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Annual Compliance for Private Limited Company

  • Setindiabiz Team
  • January 23, 2024
annual compliance

Private Limited companies are required to comply with several legal and regulatory obligations after their incorporation, including annual compliances under the Companies Act, 2013. These compliances are mandatory and must be completed within their prescribed due dates. For full information on what these compliances and due dates are, read the entire blog. Do not hesitate to post your questions in the comments below. If you need any assistance, quickly contact our startup advisors!

BRIEF SUMMARY
The annual compliances for Private Limited Company include filing several e-forms to the ROC, such as annual returns (MGT-7), annual financial statements (AOC-4), intimation of auditor’s appointment (ADT-1), and annual ITR. In addition to these, there are internal compliances to be completed, like organizing general meetings of shareholders, board meetings of directors, and updating statutory registers. The due dates for each of these compliances vary depending on regulatory requirements. Non-compliance or delays may result in penalties that might hinder business operations and raise the cost of compliance. Hopefully, the information in this blog will help avoid such adverse consequences.

Annual Compliances for Private Limited Company

The Companies Act, 2013 governs all Private Limited Companies incorporated in India, prescribing a detailed list of compliances to ensure transparency and accountability in business operations. The table below describes all these compliances for Private Limited Company in detail, with comprehensive explanations about their objectives, due dates, and penalties. Whether you’re an entrepreneur looking forward to starting a Company or an established owner already running one, this table will help you create a robust compliance calendar to keep you business standing on the right legal foot!
S.No. Annual Compliance Details, Due Dates & Penalties
1.
Financial Statement
Objective: Financial statements are a set of formal records and reports that present the financial performance and position of a business or an organization. These statements provide information on the entity's financial activities, including its revenue, expenses, assets, liabilities, and equity. There are three main financial statements that a company must prepare and publish annually as part of its financial reporting:
  1. Income statement or profit and loss statement: This statement provides information on the company's revenues, expenses, and net income (or loss) for a particular period, typically a year.
  2. Balance sheet: This statement presents the company's assets, liabilities, and equity at a specific point in time, typically at the end of the year.
  3. Cash flow statement: This statement shows the inflow and outflow of cash and cash equivalents during a specific period, typically a year. It includes information on operating, investing, and financing activities.
Financial statements are important for various stakeholders, including investors, creditors, and regulatory authorities, as they provide crucial insights into a company's financial health and performance.
  • Due Date: every company is required to prepare its financial statements within 6 months from the end of its financial year. For example, if the financial year of a company ends on March 31st, then the due date for preparation of its financial statements would be September 30th of the same year. It is important to note that the financial statements must give a true and fair view of the state of affairs of the company and must be prepared in accordance with the accounting standards notified by the Ministry of Corporate Affairs.
  When to file the FS with the ROC: Every company is required to file its financial statements with the Registrar of Companies (ROC) within 30 days from the date of Annual General Meeting (AGM). The financial statements that need to be filed include the balance sheet, profit and loss account, cash flow statement, statement of changes in equity, and any other document that the company is required to attach to its financial statements.

Additionally, the financial statements also need to be audited by a qualified auditor, who will issue an audit report along with the financial statements. The auditor's report will provide an independent opinion on whether the financial statements are prepared in accordance with the applicable accounting standards and present a true and fair view of the company's financial position and performance.

Non-compliance with the requirement of filing financial statements with the ROC within the due date can lead to penalties and fines imposed by the ROC. The penalty may vary depending on the number of days of delay and the type of company. It is, therefore, important for companies to ensure timely preparation and filing of their financial statements with the ROC to avoid any penalties or legal consequences.
2.
Income Tax Return (ITR)
ITR stands for Income Tax Return. It is a form that individuals and companies file with the government to report their income and taxes paid during a financial year. For companies, the income tax return is filed in the prescribed form and contains details of the company's income, deductions claimed, taxes paid, and any tax liability for the financial year. Filing income tax returns is mandatory for companies in India, irrespective of whether they have made profits or incurred losses during the financial year. Failure to file income tax returns or delay in filing can result in penalties and interest payments.

