In corporate governance, private companies performing under the Indian Legal system must be carefully maintained for their secure future and legal structure. There are certain rules and regulations set up by the Companies Act, 2013 for following the essential compliances for private companies. This article provides the essential Compliance for Pvt Companies under the Companies Act, 2013. Furthermore, there will be a discussion on the key significance of fulfilling these compliances on time.
| Table of Contents |
Glimpses of Private Limited Companies
Private Companies are generally denoted as Pvt. Ltd. It is a common form of business, which is different from publicly traded companies. Private companies are entities where ownership is mainly limited to a small group of people or ventures. These businesses are not traded as publicly on stock exchanges as it privately held. As per the Companies Act, 2013, private companies define under section 2(68). It is a kind of company incorporation under the Act that has certain key elements:
- Having limited liability for their shareholders amounts to unpaid on the shares. It means the personal assets of the shareholders are mainly secured by the company’s debts.
- There are a minimum of 2 shareholders and a maximum of 200 members in the company.
- Companies have certain exemptions from reporting and regulatory needs, which apply to public companies.
- Companies are never issuing their shares to the public.
- There is no minimum capital requirement.
- Companies have perpetual existence.
- There is a restriction on the share transfers as the Articles of Association of a company mainly impose it.
Essential Compliances for Private Companies under the Companies Act, 2013
There are several essential lists of annual Compliance for Pvt Companies under the Companies Act, of 2013, and these are:
- Business Commencement Declaration: Before commencement of business, a company must file a declaration with the ROC.
- Annual General Meeting (AGM): It must hold an AGM every year within six months from the end of the financial year. During the AGM, annual reports, financial statements, and other vital matters are discussed.
- Appointment of Auditor: Within 30 days of incorporation, a private company must appoint its first auditor, and subsequently, an auditor must be appointed at each AGM.
- Statutory Registers: Maintain various statutory registers as required by the Companies Act, 2013. This includes registers for members, debenture holders, charges, etc.
- Board Meetings: Held on at least two board meetings in a calendar year, with a gap of no more than 120 days between them. The board of directors have to meet and discuss the company’s significant matters.
- Filing of Financial Statements: File the annual financial statements, including balance sheets and profit and loss accounts, with the Registrar of Companies (ROC) within 30 days from the AGM.
- Director Identification Number (DIN): All directors must obtain a DIN. Make sure that the DIN of directors is updated and valid.
- Annual Return filing: It contains the details of the company’s directors, financial position, and shareholders, with the ROC within 60 days from the AGM.
- Appointment and Resignation of Directors: It is compulsory to inform the ROC of any alteration or amendment in the board of directors. It also includes the resignation or appointment of directors.
- Statutory Audit: Qualified auditors are doing a statutory audit of the company and their financial statements as per compliance with the Companies Act, 2013.
- Annual ROC Filing: In the annual ROC filing, the company need to file several documents. Like annual returns, financial statements, and other forms, with the ROC as needed by the Companies Act, 2013.
- Amendment in Capital Structure: In case there is any amendment required in the capital framework of the company. These are amending the share capital, issuing new shares, or buyback of shares.
- Compliance with Secretarial Standards: Private companies need to adhere to the Secretarial Standards issued by the Institute of Company Secretaries of India (ICSI).
- Related Party Transactions (RPTs): Disclose and seek approval for related party transactions, if applicable, during board meetings or general meetings.
- Taxes payment: Ensure timely payment of all taxes, including income tax, GST, and any other applicable taxes.
- Maintenance of Books of Accounts: Managing proper books of accounts, records of financial, and other relevant documents as required by the Companies Act, 2013.
- ESOP Compliance: If the company issues Employee Stock Options, comply with the regulations governing Employee Stock Option Plans.
- Secretarial Compliance Certificate: Obtain a Secretarial Compliance Certificate from a Company Secretary in Practice and file it with the ROC annually.
RESIGNATION OF COMPANY SECRETARY
The key significance of fulfilling the essential Compliance for Pvt Companies under the Companies Act, 2013
Accomplishing the list of annual Compliance for Pvt Companies is crucial for several reasons:
- Efficient Governance: Compliance requirements generally involve holding regular board meetings. That can help in the efficient governance and decision-making processes of the company.
- Access to Credit and Finance: Banks and financial institutions mainly need private companies to be compliant with statutory obligations to qualify for loans or credit facilities. Compliance can make it easier to access financing when needed.
- Transparency in finances: Compliance mandates the preparation and filing of financial statements and promotes transparency, annual returns, and answerability. This information is crucial for shareholders, investors, creditors, and regulatory authorities.
- Investor Confidence: Fulfilling the compliances enhances the company’s credibility and reputation. It built up the confidence of potential investors, raise capital and attract investment.
- Legal Standing and Existence: Compliances make sure that the private company is identified as a legal entity. Failure to meet compliance requirements can lead to legal challenges, such as the potential to be declared a defunct or non-operational entity.
- Business Continuity: Maintaining compliance ensures the company’s continuous operation. It minimizes the risk of regulatory penalties, fines, or legal actions that could disrupt business operations.
- Tax Compliance: Completing the statutory needs makes sure that the company complies with the tax regulations. This can help you to prevent legal disputes with tax authorities and reduce the risk of tax penalties.
- Enhances the reputation and also increases the recognition of the brand image.
End Notes
Through the above details, it can be easy to say that the Companies Act, of 2013, sets the structure for Private Companies in India. It must be performed within the pvt. ltd. company compliance. We have explored the company’s annual compliance list, which makes sure about transparency in finances, legal protection, and performance stability. These compliances have secured your business from legal penalties and harm to your reputation, and they open the path to the success and survival of the company.
