This article is written by M.S.Bushra Tungekar from the University of Mumbai Law Academy. The author in this article sets forth the various compliances which are to be followed by a private limited company after its incorporation.
Table of Contents
Introduction
Simply incorporating a company and starting a business is not sufficient. Obtaining an incorporation certificate is just the beginning of the business. There are various compliances that are to be met with the post-incorporation of the company. There are yearly as well as quarterly compliances.
The governing law lays down the series of compliances to be followed by a private company post its incorporation, and is set forth under the Companies Act of 2013 and its accompanying rules. This article discusses the compliances which are to be followed by a private limited company after its incorporation.
First board meeting
Section 173 of the Companies Act 2013, makes it mandatory for every company to hold a meeting of its board of directors within 30 days of the date of its incorporation. Annually a total of 4 board meetings must be conducted. Annually these board meetings must be conducted in such a way so that not more than 120 days intervene between two board meetings.
The board of directors may be present for the board meeting in person or through video conferencing. The notice of the board meeting is to be given to every director at least 7 days prior, in writing.
Annual general meeting
It is obligatory for companies to hold an annual general meeting apart from the other meetings with not more than an elapse of fifteen months between the date of one annual general meeting and another. As per the provisions of Section 96 of the Companies Act, 2013, the company is required to hold its first annual general meeting within 9 months from the date of closing of its first financial year and in any other case it shall be held within 6 months from the date of its closing.
Appointment of first statutory auditor
- Provisions pertaining to audit and auditors under the Companies Act, 2013 are set forth under chapter X. Section 139 of the Companies Act, 2013 provides that at the first annual general meeting of the company, the company is required to appoint an auditor. The auditor can be an individual or a firm and shall hold the office from the end of the first annual general meeting up to the 6th annual general meeting.
- The manner of selection of an auditor and the procedure in which the auditors are to be appointed are laid down under Rule 3 of the Companies (Audit and Auditors) Rules, 2014.
- The appointment of the auditor is to be made with the written consent of the auditor where he or it (in case of a firm) shall submit a certificate that the appointment, if made is in accordance with conditions prescribed under Rule 4 of the Companies (Audit and Auditors) Rules, 2014.
- Furthermore, according to Rule 4 of the Companies (Audit and Auditors) Rules, 2014, the company is required to file a notice of such appointment of the auditor with the registrar of companies. This notice must be filed within 15 days of the first annual general meeting or the meeting in which the auditor has been appointed. The said notice must be in Form No ADT – 1 along with the required documents.
- According to subsection 6 of Section 139(6) of the Companies Act, 2013, the first auditor of the company is appointed by the board of directors. The first auditor of the company is to be appointed within 30 days of the date of registration of the company.
- If in any case the board of directors fail or are unable to appoint an auditor, they are required to inform the members of the company. The members within 90 days shall then at an extraordinary general meeting appoint an auditor. The said auditor shall hold the office from the end of the extraordinary general meeting up to the conclusion of the first annual general meeting.
Disclosure of interest by directors
- As per Section 184 of the Companies Act, 2013, every director participating in his first board meeting is required to disclose in the meeting his concerns or interests in any company or body corporate or firms or any association, these shall also include shareholding interest. The interest or concern is to be disclosed by written notice in Form MBP – 1.
- According to Rule 9 of Companies (Meeting of Board and its Power) Rules, 2014, it is the duty of the director who is giving the notice of disclosure of the concern or interest to ensure that it is disclosed at the board meeting, which takes place immediately after the director has given the notice.
- Subsection (2) Section 182 of the companies Act, 2013 every director of the company who is whether directly or indirectly or in any other way is interested or is concerned in a contract or arrangement or a future contract or future arrangement has been entered into or in interested in entering with:
- A company where the director individually or along with other director holds more than 2 percent shareholdings or the director is either a promoter or a manager of that company or Chief executive officer (CEO) of that company.
- A firm where the director is a partner or a member or an owner.
- Is required to disclose the nature of the interest or the concern at the board meeting. He shall also not participate in the meeting during the discussion on the subject matter of the resolution regarding such an arrangement. However, in the case of a private company, the Act provides for an exception to Subsection (2) Section 182. Wherein the director giving the notice may participate in such a meeting after he has disclosed his interest or concern.
- Rule 9 of Companies (Meeting of Board and its Power) Rules, 2014 provides that the notices are required to be stored at the registered office of the company. Not only that these notices are to be preserved for a period of not less than 8 years but also shall be kept under the custody of the company secretary.
- According to Rule 16 of the Companies (Meeting of the Board and its Powers) Rules, 2014, the company is required to maintain at least one register wherein the details and particulars of the contracts and arrangement in which Directors are interested shall be maintained. The register is to be maintained in Form MBP – 4.
- The register is maintained as it facilitates maintaining records and tracing related party transactions. The register like the notices’ is to be kept in the custody of the company secretary and are to be kept at the registered office of the company.
The registered office of the company
It is obligatory for a company to have a registered office where it shall receive all the acknowledgements, correspondence, and notices. As per the provisions of Section 12 of the Companies Act, 2013, the company must within 30 days of its incorporation have its registered office.
