COMPLIANCE MANUAL FOR PRIVATE LIMITED COMPANIES Quick E – Referencer !! Vol. 01/2022
Private Limited Companies
in India are the most common type of legal entity that is preferred by millions of Indian Entrepreneurs and are governed by the Companies Act, 2013 under the Ministry of Corporate Affairs, widely known as MCA. The liability of the members of a Private Limited Company is limited to the amount of shares respectively held by them. All private companies must (mandatory) use the word private limited (Pvt. Ltd.) at the end of its company name. To incorporate / register a private limited company, the earlier minimum paid up share capital requirement was Rs. 1,00,000, but now there is no such minimum compulsion, as the same is already omitted.
The Ministry of Corporate Affairs (MCA), has introduced Simplified Proforma for Incorporating Company electronically through SPICe plus forms that helps
incorporate a company with a single application for reservation of name, incorporation of a new company and/or application for allotment of DIN and Application for PAN/TAN.
All Private Limited Companies are subject to certain Mandatory Compliances including ROC Compliances, Income Tax Compliances, GST Compliances and other Statutory periodical Compliances, which are essential for ensuring adherence to rules, regulations and applicable law, as enforceable from time to time as well as enables the Company to efficiently manage day to day affairs of the Company.
Definition of Private Limited Company:
Private Limited Company is defined under Section 2(68) of the Companies Act, 2013. It Means a company which by its articles:
- restricts the right to transfer its shares;
- except in case of One Person Company, limits the number of its members to two hundred (200):
Provided that where two or more persons hold one or more shares in a company jointly, they shall, for the purposes of this clause, 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 that employment and have continued to be members after 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;
Kindly note that: Minimum Paid up Share Capital criteria is omitted.
Characteristics of Private Limited Company
- No minimum paid up share capital: A Private Company can be registered with or without share capital.
- Members: A minimum number of 2 members are needed and a maximum number of 200 members to register a Pvt. Ltd. Company (except OPC).
- Perpetual succession: A company has ‘perpetual succession’, i.e. continue or uninterrupted existence until it is legally dissolved. The life of the company is never-ending.
- Limited Liability: The liability of each member or shareholder is limited. The shareholders’ assets are protected if the company goes into liquidation. If the company goes bankrupt, the owners are only liable for the amount they have invested in the company.
- Tax Efficient: Private limited companies are tax efficient as they can claim corporation tax relief on their profits.
- Dividend: Private limited companies can pay dividends to their shareholders, which are also taxed at a lower rate.
- Separate Legal Entity: The Company can contract with other businesses and individuals and is liable for its debts. The Company is responsible for the management of its assets and liabilities, debtors and creditors. Thus, a Pvt. Ltd. company is a separate legal entity from its shareholders and directors.
- Credibility: Private limited companies are becoming increasingly popular as they attract investors into the business more due to their credibility.
………………..and many more………..
Compliance as per MCA / ROC
AN OVERVIEW OF KEY COMPLIANCE REQUIREMENTS:
- Meeting of Board of Directors:
- First Meeting of Board of Directors is required to be held within 30 days of Incorporation of Company and thereafter 4 meetings (minimum) are required to be held in every financial year.
- Gap between 2 Board meetings : should not be more than 120 days.
- Notice of Board meeting must be send before 7 days of meeting to every director by way of physical or through e-mail.
Kindly Note that: In First Board meeting, Company has to approve pre- incorporation expenses, authorize directors for issuing share certificate, signing the ROC Forms, and bank account opening, appoint first auditor of the company etc.
2. Issuing of Share Certificate
The Company is required to issue Share Certificates to the subscribers of memorandum within 60 days of Incorporation of Company.
3. Filling of Disclosure of interest by Directors:
- MBP-1 [Pursuant to section 184 (1) and rule 9(1) of Companies (Meetings of Board and its Powers) Rules, 2014
Director of every company are required to give disclosures about their interest in any other business entity in first Board Meeting in which they participate as a Director and thereafter in First Board Meeting of every financial year in FORM MBP-1 to the Company.