Due Date: The financial year 2022-23 in India begins on April 1, 2022, and ends on March 31, 2023. The due date for filing the Income Tax Return (ITR) for companies for the financial year 2022-23 in India is October 31, 2023.

However, it's important to note that the government may announce any changes or extensions to the due date in case of unforeseen circumstances or for other reasons. It's always advisable to keep a check on the latest updates from the Income Tax Department to ensure compliance with the deadlines.
3.
Annual General Meeting
  • Objective: AGM stands for Annual General Meeting, which is a mandatory yearly meeting of the shareholders of a company, as per the Indian Company Act, 2013. The main purpose of the AGM is to present the financial statements of the company to the shareholders and to discuss and approve the matters related to the company's operations and management. According to Section 96 of the Companies Act, every company is required to hold its first AGM within 9 months from the closure of its first financial year, and subsequent AGMs should be held within 6 months from the end of each financial year.

    During the AGM, the shareholders are given the opportunity to ask questions, raise concerns, and vote on the company's various proposals, including the election of directors, appointment of auditors, and approval of dividend payments. The AGM also serves as a forum for shareholders to interact with the company's management and to provide feedback on the company's performance.
  • Due Dates:  TAs per the Indian Companies Act, the due date for holding the Annual General Meeting (AGM) of a company is within six months from the end of the financial year. This means that if a company's financial year ends on March 31, the AGM must be held by September 30 of the same year. However, the first AGM of a company must be held within 9 months from the end of the company's financial year. So, for example, if a company's financial year ends on March 31, then its first AGM should be held on or before December 31 of that same year.
  • Penalty for non-compliance: As per the Companies Act, 2013, if a company fails to hold its Annual General Meeting (AGM) within the prescribed time, it is considered a violation of the Act. The penalty for not holding an AGM on time is:
    1. Fine on the Company: The company is liable to pay a fine of up to Rs.1,00,000 or such higher amount as may be prescribed by the Government from time to time.
    2. Penalty on Directors: The Directors of the company may also be subject to a penalty of up to Rs.1,00,000 for every default, in addition to the penalty levied on the company.
    It is therefore important for companies to hold their AGM within the prescribed time to avoid any penalties and legal repercussions.
4.
Auditor’s Appointment
  • Objective: As per the Companies Act, the first auditor of a company is appointed by the Board of Directors within 30 days of the date of incorporation of the company. Thereafter, the company is required to appoint an auditor at each Annual General Meeting (AGM) to hold office from the conclusion of that meeting till the conclusion of the next AGM.
  • In case a company does not appoint an auditor during an Annual General Meeting (AGM), the current auditor will remain in office until a new one is appointed. If the current auditor declines to continue, the company must notify the Registrar of Companies (ROC) within 7 days of the AGM. The ROC has the authority to appoint a new auditor in such a situation.
  • ROC Filing: After the appointment of an auditor in the AGM, the company must file Form ADT-1 with the Registrar of Companies within 15 days of the AGM. This form contains details of the auditor and their appointment, and serves as an intimation to the ROC about the appointment of the auditor. Additionally, the company must also file its audited financial statements, along with the auditor's report, with the ROC within 30 days from the date of the AGM. These filings are mandatory and failure to comply with these requirements may attract penalties and legal consequences.
  • Penalty: The penalty for not filing ADT-1 is specified under Section 450 of the Companies Act, 2013. If a company fails to file ADT-1 within the prescribed time, the company and every officer of the company who is in default shall be punishable with a fine which shall not be less than Rs. 10,000 but which may extend to Rs. 1,00,000. Additionally, the company may also have to pay additional fees for delayed filing.
5.
Annual Returns
  • Objective: Annual filing with ROC by a company refers to the submission of various documents and forms to the Registrar of Companies as per the requirements of the Companies Act, 2013. The following are some of the important forms that need to be filed annually by a company with the ROC:
    • Annual Return: Every company needs to file its annual return in Form MGT-7 with the ROC within 60 days of the conclusion of the Annual General Meeting (AGM).
    • Financial Statements: Every company needs to file its financial statements (including the Balance Sheet, Profit and Loss Account, Cash Flow Statement, and Notes to Accounts) in Form AOC-4 with the ROC within 30 days of the conclusion of the AGM.
    • Auditor Appointment: Every company needs to file Form ADT-1 with the ROC within 15 days of the appointment of an auditor in the AGM.
    • Director's Report: Every company needs to file its Director's Report along with its financial statements in Form AOC-4 within 30 days of the conclusion of the AGM.
    • Register of Members: Every company needs to maintain a Register of Members and file it with the ROC in Form MGT-7 within 60 days of the conclusion of the AGM.
    Failure to file these forms within the prescribed due dates can attract penalties and fines. It is, therefore, essential for every company to ensure timely compliance with these annual filing requirements to avoid any legal complications. In case of the defaulting company, the penalty imposed will not be less than Rs.50,000 and won’t exceed Rs.5 lakhs. Other than this, each defaulting officer will be penalized with the same amount, or 6 months of imprisonment or both.
6.
DIR-3 KYC
  • Objective: Every year, all directors are required to file DIR-3 KYC form with the MCA, which includes details such as the director's name, address, PAN, Aadhaar number, and mobile number. This filing must be completed by the due date, which is typically April 30th of the relevant financial year. Non-filing or late filing of DIN KYC can result in penalties and even deactivation of the director's DIN.
  • Types of Forms: Two types of forms are available for filing KYC details of directors holding DIN. The first form is DIR-3 KYC, which should be filed by DIN holder directors who have never filed DIR-3 KYC before or need to make changes in their KYC details. The second form is DIR-3 KYC Web, which is a web-based form used to file KYC details for directors who have already filed DIR-3 KYC and do not have any changes to make in their KYC details.
  • Due Date: Before the 30th of September of every financial year, for the immediately preceding Financial Year. 
  • Penalty & Consequence of non-filing: If the Form DIR-3 KYC is not done before the prescribed due date, the DIN of the concerned director shall be “deactivated due to non-filing of DIR-3 KYC” until the forms filed with a late fee of Rs.5,000.

