Post Incorporation Compliance for a Private Limited Company

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Reading Time: 8 minutes| (Last Updated On: October 30, 2019)

Post Incorporation Compliance for a Private Limited Company

A company is registered on the day its Certificate of Incorporation is issued by the registrar of companies having its jurisdiction over the registered address of the company. Though legally the company has come into existence, it can not start its operations without filing a declaration for the commencement of its business in Form 20A. For the purpose of filing of the declaration for the commencement of business, the following are pre-conditions.

  1. That the company has a physical registered address. Refer section 12 of the Companies Act, 2013
  2. Ensure that the company has intimated to the ROC its registered address at the time of its incorporation. You should check the Spice Form, which was filed at the time of incorporation of the company. If you found that the company is incorporated on Communication Address then to intimate the registered address of the company file Form INC 22 within 30 days of its incorporation to the ROC, with its filing fee.
  3. Open a current bank account for the company.
  4. Transfer capital from the specific shareholder bank account. The transfer should be exactly the same as it was agreed between the shareholders at the time of registration of the company in the Memorandum of Association (MOA) of the company.

Filing for Declaration to Commence the Business (INC-20A): The declaration to commence the business is filed in Form 20A with the ROC and it must be filed within 180 days of incorporation of the company. In other words, you get exactly 180 days to meet above pre-conditions of filing this declaration. In case a company fails to file the INC-20A within 180 Days then the CIN of the company gets blocked and eventually, the ROC would close the company. Section 248 of the companies act sets two grounds for closure as under

Grounds of Closure of Company for Non Compliance of above.

Section 248(1)(d) the subscribers to the memorandum have not paid the subscription which they had undertaken to pay at the time of incorporation of a company and a declaration to this effect has not been filed within one hundred and eighty days of its incorporation

Section 248(1)(e) the company is not carrying on any business or operations, as revealed after the physical verification carried out by the ROC

For Foreign Shareholder: In case the company is incorporated by one or more foreign individual or foreign corporation, then the shares as subscribed by such foreign shareholder must be remitted from the banking channel in the foreign exchange. Care must be taken to bring exactly the same or a little higher amount as capital from the foreign-held bank account of such shareholder. Please note that the foreign remittance as capital must be supported with “Foreign Inward Remittance Certificate” issued by the banker of the Indian company, wherein the purpose of inward remittance should be mentioned as “Towards Equity Share Capital under Automatic Route”. For the companies which have foreign shareholder, there is an additional report which has to be filed in form FC-GPR to the RBI within 30 days of the remittance. Please contact us if you need any assistance on it.

General Post Incorporation Compliance for a Private Limited Company.

A Company being a creation of law is required to comply with the provisions of the Companies Act, 2013, which prescribes certain specific activities to be performed immediately after incorporation of the Company. These activities are warranted because of specific provisions under the Companies Act, 2013 or under other state-level laws like that of Shops and Establishment Act, State Stamp Act or professional Tax. A suggestive list is as under:

Sl.No.Type of complianceRemarks
1.Convening of First Board meetingMandatory
2.Disclosure of Interest by DirectorsMandatory
3.Provisioning of Maintenance of Statutory RegistersMandatory
4.Developing of Accounting System for the CompanyMandatory
5.Opening of Bank Account for the CompanyNeed-based
6.Demand and Collection of Paid-up Capital from the ShareholderMandatory, however, to be decided by Director
7File declaration for the commencement of business in Form INC-20AWithin 180 Days
7.Appointment of Auditor within 30 Days of IncorporationMandatory, if not done punishable
8.Issue of Share Certificate within 60 DaysMandatory, if not done punishable
9.Payment of Stamp Duty on Issuance of Share CertificateMandatory, if not done punishable
10.Obtain Registration under Shops and Establishment ActMandatory, if not done punishable
11.Professional Tax Registration of Company and its DirectorsMandatory, if not done punishable
12.Need-Based Registration and licensesNeed-based
13.Drafting of Employer related documents and HR PoliciesOptional
14.Drafting of agreements like NDA, Privacy Policy for Website and Agreements to be Entered with VendorsOptional
15.Protect Intellectual Property Rights like Trademark, Copyright, Patent, and DesignStrongly recommended

1. Convening of First Board Meeting:

The board meetings are meeting of director which is to be held at least one in every quarter (the gap between the two meetings should not be more than 120 days) for a private limited company however, for small company (having capital of fifty lacs and turnover is not more than two crores) minimum of two meetings must be held within the financial year at a gap of six months. There is no limit on a maximum number for which a board meeting can be held. The first meeting of the directors after incorporation of the companies is very important as it must deal with various provisions of the Companies Act and a decision is to have arrived with respect to each such requirement.

2. Disclosure of Interest by Directors:

Section 184 of the Companies Act, require every director to disclose his concern or interest, whether directly or indirectly, in a contract or arrangement, or proposed contract or arrangement in the first meeting of a board of directors of the company and thereafter in the first board meeting to be held in every financial year. Any change in the interest of director is to be intimated to the Board of Directors within 30 days of such change. Any non-disclosure shall make any such contract or arrangement voidable at the option of the company. Such disclosure to be made in the prescribed form MBP-1. In case of public limited companies, such disclosure needs to be filed with ROC in prescribed form MGT-14.

3. Provisioning of Maintenance of Statutory Registers:

Every company is under obligation to maintain certain register under Section 85, Section 88 etc. of the Companies Act, 2013 and required to keep and maintain at its registered office in the prescribed form, any failure in maintaining the statutory register is an offence for which company as well as directors may be fined and prosecuted.

