Business Incorporation & Compliance

Mandatory Compliances for a Private Limited Company in India

The regulatory landscape for companies has significantly evolved with the Companies Act, 2013, moving from the simpler procedures under the Companies Act, 1956. The new Act introduces stringent provisions and stricter enforcement mechanisms, making timely compliance critical. Defaults can lead to substantial monetary penalties and other non-monetary correctional consequences for the company and its administrative personnel. Therefore, Private Limited Companies must adhere to all statutory compliances to avoid punitive actions. While compliance requirements for a Private Limited Company are generally less stringent than those for a Public Limited Company, adherence to the following mandatory compliances is essential: --- 

I. Board Meetings

1. First Board Meeting: 

Requirement: A Private Limited Company must convene its first Board Meeting within 30 days of its incorporation. 

Notice: A notice for this Board Meeting must be dispatched to every director at least 7 days prior to the meeting date.

2. Subsequent Board Meetings: 

Frequency: Every company is required to conduct a minimum of four Board Meetings annually. 

 Interval: The interval between any two consecutive Board Meetings shall not exceed 120 days. 

Exceptions: Certain specified classes of companies may be permitted to hold only two Board Meetings per year, provided there is a minimum gap of 90 days between such meetings.

II. Directors' Obligations

1. Disclosure of Interest by Directors: 

Mandatory Disclosure: Every director is obligated to disclose their interest or concerns in any other company, firm, body corporate, or association (including details of shareholdings). 

Timing of Disclosure: This disclosure is required at:

The first Board Meeting in which the individual participates as a director.

The first Board Meeting of the Board of Directors is held in every financial year.

Whenever there is any change in their disclosed interest. 

Form & Record: The disclosure must be made in

Form MBP-1 (along with a list of all relatives and concerns of relatives as per the definition of Related Party Transaction). This form must be filed timely and maintained in the company's records. --

III. Appointment of Auditors

1. Appointment of First Auditor: 

Procedure: The Board of Directors is responsible for appointing the first auditor of the company within 30 days of the date of incorporation. 

Tenure: This auditor will hold office until the conclusion of the company's first Annual General Meeting (AGM). 

Filing: For the appointment of the first auditor, the filing of Form ADT-1 with the Registrar of Companies (RoC) is not mandatory.

2. Appointment of Subsequent Auditor:  Procedure: The auditor is to be appointed by the shareholders at the

First Annual General Meeting (AGM). Tenure: This appointed auditor will hold office for a term extending until the conclusion of the sixth AGM. 

Filing: The company is responsible for informing the RoC about this appointment by filing Form ADT-1 within 15 days from the date of such appointment. It is the company's duty, not the auditor's, to ensure this filing. 

IV. Annual General Meeting (AGM) and Filings 1. Holding of Annual General Meeting:  

Timeline: Every company must convene an Annual General Meeting on or before September 30th of each year. 

Conditions: The meeting must be held during business hours, on a day that is not a public holiday, at either the registered office or within the same city, town, or village where the registered office is situated. 

Notice: A clear notice of 21 days is required to be dispatched to all shareholders of the company for the AGM. 

Filing of Annual Return (Form MGT-7):

Requirement: Every Private Limited Company is mandated to file its annual return in Form MGT-7 (or MGT-7A for certain small companies). 

Timeline: This filing must be completed within sixty days from the date of holding the Annual General Meeting. 

Period: The annual return covers the financial period commencing from April 1st and concluding on March 31st of every year.

3. Filing of Financial Statements (Form AOC-4): 

Requirement: Companies must file their audited balance sheet, along with the statement of profit and loss account and the Board’s Report, with the MCA in Form AOC-4. 

Timeline: This form must be filed within 30 days of the conclusion of the Annual General Meeting.

4. Statutory Audit of Accounts: Mandate: Every company must maintain proper books of accounts and have them audited by a practising Chartered Accountant. 

Process: The financial statements, after being approved by the Board of Directors, are submitted to the auditor. The auditor then provides an Audit Report along with the duly audited financial statements for filing with the Registrar. 

V. Other Post-Incorporation Compliances DPT-3 Filing: 

Requirement: Companies that have received money or loans that are due, and which fall under the definition of deposits or exempt deposits, must file Form DPT-3. 

Purpose: This filing pertains to the annual return of deposits or particulars of transactions not considered as deposits.

Adhering to these post-incorporation compliances is critical for maintaining good standing with regulatory authorities and avoiding penalties. Engaging experienced professionals for managing these compliances is highly recommended to ensure timely and accurate adherence to statutory requirements.