the purpose of auditing the finance accounts of the company.
Statutory audit compliance is carried out to determine whether the company provides accurate financial details by examining the bank statement, bill book and financial transactions.
- Annual General Meeting
It is necessary to hold an annual general meeting by the shareholders once in a financial year within 6 months from the closing year.
Annual General Meetings are held for the approval of financial statements, declaration of dividends, commission, appointment or reappointment of auditors, remuneration of directors, etc.
The meeting shall be held during business hours and on working days which are not a public holiday. Meeting held at the address provided in documents.
- Income Tax Return
ITR filing is the process in which a taxpayer has to file a report of his total income earned in a financial year. ITR is the form used to declare the net tax liability, claim tax deduction and report the gross taxable income. It is mandatory for individuals to fill out the income tax return.
Tax audit is mandatory for companies having turnover more than 1 crore.
- Annual Registrar of Companies filling
The private limited company needs to file annual accounts and return disclosing details of its directors, shareholders, etc. to the company registrar.
ROC compliance filled after annual general meeting
E-forms need to be filled for Registrar of companies filling
- INC-20A: declaration for the commencement of business.
- DIR-3KYC : application for director’s KYC
- DIR-3 : application for director din
- ADT-1 : for the appointment of auditor
- AOC-4 and AOC-4CFS : filing of annual accounts
- MGT-7 : filing of annual return
- CRA : annual cost for audit report
- MGT-14: filing of resolution with the Ministry of Corporate Affairs regarding board reports and annual account
- Other event based compliance
Besides annual compliance there are several other compliances which are event-based and comply only after the event occurs. Events such as change in directors, address capital etc.
E-forms for event based compliance
- DIR-12 : change in directors
- SH-7 : increase in authorised share capital.
- PAS-3 : increase in paid up share capital.
- CHG-1 : change in secured borrowing.
- INC-22 : change in registered office.
- INC–24 : change in name of company.
- DIR-9 : report for the disqualification of directors
Documents required for annual compliance
Certificate of incorporation
MoA and AoA of private company
Audited financial statement
Companies work under different regulatory bodies, these bodies have common compliances and few other compliances as required by the norms. Company compliance is done according to the respective law of that body . Other compliance depends upon the company type, employee strength etc.
Non Compliance of company
If a company fails to comply with rule and regulation of Company Act 2013, then the company and its member who defaults shall be punished with a hefty fine for the period of which default continues.
In case of delay in annual filing, an additional fee is paid as a late fee.
That’s why it is always better to fulfil compliances before time .