Overview of Annual Compliances of Public Company
After Public Limited Company Registration, the very next step is to fulfill the legal compliances. Public Limited Company is restricted to follow the annual and event-based compliances. Before getting a stand in consonance with Annual compliances of Public Company, it is far more important to know what is Public Company at the first instance. The incorporation of the Public Company is done under the compliance of the Companies Act, 2013. The Public Company Incorporation is subject to strict compliances that are required to be followed-
Since public money is involved, annual compliances become the major accountability to the public regarding the affairs of the company. All Public Limited companies must file annual compliances timely as per dates defined by the Registrar of the companies as Non-compliances leads to heavy penalties on the Companies.
Why it is Essential to comply with Annual Compliance?
Running a company (whether it’sa Public Company or a Private Company) is not that easy. Often, the persons thinkingto start a company are unaware of the important compliances that are mandatorily required to be performed, failing to comply with the same, can lead the company to pay hefty penalties. Apart from penalties, the company and its directors may also be required to face undertaking and further investigation.
Thus, it is worth mentioning that a Public company becomes eligible for performing the annual compliances right from the time of its incorporation. Non-compliances create various hindrances for the company in the form of penalties and fines. To prevent such situations, it is of utmost importance to be aware and comply with the applicable compliances. For Public Company, it is required to publish its accurate financial status to the Shareholders and investors.
What are the benefits of Public Limited Company Annual Compliances?
The advantages of Annual Compliances of Public Limited Company are-
Creates Transparency and Credibility
Proper compliance in the company as per the Company law is the obligation of every company. This regular compliance helps the company in raising its credibility. Proper compliances serve as a criterion for ensuring the credibility & transparency of the company.
Enhances the Public Confidence
Proper annual compliance results in enhancing the Public as well as the client’s confidence that the company is regularly reviewing its operation.
Provides Competitive Edge in the Market
Annual compliance gives a competitive advantage in the market. The company can use it as an advertising strategy in the business & assuring the investors or customers that business has been conducted diligently.
Opens Investment Opportunities
For smooth functioning, every company needs investment & the investors only invest in those companies that are well compliant and giving them high returns. Before making any investment, an investor keeps a check at the financial records and status of the company before making any proposal. The companies need to fulfill all the compliances as regular compliance increases the credibility of the company.
Provides Active Status
Proper and timely compliances help in maintaining the active status of the company.
Ensures Accurate Data Collection
Annual Compliances by the Public Company, ensures the public that the data collected for the compliances are accurate and true.
Avoids Hefty Penalties
Non compliances often result in hefty penalties and Fine. Proper annual compliances help in avoiding the hefty penalties.
What are the Type of Annual Compliances of a Public Company?Types of Annual Compliance of Public Company
Mandatory Annual Compliances of a Public Company
The mandatory annual compliance of a Public Limited Company includes the following-
Conducting the Board Meetings
Conducting the Board Meetings is the initial compliance after incorporation that needs to be done by Public Limited Company. Certain Criteria’s needs to be fulfilled while Conducting the Board Meeting-
Appointment of Auditor
Every Public company needs to conduct its 1st Annual General Meeting and has to appoint an auditor. As per the provisions of Section 139 of the Act 2013, the 1ST auditor shall be appointed mandatorily by the Board of Directors within 30 days of incorporation.
Once an auditor is appointed, the intimation of his appointment must be provided to the Registrar of Companies in prescribed form and manner within 30 days from the date of such appointment.
Disclosure of Director’s Interest
Every director of the Public Company shall in its 1st Board meeting disclose about the interest in any company or firm. The Disclosure of Director’s interest shall be filed every year, also if there is any change in the Director’s interest, the director shall file the same in MBP 1 form to the company.
Conducting the Annual General Meeting
Every Public Company is required to conduct an Annual General Meeting. It provides an opportunity for the stakeholders to meet every year and discuss matters relating to the Company which ensures that the Shareholder’s interest is protected. The Annual General Meeting must be held on a working day at the registered office of the company.Important Compliances Relating to the Annual General Meeting
In case of the 1ST Annual General Meeting
The meeting shall be held within 9 months from the date of closing of the 1st financial year of the Company.
Subsequent Annual General Meeting
The Subsequent AGM shall be held within 6 months from the date of closing of the financial year. In addition to any other meeting, every Public Company shall hold an annual general meeting and shall specify the meeting as such in the notices to be circulated to the members and not more than 15 months shall elapse between the 2 annual general meetings.
