Compliance for a Newly Formed Private Limited Company in India
After registering a Private Limited Company in India, several compliances must be followed under the Companies Act, 2013:
Initial Compliance
1. First Compliance
First Board Meeting
Must be held within 30 days of company formation. The auditor is appointed for one year using Form ADT-1.
2. Second Compliance
Certificate of Commencement (COC):
Filed within 180 days of company formation. Paid-up capital must be deposited in the bank. File Form INC-20A with an attached bank statement, signed by a Chartered Accountant and Director (one-time compliance).
3. Third Compliance
Annual Forms: Filed between 31st March and 30th June.
MBP-1: Board Resolution for disclosure of interest by directors.
DIR-8: Intimation by directors about their disqualification.
MSME-1: Information on outstanding payments to MSMEs on a half-yearly basis (filed by 30th April and 31st October).
DPT-3: One-time return of outstanding loans not treated as deposits.
4. Fourth Compliance
Financial Preparation: Completed between 30th June and 30th September.
- Balance Sheet
- Profit & Loss Statement
- Director's Report
- Auditor's Report
- DIR-3: KYC of directors (failure incurs a fine of Rs. 5,000).
5. Fifth Compliance
Annual General Meeting (AGM):
Must be held by 30th September. File Form ADT-1 within 30 days of AGM to appoint the auditor for five years (failure doubles the compliance penalties).
6. Sixth Compliance
AOC-4: Filed within 30 days of AGM, containing the financial statement of the company.
7. Seventh Compliance
MGT-7 (Annual Return): Filed within 60 days of AGM, detailing meetings, share transfers, and director changes. Attach MGT-8 if turnover exceeds Rs. 50 crore or paid-up capital exceeds Rs. 10 crore.
Ongoing Compliance
- Board Meetings: Held at least once every three months, totalling four per year.
Required Registers
- Register of the company
- Register of members
- Register of directors and key managerial personnel
- Register of charges
- Register of renewed and duplicate share certificates
- Register of related party transactions
- Register of employee stock options
- Register of shares and other securities bought back
Auditing Requirements
Statutory Audit
- Mandatory for all private limited companies, regardless of profit or turnover.
- Must be conducted annually as per the Act and Companies (Accounts) Rules, 2014.
Internal Audit
- Required for companies with a turnover of Rs. 200 crore or more or outstanding loans from financial institutions exceeding Rs. 100 crore.
Cost Audit
- Required for companies producing goods or services listed in Table 3(A) or 3(B) of the companies' regulations with specified turnover thresholds.
Auditor Appointments
Statutory Auditor: Appointed within 30 days of company registration.
Internal Auditor: Can be an internal staff member or an independent party (CA, cost accountant, or other professional).
Cost Auditor: Appointed within 180 days of the financial year commencement.
ROC Forms for Audit Requirement
ADT-1: Appointment of company auditor.
AOC-4: Annual filing of financial statements.
MGT-7: Filing of annual return.
CRA-2: Appointment of cost auditors.
CRA-3: Submission of cost audit records to the board.
CRA-4: Filing of cost audit report.
Formation Requirements for Different Company Types
Public Limited Company
- Minimum 7 shareholders
- Minimum 3 directors
- Minimum share capital of Rs. 5 lakh
Private Limited Company
Minimum 3 shareholders (maximum 200)
Minimum 2 directors
Minimum paid-up share capital of Rs. 1 lakh
Steps to Form a Company
1. Apply for DSC (Digital Signature Certificate).
2. Apply for DIN (Director Identification Number).
3. Apply for the company name (minimum 6 names).
4. Draft the Memorandum of Association (MOA).
5. Draft the Articles of Association (AOA).
6. Upload the digital copies on the MCA website.
After these steps, company name approval takes two to six weeks. PAN, TAN, EPF, and ESI will also be generated.
Required Documents
- Photograph
- Copy of PAN Card
- Copy of Aadhaar Card
- Latest bank statement of all directors/shareholders
- Latest electricity bill for the registered office
- Rent agreement (if any) for the registered office
- Mobile number and email ID of all directors
- Amount of paid-up capital
Taxation
- Private limited companies have a tax slab of 30%.
- If turnover is above Rs. 400 crore, the tax rate is 25%.
Special Tax Provisions
New manufacturing companies have a tax rate of 15%.
Difference Between Private and Public Limited Companies
Public Limited Company: Listed on stock exchanges and can be freely traded.
Private Limited Company: Not listed on stock exchanges and held privately.
By adhering to these compliance requirements and understanding the distinctions between different company structures, foreign companies can effectively manage their operations in India.
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