Annual compliances for Private Limited Company are necessary requirements to be completed every year. These compliances are prescribed under the Companies Act, 2013 and regulated by the Ministry of Corporate Affairs. Meeting these compliances within their due dates is essential to avoid penalties and maintain compliance with the law. Our detailed overview on annual compliances for Private Limited Company outlined in this blog has hopefully provided you with a good understanding of the laws in this respect. For further assistance, you can always look up to our experts!

Conclusion

FAQs

Q1: What are the key compliances for Private Limited Company?

Key annual compliances for Private Limited Company includes:

  1. Filing Annual ROC Returns
  2. Filing Annual Financial Statements to ROC 
  3. Filing Annual ITR to Income Tax Department
  4. Filing Intimation of Auditors Appointment to ROC 
  5. Holding Annual General Meeting

Q2: When is the due date for filing financial statements with the ROC?

Financial statements must be filed with the ROC within 30 days from the date of the Annual General Meeting (AGM), and they should be prepared within 6 months from the end of the financial year.

Q3: What is the penalty for not holding an Annual General Meeting on time?

Non-compliance with AGM due dates can result in a fine on the company of up to Rs.1,00,000. Directors may also face penalties of up to Rs.1,00,000 for every default, in addition to the penalty on the company.

Q4: What forms need to be filed annually with the ROC?

Private Limited Companies need to file forms such as MGT-7 for annual return, AOC-4 for financial statements, ADT-1 for auditor’s appointment, and MGT-7 for the Register of Members within prescribed due dates.

Q5: Why is filing DIR-3 KYC important for directors?

Filing DIR-3 KYC is crucial to provide updated details of directors to the Ministry of Corporate Affairs (MCA). Failure to file or late filing may result in penalties, and the director’s DIN could be deactivated until filed with a late fee of Rs.5,000.

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