Compliances for Private Limited Company

COMPLIANCES FOR PRIVATE LIMITED COMPANY

Section 2 (68) of the Companies Act defines the term “Private Company”. The Section is read as follows:

“private company” means a company having a minimum paid-up share capital *** as may be prescribed, and which, by its articles,-

Restricts the right to transfer its shares
Except in the case of One Person Company, limits the number of its members to two hundred

Provided that where two or more persons hold one or more shares in a company. Jointly, they shall be treated as a single member:

Provided further that-

Persons who are in the employment of the company, and
Persons who, having been formerly in the employment of the company, were members of the company while in the employment ceased, shall not be included in the number of members, and
Prohibits any invitation to the public to subscribe for any securities of the company

Registration of a company is not an easy business. While incorporation is a long process, running a company requires following through all the legal requirements and compliances failing which the Ministry of Corporate Affairs can strike off companies and disqualify its directors. This article is to guide you through all the compliances that are applied to a company.

There are two parts of compliances applicable to a company.

Mandatory compliances
Event-based compliances

MANDATORY COMPLIANCES

As the name suggests, mandatory compliances are those compliances that every private company has to go through no matter what. Following are those mandatory compliances:

Board Meetings

Every company has to hold the first meeting of the Board of Directors within thirty (30) days of the date of its incorporation and thereafter hold a minimum of four (4) meetings every year in such a manner that not more than one hundred and twenty (120) days can intervene between two consecutive meetings of the Board. A Board meeting shall be called by giving not less than 7 days’ notice in writing, unless there is urgent business, to every director at his address registered with the company. The quorum for a meeting of the Board of Directors of a company shall be one-third (1/3^rd) of its total strength or two directors, whichever is higher.

Annual General Meeting

Every company has to hold in each year, in addition to other meetings, a general meeting as its Annual General Meeting and not more than fifteen (15) months should elapse between the date of one annual general meeting of a company and that of the next. A general meeting may be called by giving not less than 21 days’ notice and shall be given to every member of the company, legal representative of any deceased member, the assignee of an insolvent member (if any), the auditor(s) of the company and every director of the company.

In the case of the first annual general meeting, it must be held within nine (9) months from the date of closing of the first financial year of the company. Every annual general meeting is to be called during business hours, which is between 9 a.m. and 6 p.m. on any day that is not a National Holiday and shall be held either at the registered office of the company or at some other place within the city where the registered office is situated. If there is any default in holding a meeting in accordance with provisions of the Act, the company and every officer of the company who is in default shall be punishable with fine which may extend up to 1 lakh.

Filing of Disclosure of Interest by Director

Every director, at the first meeting of the Board in which he participates and at the first meeting of the Board in every financial year has to disclose his concern or interest in any company or company, bodies corporate, firms or other association of individuals which must include the shareholding. If a director of the company contravenes with these provisions, he will be punishable with imprisonment with a term which may extend to 1 year or with fine, not less than INR 50, 000 but which may extend up to INR 1, 00, 000 or with both.

Appointment of Auditors

Section 139 talks about the appointment of auditors. It says that every company shall, at its first annual general meeting, appoint an individual or a firm as an auditor who shall hold office from the conclusion of that meeting till the conclusion of its 6^th annual general meeting and thereafter till the conclusion of every 6^th meeting. No listed company or a company belonging to such class or classes of companies as may be prescribed shall appoint or re-appoint:

individual as auditor for more than one term of five consecutive years; and
an audit firm as auditor for more than two terms of five consecutive years

The first auditor of a company is to be appointed by the Board of Directors within thirty (30) days from the date of registration of the company.

Filing of Annual Return

Every company has to prepare a return as they stand close of the financial year regarding:

Its registered office, principal business activities, particulars of its holding, subsidiary and associate companies;
Its shares, debentures and other securities and shareholding pattern;
Its indebtedness;
Its members and debenture-holders along with changes therein since the close of the previous financial year;
Its promoters, directors, key managerial personnel along with changes therein since the close of the previous financial year;
Meetings of members or a class thereof, Board and its various committees along with attendance details;
Remuneration of directors and key managerial personnel;
Penalty or punishment imposed on the company, its directors or officers and details of compounding of offenses and appeals made against such penalty or punishment;
Matters relating to certification of compliances, disclosures as may be prescribed;
Details in respect of shares held by or on behalf of the Foreign Institutional Investors indicating their names, addresses, countries of incorporation, registration, and percentage of shareholding held by them; and
Such other matters as may be prescribed

Signed by a director and the company secretary, or where there is no company secretary, by a company secretary in practice.

Filing of Financial Statements

The financial statement, including consolidated financial statement, if any, shall be approved by the Board of Directors before they are signed on behalf of the Board at least by the chairperson of the company or by two directors out of which one shall be managing director and the Chief Executive Officer for submission to the auditor for his report thereon. The auditors’ report shall be attached to every financial statement.

EVENT BASED COMPLIANCES

Declaration of Commencement Of Business This is for the companies incorporated after 2^nd of November, 2018 and should be filed within one hundred and eighty (180) days of the date of incorporation of the company
Change in Registered Office This should be filed within fifteen (15) days from the day of such change
Change in Directors This should be filed within thirty (30) days of such change
Increase in Paid-up Share Capital This should be filed within fifteen (15) from the date of allotment
Change in Secured Borrowing All types of charges should be filed within thirty (30) days of its creation
Filing of Resolutions and Agreements To be filed within thirty (30) days from the passing of such resolution