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Compliances for Private Limited Company: A Brief Explanation

Compliance refers to the capacity to follow directives, guidelines, or demands. A private limited company that was established in India has to make sure that all requirements set forth by the Companies Act of 2013 are satisfied.

The appointment, qualifications, compensation, and retirement of the company's directors, as well as other matters like holding shareholder and board meetings, are governed by the Companies Act, 2013. For registered private limited companies, annual compliance with the RoC is essential. The organization is required to adhere to the yearly compliance requirement, regardless of the overall turnover or capital amount.

Every company that is registered in India, including section 8 companies, private limited companies, limited companies, and one-person firms, must keep yearly annual compliances at the end of the financial year, such as income tax filings and annual returns, every year. Even though registering a company is the most common way to launch a business, after the company is incorporated, several annual compliance requirements must be met.

The challenge for the entrepreneur might be to oversee the day-to-day operations of the company while adhering to complex corporate regulations. Therefore, it is always preferable to get expert assistance and comprehend the legal requirements to guarantee that these compliances are fulfilled on time to avoid penalties or fines.

Compliances to be followed by Private Limited Company

Here is an annual compliance checklist for companies incorporated in India. The compliances followed by Private Limited Company are mentioned below:

1. Statutory Audit Compliance

By looking at bank balances, bookkeeping records, and financial statements, statutory compliances for audit are conducted to ascertain if a business offers correct facts of the financial status.

  • A company's statutory auditor is chosen.
  • The company's auditors will complete the yearly accounts.

2. Annual ROC Filings

The registrar of companies must receive the yearly accounts and returns from Private companies, which reveal information on their directors, shareholders, and other stakeholders.

The ROC must receive the following paperwork as part of the yearly filing:

  • The company is required to hold its annual general meeting within sixty days after filing an annual return in Form MGT-7 must be done.
  • A private limited company must file Form AOC-4 (Financial Statements) together with the balance sheet, profit and loss account, and director report within 30 days.

3. Auditor's Appointment

Within 30 days of company formation, all Indian companies are required to appoint a statutory auditor. If the corporation doesn't designate someone, they will be subject to a 300 rupee monthly penalty in addition to being prohibited from operating their business.

4. Annual General Meeting

A shareholder meeting must be held once a year, no later than six months after the end of the fiscal year. Therefore, the company hold an annual general meeting once a year as per the Companies Act of 2013. The date of the annual general meeting must be communicated at least 21 days before the meeting. Moreover, the first annual general meeting can be held within nine months from the end of the financial year.

AGMs are called in order to approve financial accounts, declare dividends, appoint or re-appoint auditors, commission, pay directors, and other matters.

The meeting is scheduled during working hours, and it must not be a public holiday. It will happen when the business registers or when the registered office is located in a city, village, or town.

5. Board Meeting

The first meeting of a company's board of directors must be held by the company within 30 days of its incorporation.

  • Every three months, the board of directors of the company must meet four times, with a minimum of two directors present or one-third of the total number of directors, whichever is higher.
  • In addition, the conversation during the meeting must be written down, Documented in the meeting minutes, and kept in a file at the company's registered office.
  • Seven days before the meeting, a notice of the date and its purpose should be sent as mandated by the Companies Act.

6. Directors Report

Each year, the Director is required to reveal information on his directorships in other firms. This can be accomplished by annually providing a written declaration to the corporation to comply with the annual compliance of the company.

7. Income Tax Compliances

  • Advance tax payment on a quarterly basis.
  • Every company needs to fileincome tax returns with the income tax department to maintain compliance.
  • Tax audits are required if a company's gross revenues or sales in the year before the assessment year exceeded Rs. One crore.
  • The Tax Audit report must be filed.
  • Additional Compliances based on filing requirements.
  • In addition to the yearly filings, several other annual compliance with the law must be completed on an annual basis whenever an event occurs inside the organization.

Other event-based Compliances

Here are particular examples of event-based compliances or specific compliances:

  • Alteration to the company's authorized or paid-up capital.
  • New shares may be allocated or transferred, and directors may receive loans from other businesses.
  • Management or full-time appointment.
  • The Director and their payment upon the opening, closing, or modification of a bank account's signatories.
  • If the company's statutory auditors are appointed or otherwise changed.

For each of these occasions, separate forms must be submitted to the registrar within a given time frame. If this is overlooked, there may be penalties and legal consequences. Therefore, to avoid any legal penalties, it is essential to fulfil these compliances on time.

ROC Compliance for Private Limited Company

Now for one of the most significant and frequently asked questions:

Is ROC compliance required for Pvt Ltd Companies?

Yes, private limited companies must comply with ROC regulations. Penalties and legal ramifications for the firm and its directors may arise from failure to comply with the requirements of the ROC filing process.

In order to preserve its good standing and adhere to legal requirements, the company must also file Documentwork and forms with the Registrar of Companies in a timely and accurate manner.

Legal Compliance Checklist for Start-ups

It is important to understand the legal compliance checklist for private limited company startups as operating as a private limited company requires adhering to annual filing requirements and annual compliance standards established by various laws and other governing authorities. These consist of but are not limited to keeping approved books and accounts, hosting board meetings and other gatherings, submitting taxes, and filing financial statements regularly.

  • Periodic dues payment: Required TDS, TCS, and GST liabilities.
  • Periodic return non-registrar compliance (monthly, quarterly, yearly returns; GST, TDS, etc.)
  • Quarterly/Monthly: GST Reports.
  • Copyright TDS Quarterly Reports.
  • Assessing advance tax liabilities and making periodic advance tax payments.
  • Income Tax Return Filing (A flat rate of 30% plus the Education Cess will be required).
  • Administrative evaluation of trade in accordance with several legal statutes (such as the Environment and Protection Act, the Money Laundering Act, the Competition Act, the Factory Act, etc.)