- DIR-8 Pursuant to Section 164(2) and rule 14(1) of Companies (Appointment and Qualification of
Directors) Rules, 2014Every director shall inform to the company concerned about his disqualification under section 164 (2), if any, in Form DIR-8 before he is appointed or re-appointed.
4. Annual General Meeting (Section 96):A company may hold its first annual general meeting, within a period of nine months from the date of
closing of the first financial year of the company and in any other case, within a period of six months, from the date of closing of the financial year.
Registrar may, for any special reason, extend the time within which any annual general meeting, other than the first annual general meeting, shall be held, by a period not exceeding three months
– Meeting must be held not later than 6 months from close of financial year.
5. Minutes of proceedings of Meeting of Board of Directors, General Meeting:
It is mandatory for every company to cause minutes of the proceedings of every meeting of Board of Directors, General meeting within 30 days of conclusion of meeting concerned. Minutes shall be preserved permanently and shall act as evidentially value in case of any dispute.
(Follow instructions as mentioned under revised SS-1 and SS-2)
6. Compliance with respect to Secretarial Standards:
- SS-1 (Secretarial standard on meetings of the board of directors)
- SS-2 (Secretarial standard on general meetings)
7. Approval and Signing 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 by the chairperson of the company where he is authorized by the Board or by two directors out of which one shall be managing director, if any, and the Chief Executive Officer, the Chief Financial Officer and the company secretary of the company, wherever they are appointed, or in the case of One Person Company, only by one director, for submission to the auditor for his report thereon.
8. Report by Board of Directors:
Every Company has to prepare a board report which shall include: Details as mentioned under Section 134(3) of the Companies Act, 2013.
Briefly includes: state of the company, operations during the year, net profit, dividend declaration and its compliance with a set of financial, accounting and corporate social responsibility standards contains etc.
9. Provisioning of Maintenance of Statutory Registers & Books:
Every Company has required to maintain various Statutory Registers and Books as per the requirements of Companies Act, 2013:
- Board Meeting Minutes Book
- General Meeting Minutes Book
- (i.e. AGM, EGM, Postal Ballot, Creditors Meetings, Debenture holders Meetings)
- Register of Directors Attendance at Board & Committee Meetings.
- MGT-1: Register of Members
- MGT-2: Register of Debenture holders
- Register and Index of Beneficial Owner
- Form SH-2: Register of Renewed and Duplicate Share Certificate
- Form SH-3: Register of Sweat Equity Shares
- Form SH-6: Register of Employee Stock Options
- Form SH-10: Register of Shares or Securities Bought Back
- Register of Directors and KMPs
- Form CH-7: Register of Charges
- Form MBP-2: Register of Loans/Guarantee/Security and Acquisition by Company
- Form MBP-3: Register of Investments not held in its own name
- Form MBP-4: Register of Contracts or Arrangements in which Directors are interested
10. Opening of Bank Account for the Company
The Company is required to open a bank account to inject Subscription money within 60 days from the date of Incorporation of the Company.
11. Appointment of Auditor:
First Auditor Appointment (Section 139(6) :
The first auditor of a company, other than a Government company, shall be appointed by the Board of Directors within thirty days from the date of registration of the company and in the case of failure of the Board to appoint such auditor, it shall inform the members of the company, who shall within ninety days at an extraordinary general meeting appoint such auditor and such auditor shall hold office till the conclusion of the first annual general meeting.