Filing the Annual Return
Every Public Limited Company must file the Annual Return in every financial year mandatorily irrespective of its turnover or activities. The particulars of the Annual Return shall include the information about-
The Below-mentioned forms are required to be submitted while filing the Annual Return.
Form MGT-7 (Annual Return)- Every Public Limited Company shall file its Annual Return within 60 days from the date of holding of Annual General Meeting (AGM).
The Company must also file the Financial Statements that relate to the finances of the company and includes-
Form AOC-4 (Financial Statements)- Every Public Limited Company shall file its Balance Sheet together with a statement of Profit and Loss Account and Director Report within 30 days from the date of conductingthe Annual General Meeting of the company.
Certification by PCS in case of Listed Company
Additionally, in the case of a Listed Company, it is mandatory to get the certification from the PCS (Company Secretary in Practice) in FORM MGT-8.
Here, Listed Company refers to the company having a paid-up share capital of 10 Crores or more and a turnover of 50 Crores or more.
KYC of Directors
All the directors of the Public Company are required to file a form to do the KYC with the Registrar of Companies. However, if the directors have already submitted the form then one needs to verify the OTP over email and mobile number.
Event-Based Annual Compliance of Public Company
Event-Based Annual Compliances are those compliances which need to be fulfilled only on the happening of a certain condition. In case of such an event, the Public company shall intimate to the Registrar of Companies (ROC) about such an event by filingthe return in the prescribed form and manner. The Event-based compliances of a Public Limited Company include the following aspects:-
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What Documents are Required for Annual Compliances of Public Companies?
Below-mentioned documents are required for Annual Compliances of Public Company-
How CorpBiz can help clients assisting in Annual Compliances of Public Company?
We at Corpbiz have trained experts to help you throughout the Annual Compliance process of the company. Our Experts will guide and assist you in the compliance process and also ensures the timely and effective completion of your work. For any queries related to Annual Compliance and related services, feel free to contact our experienced and trained professionals at Corpbiz. Contact Corpbiz and our team of experienced professionals and provides timely updates about the process and get your job completed.Package Inclusion
What are the Consequences of non-complying with the Annual Compliance?
The Directors of a company are considered to be the “brain” of the company who possesses the responsibility to act on behalf of the company and to ensure that the company complies with all applicable rules and regulations. However, if a company commits any default, the company along with its director shall be liable to pay the penalties.
Below mentioned are the Annual Compliance and related penalties for Directors and company in case of Non-Compliances. If the Public Company does not comply with the Annual Compliances, it will be subject to the following consequences-
Failure to Submit Annual Report
Where a company has failed to submit its Annual Return for 3 continuous financial years, then every individual who has been a director or a present director of the company concerned shall be disqualified under the Companies Act, 2013.
Penalty- Where a company fails to file annual returns till September 30 every year, the company may be forced to pay up to 9-12 times of the normal fee for submission.
Failure to intimate the ROC about the appointment of Auditor in ADT-1-
Failure to file the Form ADT 1 on time will attract these penalty fees specified below:
Delay of filling
Up till 30 days
2 times of Normal Fees
Above 30 days below 60 days
4 times of Normal Fees
Above 60 days below 90 days
6 times of Normal Fees
Above 90days below 180 days
10 times of Normal Fees
Above 180 days
12 times of Normal Fees
Failure to Audit Report
If the company fails to submit an audit report on time, a company may have to submit an amount equal to 0.5% of turnover up to the maximum limit of 1,50,000 lakhs.
Failure to maintain necessary registers and records
Non-maintenance of necessary register and records may attract the penalty on the Company & every Officer in Default of –
Penalty- Not less than Rs. 50,000/- which may extend up to Rs. 3 lacs.
In case the default continues
A penalty of Rs. 1,000/- per day till the default continues. In a nutshell, If the Public Company fails to fulfill its annual and event compliances, the authority may initiate legal proceedings against the company resulting in dissolution. Also,the Registrar has the power to issue a notice to the Company and can ask for strike-off proceedings for the company.
Frequently Asked Questions
- The Balance Sheet
- P&L Account and other documents.
- It is governed by the Ministry of Corporate Affairs.
- Increases the confidence of the Public.
- Provides active status.
- Enhances transparency and creditability.