Compliance Requirements for Companies in India

The Companies Act, 1956 has elaborate provisions relating to the Governance of Companies, which deals with management and administration of companies. It contains special provisions with respect to the annual compliance requirements. Companies incorporated under the Act have to file various forms, returns and documents under various sections with the Registrar of Companies (ROC) in an electronic mode within the prescribed time along with the prescribed fees or with payment of additional fees in the event of delayed filing.

As part of its major drive to promote egovernance, the Ministry of Corporate Affairs (MCA) launched MCA-21, a portal to facilitate e-filing. Physical filing of forms under Companies Act has been discontinued. All filings, since September 30, 2006, are made through e-filing using specially designed e-forms.

The general annual compliance requirements for both public and private companies are discussed below. The requirements for listed public companies are more extensive and not under the scope of the discussion which is limited to the annual requirements relating to meetings, accounts, auditing, returns & changes or events.. Please seek professional advice for more details on regulatory requirements.

Meetings

  • As per the Provisions of Section 166 of the Companies Act, 1956, the Annual General Meeting (AGM) of a Company is required to be held once in every calendar year and not more than 15 months shall elapse between the date of one AGM and that of the next. This meeting can be held only in the same city or town, where the registered office is situated.
  • A meeting of its Board of Directors must be held at least once in every three months and at least four such meetings shall be held in every year. Matters of concern shall be disclosed and discussed in such meetings. The meeting can be held anywhere in India. Meeting cannot be called through video conferencing.

Accounts, Auditing & Returns

  • The first annual accounts of a newly incorporated company should be drawn from the date of its incorporation up to the day not preceding the AGM date by more than 9 months. Thereafter Audited Annual Accounts for the period ending with the day, not preceding the AGM by more than 6 months, have to be placed in the said AGM.
  • Companies are required to file the Annual Accounts with the Office of the concerned Registrar of Companies within 30 days from their AGM or where the AGM is not held, then within 30 days of the last date on which the AGM was required to be held.( Form 23AC and Form 23ACA)
  • The accounts of the company must relate to a financial year (comprising of 12 months) but must not exceed 15 months. The company can obtain prior permission from the ROC for an extension of the accounting period to the extent of 18 months.
  • At each AGM, every company must appoint auditor or auditors. Such auditors are to hold office from the conclusion of that meeting until the conclusion of the next AGM and shall. Every auditor so appointed must be intimated within seven days of the appointment. Every auditor of a company shall have a right of access at all times to the books and accounts and vouchers of the company.
  • Every company is required to maintain proper books of account according to the standards issued by the Institute of Chartered Accountants of India. The books shall maintain records of the following
    • All sums of money received and expended and the matters in respect of which the receipt and expenditure take place
    • All sales and purchases of goods by the company
    • The assets and liabilities of the company
    • In case of companies engaged in manufacturing, processing, mining etc, such particulars relating to utilization of material or labor or other items of cost
  • The books of account relating to eight years immediately preceding the current year together with supporting vouchers are required to be preserved in good order.
  • Every company having a share capital is required to file an annual return with the ROC within 60 days from the date on which the AGM of the company was held or where the AGM is not held, then within 60 days of the last date on which the AGM was required to be held. (Form 20B). The return is to be duly signed digitally and the requisite certificates to be attached. In case of a company whose shares are listed on a recognized stock exchange, the return must be signed digitally by a secretary in full-time practice.
  • Companies with a Paid-up capital between INR 1million and INR 20 Million are required to file an annual compliance Certificate (Form 66) from a Company Secretary in whole time within 30 days from the date of annual general meeting, along with the Annual Report.

Registers

  • Register of Member, Register of Directors, Register of Contracts, Register of Charges, etc. The registers are required to be kept at the registered office of the company.
  • The directors are required to inform the company about their directorship in other companies every year

Event Based Compliance

Apart from above annual compliance requirement companies are required to report events to the ROC. Events requiring reporting compliance are

  • 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
  • Change in registered address
  • Changes in any of the registered particulars

Filing of Tax Returns

Companies have to file their annual corporate tax returns. Additionally

  • Companies who provide a service to their customers must file their service tax returns every six months.
  • Companies that sell a product must file annual sales tax or submit their value added tax returns.
  • Companies located in states where professional tax registration is mandatory, must file the annual professional tax returns of each of their employees for whom they have deducted professional tax.

Directors Responsibility in Compliance

The Directors are held responsible for all ongoing compliance requirements. Directors must ensure that the company’s activities do not deviate from the MOA. Non compliance will attract heavy fine or even prosecution at the Court of Law. Any changes in registered particulars should be promptly reported to the Registrar of Companies. Directors must ensure that the company acts in trustworthy manner without any willful negligence of its obligations, and disclose true information about its financial status and business activities.

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