ROC Annual Compliance Requirements for Private Limited Companies in India

Published Thu, 15 Feb 2024 | Updated Thu, 15 Feb 2024 Corporate Law

In India, Private Limited Companies are governed by the Companies Act, 2013 under the Ministry of Corporate Affairs (MCA). These companies are required to fulfill annual compliance obligations to ensure adherence to regulations and applicable laws. Compliance not only ensures legal compliance but also enables effective management of day-to-day affairs of the company.

Salient Features of Private Limited Companies

Private Limited Companies have several distinctive features that make them an attractive form of business in India. Some of the salient features include:

1. Limited Liability: Shareholders of a Private Limited Company have limited liability, which means their personal assets are protected in case of business debts or legal disputes.
2. Separate Legal Entity: A Private Limited Company has a separate legal entity distinct from its shareholders, which means the company can enter into contracts, own property, and sue or be sued in its own name.
3. Ease of Incorporation: The process of incorporating a Private Limited Company is relatively simple and requires a minimum of two shareholders and two directors.
4. Equity Fundraising: Private Limited Companies have the ability to raise equity funds from investors, making them an attractive option for businesses looking to expand.
5. Continuity: A Private Limited Company enjoys perpetual succession, meaning the company continues to exist even if there are changes in its ownership or management.

Framework of Companies Act 2013

The Companies Act, 2013 provides the legal framework for the functioning of Private Limited Companies in India. It lays down the rules and regulations that govern their operations, including compliance requirements. Private Limited Companies must adhere to these provisions to ensure regulatory compliance.

Kinds of Compliance

Compliance requirements for Private Limited Companies can be classified into two categories: mandatory compliances and event-based compliances.

Mandatory Compliances: Mandatory compliances are recurring obligations that Private Limited Companies must fulfill on an annual basis. These include:

1. Appointment of Auditor: Within 30 days of incorporation, a Private Limited Company must appoint an auditor who will be responsible for finalizing the company's accounts annually.
2. Obtaining Commencement of Business Certificate: Private Limited Companies incorporated after November 2019 must obtain a Commencement of Business Certificate within 180 days of incorporation by filing form INC – 20A.
3. Annual General Meeting (AGM): Private Limited Companies are required to conduct an AGM once a year to discuss and approve financial statements and director’s report, appointment of auditors and appointment of Directors.
4. Board Meetings: Private Limited Companies must hold at least four board meetings annually with a gap of not more than 120 days between two meetings, with a minimum of two or one-third of the total directors present.
5. Maintenance of Statutory Registers: Private Limited Companies must maintain various statutory registers, including the Register of Directors, Register of Members, and Register of Transfer.
6. KYC of Directors: Every Director who has been allotted DIN on or before the end of the financial year, and whose DIN status is 'Approved', would mandatorily required to file form DIR-3 KYC/KYC Web as applicable, before 30th September of the immediately next financial year.
7. Statutory Audit of Accounts: Each and every company should prepare its Accounts and get the same audited by a Chartered Accountant or any appropriate person at the end of the Financial Year mandatorily. The Auditor should provide an Independent Auditors Report and the Audited Financial Statements to file with the Registrar.

Event-Based Compliances: Event-based compliances are triggered by specific events or changes within the company. These include:

1. Change in Directors: Private Limited Companies must notify the Registrar of Companies (ROC) within 30 days of any change in directors.
2. Change in Authorized Share Capital: Any increase in the authorized share capital of a Private Limited Company must be reported to the ROC within 30 days.
3. Alteration of Memorandum and Articles of Association: Any alteration in the Memorandum and Articles of Association must be filed with the ROC within 30 days.

Compliance Requirements in Detail

Maintenance of Statutory Registers of the Company

Private Limited Companies are required to maintain various statutory registers as per the Companies Act, 2013. These registers provide important information about the company and its stakeholders. Some key registers that need to be maintained include:

1. Register of Directors and KMPs: This register contains details about the directors of the company, including their names, addresses, date of appointment, and director identification number (DIN).
2. Register of Members: The register of members contains information about the shareholders of the company, including their names, addresses, and shareholdings.
3. Register of Share Transfer: This register records the transfer of shares from one shareholder to another.

Compliance relating to Board Meetings/General Meetings

Private Limited Companies are required to conduct board meetings and general meetings to discuss important matters and make decisions. The following compliance requirements are associated with these meetings:

1. First Board Meeting: The first board meeting of a Private Limited Company must be held within 30 days of incorporation. Notice of the meeting must be sent to every director at least 7 days before the meeting.
2. Subsequent Board Meetings: Private Limited Companies must hold a minimum of four board meetings in a year, with a maximum gap of 120 days between two consecutive meetings.
3. Annual General Meeting (AGM): An AGM must be conducted once a year, within 6 months from the end of the financial year. The notice for the AGM must be issued as per the provisions of the Companies Act, 2013. Whereas, the first AGM of the Company must be conducted within 9 months from the end of financial year.
4. Maintenance of Minutes: Minutes of board meetings and general meetings must be prepared, signed, and kept at the registered office of the company. These minutes provide a record of the discussions and decisions made during the meetings.

Appointment of Auditors

The appointment of auditors is a crucial compliance requirement for Private Limited Companies. The following points should be considered:

1. First Auditor: The directors of a Private Limited Company must appoint its first auditor within 30 days of incorporation who shall hold office up to the first AGM of the Company.
2. Subsequent Auditor: The auditor for subsequent years must be appointed in the first AGM of the company to hold office till the conclusion of sixth AGM of the company. The appointment should be reported with the ROC in form ADT-1 within 15 days.

Disclosure and Annual Filing Requirements

Private Limited Companies must maintain and disclose certain records and file them with the appropriate authorities. Some important requirements include:

1. Filing of Annual Return: Private Limited Companies must file their annual return in form MGT-7/MGT-7A with the ROC within 60 days of the AGM. The annual return provides information about the company's activities, financial statements, and other details as required by law.
2. Filing of Financial Statements: Private Limited Companies must file their financial statements in form AOC-4, including balance sheets, profit and loss accounts, and director's reports, with the ROC within 30 days of the AGM.
3. Disclosure of Interest by Directors: Directors of a Private Limited Company must disclose their interests in any other company or entity at the first board meeting they attend in form MBP-1 and DIR-8. Any subsequent changes in these disclosures must also be reported.

Other Relevant Compliance

Apart from the above-mentioned compliances, Private Limited Companies are also required to adhere to other relevant compliances, including:

1. Tax Compliances: Private Limited Companies must comply with various tax-related obligations, such as filing tax returns, payment of taxes, and obtaining necessary tax registrations.
2. GST Compliances: If a Private Limited Company is registered under the Goods and Services Tax (GST) regime, it must comply with GST-related obligations, such as filing GST returns and paying GST on time.
3. Labour Law Compliances: Private Limited Companies must comply with various labour laws, such as the Employees' Provident Fund (EPF) Act, Employees' State Insurance (ESI) Act, and other applicable laws related to employee welfare and benefits.

Conclusion

Compliance with the various legal requirements is crucial for the smooth functioning and growth of Private Limited Companies in India. Timely adherence to mandatory compliances, such as holding board meetings, filing annual returns, appointing auditors, and maintaining statutory registers, is essential to avoid penalties and legal consequences. Private Limited Companies should also stay updated on event-based compliances and ensure timely reporting of any changes to the authorities.

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