4. Developing of Accounting System for the Company:

Section 128 of the Companies Act, requires every company to prepare and keep at its registered office, books of account and other relevant books of account and financial statement of every financial year to give a true and fair view of the state of affairs of the company. The books of account need to be maintained with the double entry system to be preserved for eight financial years. The accounts need to be maintained at the registered address of the company or at any other place where directors decide under intimation to ROC.

5.Opening of Bank Account for the Company:

To transact business the company is required to open and maintain a current account with any bank in India through which all the receipts and payments of banking nature shall be transacted. Selection of a bank account is very important for day to day operation of business it is strongly recommended to open the current account in a bank branch which is situated near to the office of the company. The mode of operation of the said bank account has to be decided in the first board meeting and a copy of the resolution passed with respect to an operation of a bank account is required to be given to the banker at the time of opening of bank account. Any subsequent changes in the mode of operation are also required to be intimated to the bank.

6. Demand and Collection of Paid up Capital from the Shareholder:

The promoters of a company subscribe to the equity shares of a company by putting their signatures against the number of shares they subscribe in the Memorandum of Association. The subscribed amount need to be paid as initial capital to the company after its incorporation. Directors are under a duty to ask and collect from the shareholders in the company account.

7. Appointment of Auditor within 30 Days of Incorporation:

As per Section 139 of the Companies Act, 2013 every company is required to appoint its first auditor within 30 days of incorporation by its board of directors and in case the board of directors fails to appoint the auditor within said period of 30 days then they shall call an extraordinary general meeting of shareholders for appointing an auditor. The appointment of auditor through shareholder must be completed within 90 days.

8. The issue of Share Certificate within 60 Days:

The board of directors must issue share certificate to the shareholders of the company within 60 days of becoming their shareholders. For a new company, the first subscriber becomes shareholder from the date of incorporation. Hence, the share certificates to them must be issued by the board of directors. The share certificate shall be signed by the two directors or one director and company secretary of the company who shall apart from other thing mention the folio number, share certificate number and a distinctive number of share for which the certificate is issued. Failure of issuing share certificate within 60 days is an offense for which company is punishable with a fine of rupees twenty thousand.

9. Payment of Stamp Duty on Issuance of Share Certificate:

Every state government has made a law imposing stamp duty on the issue of a share certificate, which is to be paid to the respective state government after such an issue. The rates of stamp duty and the method of its payment differs from state to state. However, in most of the state, the stamp duty payable is 0.1% of the market value of the shares. The non-payment of stamp duty is a very serious offence for which apart from punishment imprisonment has also been prescribed.

10. Obtain Registration under Shops and Establishment Act:

Every state has either passed its own law or adopted law of other states to regulate shops and commercial establishment from the point of view of working hours and basic facilities to be provided to the employees/labour of the companies. Within 30 days of incorporation of a company, it is liable to obtain a registration under the law of shops and establishment as may be applicable in the respective state. The failure of obtaining shops and Establishment registration is a criminal offence.

11. Professional Tax Registration of company and its Directors:

State government like Maharashtra, Karnataka, Gujarat etc. has imposed a tax on the profession which in its ambit includes company, LLP, all directors, all designated partners and all employers which need to obtain a professional tax registration with the professional tax department and pay professional tax at prescribed rates. However, all Union Territories including NCT of Delhi and certain states like Haryana, Punjab, Rajasthan, Uttar Pradesh etc. does not have any law to tax profession.

12. Need Based Registration and Licences:

Based on the business activity and the goods in which the company is dealing, there are other licences and registration which are required examples are Sales Tax Registration, CST Registration, Drug Licence, Food Licence etc.

13. Drafting of Employer Related Documents and HR Policies:

The legal documents such as Employment Agreement, Human Resource Policy, Leave Policy, Standing orders are necessary documents and must be drafted thoughtfully so that the interest of company is protected vis a vis and erring employee.

14. Drafting of Agreements like NDA, Privacy Policy for Website and Agreements to be Entered with Vendors:

The commercial understandings must be reduced in form of a legal agreement setting terms and conditions of the engagement in its fullest. The non-disclosure agreement protects a company of its business idea, dealing etc. The visitors of the website must be intimated by way of a privacy policy about the use of cookies and the information which companies gather while they visit website of the companies. Similarly, agreement with vendors, contractors, suppliers also need to be properly drafted.

15. Protect Intellectual Property Rights like Trademark, Copyright, Patent and Design:

The companies should not leave any opportunities in securing the intellectual property rights which may be in form of business name, its logo, punchline, name of brand, device marks which shall be attached to products, service marks, name of domain, literature, software codes, inventions and three dimensional shapes.

Our compliance specialists are available for a thorough discussion on above said activities which your company must undertake soon after incorporation of your company. PLease contact us for any assistance.

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Team SETINDIABIZ, is a vibrant, updated and experienced people with professional qualifications such as CA, CS, CMA & Advocates. With our presence all over India, we are in a better situation to serve entrepreneurs in securing 100% compliance, all the time.

4 Comments

  1. 1. I have heard that government removed the paid up capital requirement. Please confirm

    2. I am planning to launch internet based mobile app, so is it necessary to take Shop and establishment licence ?

  2. Very good information but please add official fess for punishment where applicable…and also without punishment normal fees where applicable

  3. iam interested to establish a private limited company with about 15 members of share holders. please explain about the details of requirement.

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