What are mandatory annual compliances of private limited companies in India?
Congratulations on starting your own business. I know it takes a lot of effort and time to become an entrepreneur. There are numerous rules and regulations to follow when starting a business. If you’ve established a private limited company as your business structure, well there are various annual compliance for private limited company which are mandatory for you.
There are two types of compliances: mandatory compliances and event-based compliances. Many people who start a private limited company are unaware of the mandatory annual compliance and treat it lightly, resulting in problems later on.
I’m going to provide you with some of the mandatory compliances so that you don’t have to deal with any problems in the future.
Here are some mandatory annual compliance for private limited company that cannot be avoided :
- The Company’s LetterHead and Name Board
If you start your own private limited company, you must attach the name of your company and the address of your business address outside your corporation and in comprehensible letters.
A company must also print its official name, address, and other important information on all business letters. This is the first thing you should do when starting your own business.
- The First Board Meeting
The first meeting of the board of directors should take place within 30 days of the incorporation of your company. Following that, a total of four Board meetings should be held over the course of a year.
If you own a small business, you should hold at least two board meetings per year. The board meeting notice, including the date and information, should be sent to the directors at least 7 days prior to the meeting. A board meeting is absolutely necessary and should not be avoided.
- Resident Director’s Appointment
Every company is required to appoint at least one director who has spent probably 182 days that is approximately 6 months in India itself in the preceding calendar period.
- Auditor’s Appointment
Within 30 days of the company’s incorporation, the directors should appoint the company’s first auditor. The auditor will be appointed for a period of at least five years.
- Statutory Audit Compliances
Every company is required to prepare its accounts and have them audited by a Chartered Accountant at the end of the financial (fiscal) year. The statutory audit examines information such as account balances, book-keeping records, and banking transactions to evaluate whether an organization is presenting a clear and balanced portrayal of its financial situation. Though necessary to appoint Statutory Auditors for the company.
- Annual General Meeting
Every private limited company is required to hold a general meeting once a year, within six months of the end of the financial year, which is on or before September 30th of each year, during business hours only.
The annual general meeting involves the authorization of financial reports, the proclamation of earnings, the registration or re-appointment of auditors, the appointment and remuneration of directors, and the appointment and remuneration of officers.
The annual general meetings should be conducted on a non-public holiday. The annual general meeting shall be held at the company’s business address or at another location within the community, town, or village wherein the company’s registered office is located.
- Director’s Report
It is essential to have a direct report. Every year, the Director’s Report should be disclosed. The directors report should be signed by the company’s chairperson, who has been authorized by the board.
Every year, the directors must submit a statement written to the corporation in the configuration stipulated for the Directors’ Report.
- Completing Financial Statements and Annual Returns
Every private limited company must finalize the financial statement within 30 days of the annual general meeting. In addition, every private limited company is required to issue the company’s annual return with the Company registrar within 60 days of the Annual General Meeting.
- Upkeep Of Mandatory Registrations and Records
As required by company law, your company must keep a registration and records. The records should be kept up to date at the company’s business address and should be available for inspection by its representatives during working hours. The registration should include a Register of Directors, a Register of Members in the Company, a Register of Shares, a Register of Chairpersons, and so on.
The company must also keep the records in accordance with the law. Resolutions of Board of Directors meetings, Minutes of Board Meetings, Annual General Meeting and Incorporation documents of the company are included in the records. All of this information is required to be kept.
Keep in mind that it is always necessary to follow all of the annual compliance of a private limited company. It is not advisable to take a private limited company lightly. If you do not follow these Compliances, you will be fined, and you will face consequences in the future as a result.
Your company may be penalized and subjected to additional scrutiny. The person whose default will be punishable such as the company’s director will be disqualified for failing to follow the Compliances. Disqualified Directors would also be barred from forming a new corporation for a period of five years.
Also, if there is indeed a time lag in any submission, added payments must be made, which keep increasing as the time period of non-compliance results in an increase. This is why it is mandatory and should not be avoided at any cost.
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