Appointment at AGM
Every company shall, at the 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 sixth annual general meeting and thereafter till the conclusion of every sixth meeting and the manner and procedure of selection of auditors by the members of the company at such meeting shall be such as may be prescribed
13. Event Based Compliances
- Receipt of share application money
- Allotment of shares
- Transfer of shares
- Appointment/Resignation of directors
- Appointment of Managing Director/ Whole Time Director
- Executing agreement with related parties
- Change in the Bank signatories
- Change in the statutory auditors
OVERVIEW OF MCA – ROC COMPLIANCES:
|Applicable Laws/Acts||Due Dates||Compliance Particulars||Forms / Filing mode|
|Companies Act, 2013||Within 180 Days From The Date Of Incorporation Of The Company (one time compliance only)||As per Section 10 A (Commencement of Business) of the Companies Act, 2013, inserted vide the Companies (Amendment) Ordinance, 2018 w.e.f. 2nd November, 2018, a Company Incorporated after the ordinance and having share capital shall not commence its business or exercise any borrowing powers unless a declaration is filed by the Director within 180 days from the date of Incorporation of the Company with the ROC.||MCA E- Form INC 20A (one time compliance)|
|Companies Act, 2013||First declaration within 90 days from the date||A person having Significant beneficial owner shall file a declaration to the reporting company Click Here i.e. within 90 days of the||Form BEN-1 Draft Format available at LINK|
|of notification Dt. 08.02.2019||commencement of the Companies (Significant Beneficial Owners) Amendment Rules, 2019 i.e. 08.02.2019 In case Subsequent Acquisition of the title of Significant Beneficial Owner / Any Change therein a declaration in Form No. BEN-1 required to be filed to the reporting company, within 30 days of acquiring such significant beneficial ownership or any change therein.|
|Companies Act, 2013||within 30 days of acquiring beneficial interest||Filing of form BEN-2 under the Companies (Significant Beneficial Owners) Rules, 2018. (the date of receipt of declaration in BEN-1 ) CLICK HERE||Form BEN – 2 (e-form deployed by Ministry (ROC)) on 01.07.2019|
|Companies Act, 2013||Annual Compliance (30.09.2021)||*DIN KYC through DIR 3 KYC Form is an Annual Exercise. Last date for filing DIR-3 KYC for Financial year 2021-22 is 30th September, 2022 Annual Exercise: CLICK HERE Penalty after due date is Rs. 5000/-(one time)||E-Form DIR – 3 KYC (Web Based and E-form)|
|Companies Act, 2013||Within 270 days from the date of deployment of this Form||Annual Return To Be Filed By Auditor With The National Financial Reporting Authority CLICK HERE CLICK HERE Click Here Note on NFRA -2 Click Here||NFRA-2 (NFRA-2 e-Form live since 9th December 2019.)|
|Companies Act, 2013||Within 15 days of appointment of an auditor.||The Ministry in its General Circular No. 12/2018 dated 13th December, 2018 clarified that filing of Form NFRA-1 is applicable only for Bodies Corporate and ruled out filing by Companies as defined under sub-section (20) of Section 2 the Act.||E – Form NFRA -1|
|Companies Act, 2013||Within 30 days of the board meeting||Filing of resolutions with the ROC regarding Board Report and Annual Accounts. The details of the resolutions passed should be filed.||MGT-14 (Filing of resolution with MCA)|
|Companies Act, 2013||Within 60 (sixty) days from the conclusion of each half year.||Reconciliation of Share Capital Audit Report (Half-yearly) Pursuant to sub-rule Rule 9A (8) of Companies (Prospectus and Allotment of Securities) Rules, 2014 To be filed all unlisted companies, deemed public companies. Till further clarification to be filled in GNL-2||E-Form PAS – 6|
|Companies Act, 2013||For half year period ‘October to March’ – by 30th April, 2022||All Specified Companies (i.e. Companies who get supplies of goods or services from micro and small enterprises and whose payments to micro and small enterprise suppliers exceed 45 days from the date of acceptance or the date of deemed acceptance of the goods or services as per section 9 of the Micro, Small and Medium Enterprises Development Act, 2006) to file details of all outstanding dues to Micro or small enterprises suppliers existing on 22nd January, 2019 within thirty days.||Form MSME -1|
|Companies Act, 2013||One Time compliances||Registration of Entities for undertaking CSR activities – Trust/ Society/ Section 8 Company need to file before Acceptance of Donation as CSR w.e.f. 01st April 2021||E-Form CSR-1|