Benefits of Annual Compliance

After company registration, companies with either limited or unlimited liability have to perform annual compliances. Therefore, here are the benefits of annual compliance:

Increased Credibility of the Company

A company's primary obligation is to comply with the law; the MCA website shows the date of the company's annual return submission. Regular compliance with government bids, loan approvals, and other requirements is a crucial factor in determining a company's trustworthiness. Regular compliance also builds the company's reputation, draws in new clients, and aids in getting government contracts and loan clearance.

Draw in more capitalists

Financial records and compliances are the investors' primary areas of concern. Investors initially check to see if a company files its annual returns on time on the MCA site before investing. Investors consistently have a preference for businesses that consistently comply. Therefore, it's critical for a private firm to consistently submit yearly and mandatory annual compliance to draw in new investors.

Retain the company's Active status to avoid fines

To avoid fines, it is crucial for private companies registered in India to submit yearly compliances and file annual returns on time. The company's business standing may also be lowered if the annual compliance is not filed. The business name may also be removed by the ROC or declared bankrupt. Additionally, the concerned directors are disqualified from future appointments and excluded.

Documents Required for Annual Filing of Company

The Documents required for the annual filing of a company are discussed below:

  • PAN Card
  • Certificate of Incorporation.
  • Private Company's Audited Financial Statements, or MOA - AOA
  • Financial Statements must be audited by an impartial auditor.
  • Board and Audit Reports.
  • DSC of Director: One of the directors' correct and current DSCs has to be supplied and displayed.

What is the Cost of Annual Compliance for a Private Limited Company?

A private limited company's yearly compliance costs include a range of expenditures. These consist of Registrar of Companies (ROC) fees, accounting and bookkeeping costs, statutory audit fees, yearly return filing fees, tax compliance costs, legal and professional fees, and other ancillary expenditures, including internal procedures and training. The particular costs vary according to the industry, size of the firm, and local regulations. Estimating exact annual compliance costs is made easier by consulting an expert.

Penalty for Non-Compliances

If a company fails to follow the guidelines outlined in the Companies Act, then it will result in penalties and legal actions. Both the defaulting company and its members, such as a company secretary in practice or directors of the company, may be subject to fines for the duration that the default persists.

There are extra costs that need to be paid in the event that the periodic filing of tax or annual filing is delayed. Therefore, it is preferable to complete the compliances on time.

Who can be an Ideal Compliance Partner for your Business?

Corpbiz may be your company's perfect compliance partner. Their all-inclusive services, which include statutory audits, yearly return submissions, ROC compliances, tax duties, legal assistance, and more, are designed to guarantee compliance with regulatory standards. With their knowledge, experience, and tailored approach, Corpbiz is a perfect partner for managing a wide range of compliance requirements and helping companies effectively stay in compliance with regulations.

Frequently Asked Questions

A private limited company's ROC compliance pertains to the several legal and regulatory obligations it must satisfy and submit to the Registrar of Companies (ROC).

The Board should notify the company's members if it is unable to choose the auditor. The company's members will choose the auditor at an extraordinary general meeting within ninety days. The appointed auditor will remain in office until the first annual general meeting is over.

A private limited company's cost of ROC (Registrar of Companies) compliance in India can vary depending on several factors, such as the size of the business, the extent of the annual compliance activities, the operational complexity, and the particular services you select to manage the compliance.

A private company and every other company must prepare a few Documents to stay compliant with the Indian Companies Act:

  • Incorporation Documents.
  • Financial Statements.
  • Annual Returns
  • Director Identification Number.
  • Changes in Directors or Shareholders.
  • Registered Office Change.
  • Charge Management.
  • Company Filings for Approval.

Yes, the auditor of the company will be required to attend the company's AGM.

The company's first AGM must be held within nine months of the end of the financial year.

According to the Act and the Companies (Accounts) Rules, 2014, every private limited company is required to have an audit of its annual accounts throughout each fiscal year.

It is possible to run a small business without officially registering as a corporation or firm. It's commonly referred to as a sole proprietorship. But, there are a few legal ramifications that you should take into account, such as issues with legal identity, liabilities, taxes, lack of trustworthiness, development restrictions, and registration requirements.

The Companies Act 2013 in India mandates that all corporations, including private limited companies, hold Annual General Meetings (AGMs). It gives management and shareholders a forum to talk on critical issues about the operation, state of the business, and direction for the future.

Within sixty days following the date of the annual general meeting, all Indian registered companies are required to prepare and submit an annual return in the form of Form MGT 7 to the Registrar of Companies.

A penalty of twenty-five thousand rupees will be imposed on any director who disregards the requirements of the annual compliance of a Pvt. Ltd. company.

According to the terms of the Companies Act 2013, all companies registered under the Act must submit their annual report and audited financial statement via the MCA website within the allotted time frame.

In accordance with Section 139 (1) of the Companies Act, 2013, firms must notify the Registrar of Companies via Form ADT-1 of the appointment of an auditor following the Annual General Meeting (AGM).

The Act only requires that it be signed by "a director" without naming the specific Director who must do so. One of the directors' primary responsibilities is to approve the financial statements.

At the end of the financial year, companies are obliged to produce a financial Document called a directors' report. A crucial aspect of managing a firm is financial reporting.

The company must properly call a board meeting under Section 173 upon receiving the Documents to approve the share transfer and adopt the necessary resolution. The requirements of the Articles must also govern the Company about the necessity of convening Board Meetings.

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