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A private limited company registered in India must adhere to the provisions of the Companies Act, 2013, to ensure proper compliance. The Companies Act, 2013 governs various aspects of the company's operations, including the appointment, qualifications, remuneration, and retirement of directors. It also outlines procedures for conducting board meetings and shareholder meetings, among other important regulatory matters.
What is Private Limited Company Compliance?
Annual compliances are the essential legal and regulatory obligations that a Private Limited Company in India must fulfill every year. These compliance requirements are prescribed by the Companies Act, 2013, and other relevant laws and regulations.
No Minimum Paid-up Capital: Private limited companies no longer require a minimum paid-up capital, making registration possible with a nominal authorized share capital of Rs. 1,00,000.
Separate Legal Entity: A private limited company enjoys the status of a separate legal entity. It means that it's recognized as an independent entity with its assets and liabilities. The company can initiate legal actions and be subject to lawsuits in its name. This separation extends to management and ownership, where managers are accountable for the company's losses.
Limited Liability of Members: Members of a private limited company have limited liability. This means that in the event of a company's losses, the personal assets of the members are not used to settle the company's debts. Members are only responsible for paying debts up to the extent of their shareholding value.
Fund Raising: Private limited companies find it easier to raise funds compared to sole proprietorships or partnerships. Angel investors and venture capitalists typically invest in private limited or public limited companies.
Perpetual Existence: A private limited company has perpetual succession, ensuring its uninterrupted existence until legal dissolution. Being a separate legal entity, the company's continuity remains unaffected even when founders, directors, or members change.
Foreign Direct Investment (FDI): Private limited companies allow 100% Foreign Direct Investment (FDI), enabling foreign individuals or entities to invest directly in the company. FDI can fuel the company's growth, both nationally and internationally.
Credibility: A private limited company's financial statements and incorporation details are publicly accessible on the Ministry of Corporate Affairs (MCA) website. This transparency enhances the company's credibility, making it easy for investors, financial institutions, and clients to verify company information before entering into business relationships.
Taxation Rate for Private Limited Companies:The tax rate for Private Limited Companies depends on their annual turnover. If the company's turnover is under ₹400 crores in the previous year, a 25% tax rate is applied. However, if the turnover exceeds ₹400 crores, a 30% tax rate is levied. Additionally, the Budget 2019 introduced new corporate tax cuts, allowing companies to opt for lower rates of 22% (for existing companies) and 15% (for new companies). Opting for these lower rates, however, makes companies ineligible for specific deductions and exemptions.
Surcharge for Private Limited Companies: Private Limited Companies that choose the new tax rate of 22% or 15% will be subject to a flat 10% surcharge. On the other hand, companies that prefer to pay taxes at the old rates of 30% or 25% may face a surcharge of 7% if their net taxable income falls in the ₹1 crore to ₹10 crore range, and 12% if it exceeds ₹10 crores.
Incorporation Documents:
Company Information:
Reports:
Digital Signature Certificate (DSC):
One-Time Compliances for Private Limited Companies:
Once a private limited company completes its registration and receives a certificate of incorporation, it must fulfill certain one-time compliances. These are crucial for the company's proper establishment and functioning.
Forms/ROC Compliances for Private Limited Companies:Declaration of Commencement of Business (Form: INC-20A): This form is for companies with share capital, and it declares that the subscribers to the memorandum have paid the full share value. It should be filed within 180 days of incorporation.
Appointment of Auditor (Form: ADT-1): Companies should appoint their first auditor within 30 days of incorporation. Subsequent auditors must be appointed within 15 days of the Annual General Meeting.
Board Meeting within 30 days of Incorporation: A private limited company should hold its first board meeting within 30 days of incorporation. Matters discussed include opening a company bank account, issuing share certificates, appointing the first auditor, and other related topics.
Opening of Company Bank Account: The company must open a bank account to receive share capital from shareholders and carry out routine transactions.
Issuance of Share Certificates: Share certificates should be issued to shareholders within two months of incorporation, typically in Form SH-1. If the company has a Company Secretary, they must sign the certificates; otherwise, two directors must sign them.
Obtaining Registration Under Different Laws: Apart from complying with the Companies Act, private limited companies must also obtain necessary registrations and licenses under other applicable laws.
Printing and Display of Name and Address: Company letterheads and documents must display the company's name, address, CIN, contact number, email ID, and web address. The company name and registered address must be displayed outside the premises and on hoardings and signboards.
Annual Compliances for Private Limited Companies:
Private Limited Companies are required to file various forms and returns annually as per the Companies Act, 2013. They also need to comply with the Income Tax Act, of 1961.
Forms/ROC Compliances for Private Limited Companies: Annual Financial Statements (Form: AOC-4): To be filed within 30 days of the Annual General Meeting. If the paid-up share capital exceeds Rs. 5 crores or turnover exceeds Rs. 100 crores, financial statements should be filed in XBRL format.
Annual Return (Form: MGT-7A/MGT-7): To be filed within 60 days of the AGM. Companies with certain financial thresholds need to obtain a certificate from a Practising Company Secretary in Form MGT-8.
Disclosure of Interest by the Director to the Company (Form: MBP-1): To be disclosed in the first board meeting of each financial year.
Director KYC (Form: DIR-3 KYC): Due on 30th September of each year.Return of Deposits (Form: DPT-3): To be filed by 30th June each year.
Reappointment of Auditor (Form: ADT-1): Filed within 15 days from the AGM if reappointed, or from the EGM if a new auditor is appointed.
Statement of Unpaid and Unclaimed Amounts (Form: IEPF-2): To be filed within 60 days of the AGM or its due date.
Disclosure of Significant Beneficial Owner (Form: BEN-2): Within 30 days of receiving BEN-1 from the shareholder.
Pending Payment to Vendors in Case of MSME (Form: MSME-1): Filed half-yearly.
Meetings and Maintenance of Minutes: Annual General Meetings (AGM), board meetings, creditors meetings, and committee meetings must be held according to the provisions of the Companies Act, 2013. Minutes must be maintained for each of these meetings.
Statutory Registers: Various registers related to members, shares, investments, and contracts must be maintained by the company.
Directors Report: The company must attach a report by the Board of Directors to its financial statements, including particulars specified in Section 134 of the Companies Act, 2013.
Statutory Audit: Every year, a company must get its accounts audited by a Chartered Accountant or a firm of Chartered Accountants.
Income Tax Return: Every private limited company must file its income tax return in Form ITR 6 on or before 31st October each year.
Advance Tax Payment: Companies with an estimated tax liability of Rs. 10,000 or more for a financial year must pay advance tax on specific due dates.
Event-Based Compliances: These are necessary under certain conditions, thresholds, or when specific events occur. They include changes in the registered office, transfer of shares, changes in the company's name, registration of charge, etc.
CSR (Corporate Social Responsibility): Companies meeting specific financial thresholds must spend at least 2% of their average net profit of the preceding three years on CSR activities.
Internal Audit: Companies with a turnover of Rs. 200 crores or more or substantial loans must appoint an internal auditor.
Secretarial Audit: Companies with outstanding loans or borrowings of Rs. 100 crores or more must undergo a secretarial audit and attach a Secretarial Audit Report to their board report.
Income Tax Audit and Audit Report: A mandatory tax audit is required if the company's turnover exceeds Rs. 1 crore for businesses and Rs. 50 lakhs for professional services.
Other Event-Based Compliances:These include filing TDS returns, depositing TDS, filing GST returns, depositing GST, filing professional tax returns (if applicable), and depositing provident funds, among others.
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