|Companies Act, 2013||within a period of 60 days after the holding of AGM||IEPF Authority (Accounting, Audit, Transfer and Refund) Second Amendment Rules, 2019 Statement of unclaimed and unpaid amounts. This e-form shall be filed within a period of 60 days after the holding of AGM or the date on which it should have been held as per the provisions of section 96 of the Act, whichever is earlier||IEPF -2|
|Companies Act, 2013||Within 30 days of end of Half Yearly||Transaction during the year, which are deposits as well as and which are not deposits (exempted deposits) Auditor’s Certificate is mandatory. This is to be filled every year. Can be filed after comply with the penal provisions.||E –Form DPT – 3 (Half Yearly Return)|
Ø ROC Annual Filings (General):
|Sl.||Particulars||Due Date||E- Form|
|1||Appointment of Statutory Auditor||Within 15 days from the conclusion of AGM||ADT-1|
|2||Filing of financial statement and other documents with the ROC||Within 30 days from the conclusion of the AGM, other than OPC (In case of OPC within 180 days from the close of the financial year)||AOC-4, AOC-4 (CFS), AOC- 4 XBRL, AOC-4 Non- XBRL|
|3||Filing of annual return by a company.||Within 60 days from the conclusion of AGM (except 4 below)||MGT-7|
|4||Filing of annual return by a company – for OPC and small companies.||Within 60 days from the conclusion of AGM – Applicable in respect of Annual Return for the F.Y. 2020-21 and onwards of OPC and small companies.||MGT-7A|
|5||Filing of Cost Audit Report with the Central Government||Within 30 days from the receipt of Cost Audit Report||CRA-4|
|6||Filing of Resolutions and agreements to the Registrar||Within 30 days from the date of Board Meeting.||MGT-14|
|7.||Compliance certificate by PCS – Section 92(2)||Applicable to Companies having paid-up share capital Rs. 10 crores or more or Turnover Rs. 50 crore or more||MGT – 8 Attachment to MGT – 7|
Private Limited Companies, are liable to pay tax in India as per applicable tax rate, amended / modified from time to time.
Types of Taxation for Private Limited Company:
- Corporate Tax: Tax imposed on the profit of a business.
- Income Tax: Tax imposed by Governments on financial income produce by all entities within their jurisdiction, including individuals and businesses.
- Capital Gains Tax: Tax imposed on capital gains made by businesses from the sale of particular assets.
- Property Tax: Tax calculated as per the value of the land and paid by the owner of the property.
- GST: GST is an indirect tax which introduced to replacing a host of other Indirect taxes such as value added tax, service tax, purchase tax, excise duty, and so on. It is one tax that is applicable all over India. It is levied on the consumption of the goods and services.
INCOME TAX COMPLIANCE:
As per the Income Tax Act, 1961 every company is required to file their income tax return before 30th September.
Income-tax rates applicable in case of domestic companies for Assessment Year 2023-24 are as follows:
|Where its total turnover or gross receipt during the previous year 2020-21 does not exceed Rs. 400 crore||25%|
|Where it opted for Section 115BA||25%|
|Where it opted for Section 115BAA||22%|
|Where it opted for Section 115BAB||15%|
|Any other domestic company||30%|
The amount of income-tax computed shall, be increased by a surcharge,-
- in case company having a total income exceeding Rs. 1 crore, but not exceeding Rs. 10 crore, at the rate of 7% of such income-tax; and
- in case company having a total income exceeding Rs. 10 crore, at the rate of 12% of such income-tax;
– However, the rate of surcharge in case of a company opting for taxability under Section 115BAA or Section 115BAB shall be 10% irrespective of amount of total income.
Minimum Alternate Tax (MAT): A company shall be liable to pay MAT @ 15% of book profit (plus surchage and health and Education Cess as applicable) where the normal tax liability of the company is less than 15% of book profit.
“Domestic company” – defined under Section 2 (22A) of IT Act, 1961.
On July 1st 2017, the Goods and Services Tax implemented in India. But, the process of implementing the new tax regime commenced a long time ago. Any company that is eligible under GST must register itself in the GST portal created by the Government of India. The registered entities will get a unique registration number called GSTIN. Any Companies or Firm or person buying or selling goods or providing services have to register themselves under Goods and Services Tax (GST) to avail the benefits of input tax credit.
Every Company / Firm, doing business, whose taxable supply of goods or services under GST (Goods and Service Tax) and whose turnover exceeds the threshold limit of Rs. 40 lakh / 20 Lakh as applicable will be required (mandatory) to register as a normal taxable person under GST.
