COMPLIANCES BY STARTS UP

Although Private Limited Company is the most popular form of starting a business, there are various compliances which are required to be followed once your business is incorporated. Managing the day to day operations of your 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 fulfilment of compliances, without any levy of interest or penalty.

We have elaborated below some of the common compliances which a private limited company has to mandatorily ensure:

Statutory Audit

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.

• Appointment of the Statutory Auditors of the Company.
• Finalise Annual Accounts with the Auditors of the Company

Receipt of MBP-1

Every Director of the Company in First Meeting of the Board of Director in each Financial Year will disclose his interest in other entities. Every Director is required to submit with the Company fresh MBP-1 whenever there is change in his interest from the earlier given MBP-1.

Receipt of DIR- 8

Every Director of the Company in each Financial Year will file with the Company disclosure of non-disqualification.

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 compliances 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.
• The Annual General Meeting shall be held during business hours on a day which is not a public holiday and shall take place at the registered office of the company or at some other place within the city, town or village in which the registered office of the company is situated.

Board Meetings

• 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 (one meeting in every 3 months).

In case of a Private Limited Company which is classified as a “Small Company”, atleast two Board Meetings shall be held in a calendar year (one meeting in every half year)

• Most of the start ups fall within the category of “Small Company”.
• 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 atleast 7 days in advance from the date of the meeting.

Directors’ Report

Every director has to disclose about his directorship in other companies every year. This shall be done by giving a declaration in writing to the company every year in a specified Directors’ Report format.

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 shares, Register of Members, Register of Directors etc. Besides, Incorporation documents of the company, Resolutions of the meetings of the Board of Directors, Minutes of the Board Meetings and Annual General Meeting etc 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 atleast eight financial years should be preserved and kept in good order.

Other Event Based Filings

Besides Annual Filings, there are various other compliances which need to be done as and when any event takes place in the Company. Instances of such events are:

• Change in Authorised 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.

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.

SOME DRAFT RESOLUTIONS:

1. ANNUAL DISCLOSURE UNDER SECTION 184 OF THE COMPANIES ACT, 2013

“RESOLVED THAT pursuant to the provisions of Section 184 of the Companies Act, 2013 read with Rule 8 of Companies (Meetings of Board and its Powers) Rules, 2014, the ‘Disclosures of Interest and Shareholdings’ received by the Company from all its individual Directors on Board, for the Financial Year ……………….. and as taken up and considered at the Board Meeting dated ……………, be and are hereby taken as read.”

“RESOLVED FURTHER THAT the Board of Directors of the Company be and are hereby severally authorized on behalf of the Company to the entry of the same in the Statutory Registers maintained for the purpose.”

2. TO TAKE NOTE OF CONFIRMATION U/S 164(2) OF THE COMPANIES ACT, 2013

“RESOLVED THAT the individual confirmation letters received from all the Directors of the Company to the effect that none of them is been disqualified u/s 164(2) of the Companies Act, 2013 to be appointed or re-appointed as a Director in the Company be and are hereby received, considered and taken on record”.

3. APPROVAL OF FINAL ACCOUNTS FOR YEAR ENDING ON 31ST MARCH, ………….

“RESOLVED THAT pursuant to the provisions of Sec-134 of the Companies Act, 2013 or any other modifications or amendments thereof or the provisions of any other applicable section, if any, of the Companies Act, 2013, the draft of the Balance sheet as at 31.03.20.. and Profit and Loss account as on that date along with schedules and annexure thereon placed before the Board be & are hereby approved”.

“RESOLVED FURTHER THAT pursuant to the provisions of Sec-134 of the Companies Act or any other applicable provisions of the Companies Act, 2013, if any Mr. …………………, Director and Mr. ………………., Director, of the Company be & are hereby authorized to authenticate and sign the Annual Accounts for the Financial year ending on 31st March, 20.., for & on behalf of the Board and be sent to the Statutory Auditors of the company for their report thereon and thereafter be sent to the members of the company for adoption at the ensuing Annual General Meeting of the Company.”

4. APPROVAL OF DIRECTORS’ REPORT

“RESOLVED THAT the Directors’ Responsibility Statement as per the draft placed before this meeting be and is hereby approved and the same be included in the Directors’ Report.

FURTHER RESOLVED THAT in terms of the provisions of section 134 of the Companies Act, 2013, read with applicable rules and other applicable provisions, if any, the Directors’ Report as per the draft placed before the meeting, be and is hereby approved and adopted.

RESOLVED FURTHER THAT Mr. ………….., Director and Mr. …………………., Director, be and are hereby authorized to sign the same on behalf of the Board of Directors of the Company.”