Overview of Annual Compliance for Private Company

A Private Company is a legal entity and enjoys a separate identity from its directors. It requires controlling its active status through the regular filing with the Ministry of Corporate Affairs (MCA). Every private company must file an annual return and audited financial reports with MCA for every fiscal year. The Registrar of Companies filing is necessary irrespective of the turnover, whether it is zero or in crores. Whether a single business is undertaken or none, annual compliances for private limited are compulsory for every certified company.

Both the forms are applied to report the activities and financial data for the concerned Financial Year. The due terms for the company's annual filing are based on the time of the Annual General Meeting. The perpetual failure may lead to the elimination of the company's name from the register of companies, including the incompetence of directors. Also, it has been noticed that MCA has actively taken bold measures to deal with any such failures. The compliances relevant to the company could be segregated into two sections Mandatory Compliances and Event-Based Compliances.

Mandatory Annual Compliances

The followings are some of the mandatory agreements that a private Limited company must ensure:

• First Board Meeting

The First Meeting of the Board, along with Directors, is expected to be held within 30 days of the Incorporation of the Company. Declaration of Board Meeting must be sent to each director at least seven days prior to the meeting.

• Subsequent Board Meetings

Minimum of 4 Board Meetings to be checked every year with a gap of not more than 120 days between two meetings.

• Filing of Acknowledgement of Interest by Directors

Every director at:

1. The first meeting in which he engages as director; or
2. The first meeting of the Board in each Financial Year; or
3. Whenever there is a variety in disclosures shall reveal in Form MBP 1 (along with a list of relatives and attention of relatives in the company as per RPT definition), his interest or interest in any company, body corporate, organizers/firms or other organization of individuals (including shareholding interest). Form MBP‐1 shall be kept in the documents of the company.

• First Auditor

The Board of Directors shall designate the first Auditor of the Company within 30 days of Incorporation, who shall continue the office till the completion of the 1st Annual General Meeting. In the matter of First Auditor, filing of ADT-1 is not necessary.

• Subsequent Auditor

The Board of Directors shall delegate the Auditor in the first Annual General Meeting of the Company, who shall hold the position until the 6th Annual General Meeting and notify the same ROC by filing ADT-1. The capacity to submit Form ADT 1 is of the company and not the Auditor in between the 15 days from the time of appointment.

• Annual General Meeting

Every company is needed to hold an Annual General Meeting on or before 30th September every year during working hours (9 am to 6 pm). On a day that is not a general public holiday and either at the certified office of the company within the city, town/ village where the certified office is positioned. A 21-day notice is required to be given for the same.

• Filing Of Annual Returns (Form MGT-7)

Each and every Private Limited Company is expected to file its Annual Return within 60 days of conducting of Annual General Meeting. Annual Return will be for the time 1st April to 31st March.

• Filing Of Financial Statements In (Form AOC-4)

Every private Limited Company is expected to file its 'Balance Sheet' along with a statement of 'Profit and Loss Account' and 'Director Report' in this Form within 30 days of holding off 'Annual General Meeting'.

• 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 Audit Report and the Audited Financial Statements to file with the Registrar.

Event-Based Compliances

Even based compliances are that which need to be complied with upon happening of certain events like change in directors, change of registered office, change in approved share capital etc. Some of the Event-based agreements are mentioned below, along with the time limit:

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Stipulations of Non-Compliances

Suppose a company declines to follow any of the administrative compliances. In that case, the company and every employee who is at fault shall be liable for a fine for the period for which the default continues. 

Benefits of Annual Compliance

• Greater Company's Credibility

Compliance with the law is the fundamental requirement for any company—the date of the company's annual return filing is displayed on the MCA portal. The government tenders, loan approval or for other purposes, the regularity in the compliance is an important criterion for measuring the credibility of a company. The regularity in compliance also increases the business's credibility, attracts more customers and helps in obtaining the government tenders and loan approval. 

• Attract more Investors

The main focus points with regard to the investors are financial records and compliances. Before investing in any company, the investors first look into the regularity of filing the annual returns on the MCA portal. Investors are always inclined to favour the companies with regular compliance. Thus, for a private company to attract more investors, it is important to file annual compliance regularly. 

• Maintain the Active status of a company and avoid penalties

It is important for a private company to file annual compliances on a regular basis to avoid penalties. Failure to file the annual compliance can also reduce the status of the company's business. The company may also be disclosed as defunct or removed from the ROC. The concerned directors are also excluded and debarred from their further appointment. Since July 2018, a supplementary fee of ₹100 for each day of delay has been levied till the date of filing.

Checklist of Annual Compliance for Private Start-ups

A start-up working as a private limited company has to follow characters of compliance as laid down by different statutes and other administrative bodies. These include but are not restricted only to the periodic filing of tax and other returns, accommodating the Board and other meetings, maintaining sanctioned books and accounts etc.

• Payment of periodic dues: GST Liability, TDS & TCS mandatory payment
• Non-Registrar compliance of periodic returns – (Monthly, quarterly, annual returns- GST, TDS, etc.)
• Monthly/Quarterly- GST Returns 
• Quarterly-TDS Returns
• Evaluation of advance tax liability and payment of advance tax periodically.
• Filing of Income Tax Returns (Tax will be obligatory at a flat rate of 30% plus Education Cess) 
• Filing of Tax Audit Report 
• Administrative Assessment of trade under different acts of law (E.g., Environment and Protection Act, Money Laundering Act, Competition Act, Factory Act etc.)

Documents Required for Annual Filing of Company

• Incorporation Certificate

1. PAN Card
2. Certificate of Incorporation and
3. MOA – AOA of Private Company

• Audited Financial Statements
• An independent auditor must audit financial Statements 
• Audit Report & Board Report
• Independent Auditor's report and Board report must be concerned
• DSC of Director
• An accurate and active DSC of one of the directors must be provided and presented.

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