Under the Goods and Services Tax, registered dealers / person must file their GST returns with details regarding their purchases, sales, input tax credit, and output GST. Several aspects and factors must be taken into consideration, such as ITC, exempted supplies, reverse charge, etc. while Calculating the amount that needs to be paid as GST when filing returns.
- COMPLIANCE UNDER OTHER STATUTORY LAWS
|Applicable Laws/Acts||Timeline / Due Dates||Compliance Particulars||Forms / (Filing mode)|
|EPF (The Employees’ Provident Funds And Miscellaneous Provisions Act, 1952)||15th of the month||PF Payment||ECR|
|ESIC (Employees’ State Insurance Act, 1948)||15th of the month||ESIC Payment||ESI CHALLAN|
|Contract Labour (Regulation & Abolition) Act, 1970||Within 15 Days of commencement/ completion of contract work||Return/Notice by the Principal employer||Form VI-B|
|Contract Labour (Regulation & Abolition) Act, 1970||Within 15 Days of commencement/ completion of contract work||Notice by the Contractor within 15 days||Form VI-A|
|Payment of Gratuity Rule||Within 30 Days of applicability of the Act & any change||Notice of applicability of the Act & any change||Form A or B|
IMPORTANT OPC COMPLIANCE:
Define One Person Company (OPC):
Sec 2(62) “One Person Company” means a company which has only one person as a member. In general, OPC is a company incorporated by a single person.
Board Meeting Compliance: At least one Board Meeting in each half of the calendar year and the time gap between the two Board Meetings should not be less than 90 days.
For OPC: Return Filing Provisions & AGM
- Section 137 of the Companies Act, 2013
One Person Company shall file a copy of the financial statements duly adopted by its member, along with all the documents which are required to be attached to such financial statements, within one hundred eighty (180) days from the closure of the financial year.
AGM not Applicable for OPC: Section 96
(i) Every company other than a One Person Company shall in each year hold in addition to any other meetings, a general meeting as its annual general meeting and shall specify the meeting as such in the notices calling it, and not more than fifteen months shall elapse between the date of one annual general meeting of a company and that of the next:
OPC Annual Filings – Timeline and Key points:
- One Person Company shall file a copy of the financial statements duly adopted by its member, along with all the documents which are required to be attached to such financial statements, within one hundred eighty (180) days from the closure of the financial year. (Section 137 of the CA 2013).
2. AGM not Applicable for OPC: (Section 96.)
3. A person can be member in only one OPC.
4. The following 2 E – forms to be filed for Annual ROC (generally) filing is
a. MGT-7A – Annual return
b. AOC- 4 – Financial Statements, Balance Sheet & P&L Account
5. Due date for Annual Financial Statements (AOC-4): The due date for Annual Filing is (27.09.2022 – tentative) (if FY ended on 31.03.2022)
6. Due date for Annual Return (MGT-7A) : OPC does not require to hold AGM, yet the due date for filing Form MGT 7 shall be 60 days from the completion of the 6 months from the end of financial year, that means due date will be 60th day from (27.09.2022- tentative).
7. Form MGT-7A is the form prescribed for Annual Return of One Person Company and Small companies. This form is applicable in respect of Annual Return for the F.Y. 2020-21 and onwards of OPC as defined under Section 2(62) of Companies Act, 2013, and small companies.
Penalty for non – submission with in due timeline: In case a return has not been filed, a Penalty (additional fees) will be levied from the due date (27.09.2022 – tentative) of INR 100/- per day for each day for which default continue.
Conclusion: The Corporate Laws becomes more tough and strict against Non – Compliances with respect to any matter. The Chairmen and directors are realizing that they need specialist skills and technical knowledge in this area and they are looking to company secretaries to provide this expertise. A Company Secretary is responsible for the efficient administration of a company, particularly with regard to ensuring compliance with statutory and regulatory requirements.
Compiled & Prepared by:
Khushboo Mahesh Lalji
Company Secretary PGDBM – HR
|– By CS Lalit Rajput, & CS Khushboo Mahesh|
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