The company is further required to verify its registered office within 30 days of its incorporation. The verification must be done by paying the requisite fee and by filing Form No.INC.22. Rule 25 of the Companies (Incorporation), 2014, provides for the documents that are to be attached along with the form.
Furthermore, according to Section 12(3) of the Companies Act 2013, every company must:
- The name and address of the registered office must be painted and affixed, this must be done in a conspicuous place, the letters must be legible. It is to be done outside all of its offices or place of business.
- The name of the company must be engraved on the common seal.
Letterhead of the company
The company is required to maintain letters and letterheads. The company must mention the following contents on the letterheads, notices, and other publications by the company:
- Name of the company
- Address of the registered office
- The Corporate Identity Number (CIN) of the company
- Telephone number of the company
- Email id of the company
- Website address of the company.
Opening of banking account
After the incorporation of the company, the company is required to open a bank account. The bank account must be in the company name and all the transactions of the company or on behalf of the company must take place through the bank account.
The following documents are required for opening a current bank account of the company:
- Certificate of incorporation
- Memorandum of association
- Articles of associations
- Board resolution regarding the opening of the bank account
- Details of the individuals who are authorized to operate the Bank account
- PAN Card of the company
- List of directors (updated)
- Identity proof of authorized signatories
The list of documents varies as per the requirements of the various banks.
Issuance of share certificate
As per the provisions of Section 56(4) of the Companies Act, 2013, every company is required to deliver the certificates transferred or allotted or transmission:
- In case of issuance to the subscribers to the memorandum of association within a period of 60 days from the date of incorporation.
- In the case of allotment of any of the shares of the company within a period of 60 days from the date of allotment of such shares.
- In the case of any allotment of debenture of the company within a period of 6 months from the date of allotment of such debentures.
The share certificates are issued in a prescribed format. It is issued under the common seal of the company and it is signed by either two directors or one director and company secretary.
The share certificates are issued in Form No. SH.1 as provided under Rule 5(2) of the Companies (Share Capital and Debentures) Rules, 2014.
Allotment of securities and payment of stamp duty
The company is required to allot the shares to its subscribers within 60 days from the date of incorporation of the company. On issuance of share certificates, due stamp duty must be paid in accordance with the respective stamp duty Act and allied rules and regulations.
Filing of annual returns
As per the provisions of Section 92 of the Companies Act, 2013, every company is required to file its annual return. The company is required to file the annual return within 60 days from the date on which the annual general meeting is held.
According to Rule 11 of Companies (Management and Administration) Rules, 2014, the return is to be filed in Form No. MGT.7. The company having paid-up share capital of rupees 10 crores or turnover of 50 crores or more shall require its annual return to be certified by a company secretary and the certificate shall be in Form No. MGT.8.
Declaration of commencement of business
- The company after its incorporation has to file for a declaration of commencement of business. Provisions pertaining to the declaration of commencement of business are set forth under Section 10A of the Companies Act of 2013. As per Section 10A, the director of the company is required to file a declaration within 180 days of the date of incorporation of the company.
- The declaration is to be filed with the registrar. It shall state that every subscriber to the shares of the company has paid the said value of the shares for which he subscribed for. According to Rule 23A of the Companies (Incorporation) Fourth Amendment Rules, 2018, the declaration filed by the director under Section 10 A is to be filed in Form No, lNC-20A.
- Furthermore, the declaration is to be filed as provided in the Companies (Registration Offices and Fees) Rules, 2014. The said declaration must also be verified by a practicing Chartered Accountant (CA) or a Company Secretary (C.S) or a Cost Accountant.
- If a company fails to comply or defaults in complying with the provisions of Section 10 A of the Companies Act, 2013, then the company shall be liable to a penalty of 50,000 rupees.
- Further, any officer who is responsible for the default in compliance shall also be liable to pay a penalty of rupees 1000 for each day continuing up to the default.
Summary checklist
- The first board meeting is to be held within 30 days of the date of incorporation.
- The company is required to hold an annual general meeting within 9 months from the date of closing of its first financial year.
- The company is required to appoint its first auditor within 30 days of the date of registration of the company.
- The directors are required to disclose in the first board meeting itself, their concerns or interest in any company or association.
- The company is required to verify its registered office within 30 days of its incorporation.
- The company is required to maintain letters and letterheads in the given format.
- Post incorporation the company is required to open a bank account and all the transactions of the company shall take place through the bank account.
- Shares are to be allotted to its subscribers within 60 days from the date of incorporation of the company.
- Every company is required to deliver share certificates within a period of 60 days from the date of allotment of such shares.
- Annual returns of the company are required to be filed within 60 days from the date on which the annual general meeting was held.
- The company is required to file for a certificate of declaration of commencement of business within 180 days of the date of incorporation of the company.
References
- https://www.indiafilings.com/learn/post-incorporation-compliances-company/
- https://www.setindiabiz.com/learning/post-incorporation-compliance-private-limited-company/
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