Annual Compliance Checklist for Private Limited Companies

Running a private limited company requires legal and regulatory Annual compliance checklist for private limited companies , including annual filing, board meetings, and statutory register maintenance. Companies must also comply with Income Tax and GST regulations. Additional situational compliances may apply based on the business nature and operations scale. Let’s explore the annual compliance checklist for private limited companies.

Compliance Companies Act:

Board Meetings

Private limited companies are legally mandated to conduct board meetings as per the provisions of the Companies Act. The minimum number of board meetings that must be held in a calendar year is four, with not more than 120 days between two consecutive meetings. These meetings are intended to address a range of issues related to the company’s operations, finances, and legal compliance.

It is mandatory to prepare and maintain minutes of the board meetings in the statutory registers. Non-compliance with these requirements can result in significant penalties and legal repercussions.

In the case of private limited companies with paid-up capital of less than Rs. 50 lakh and turnover below Rs. 2 crores, only two board meetings are mandatory. To avoid penalties, it is crucial to adhere to the prescribed timelines for holding board meetings.

For instance, a company incorporated on 1 April 2022 with a financial year from 1 April to 31 March should hold its first board meeting within 30 days of incorporation, i.e., by 30 April 2022. Subsequent meetings must be held between specific intervals throughout the year, as mandated by the law.

Appointment of Auditor

Under the Companies Act, appointing an auditor is a crucial annual compliance checklist for private limited companies requirement . The appointment of the auditor must take place within 30 days of the company’s incorporation.

The appointed auditor is expected to hold office until the conclusion of the company’s first Annual General Meeting (AGM), following which they are appointed for a consecutive term of five years. Failure to appoint or remove the auditor with the approval of the company’s shareholders can result in legal action and hefty fines.

In the case of ABC Private Limited, which was incorporated on 1st April 2022, it must conduct its first board meeting within 30 days of its incorporation.

The appointment of the auditor must take place during or after this meeting, with the due date for the appointment being 29th April 2022. It is crucial for private limited companies to adhere to this compliance requirement to avoid any penalties or legal action.

Issuance of Share Certificates under Companies Act 2013

Private limited companies are mandated to issue share certificates to their shareholders within 60 days of the company’s incorporation or allotment of shares. Share certificates are crucial documents that serve as evidence of share ownership and provide details such as the shareholder’s name, number of shares held, and date of allotment. Failure to comply with the issuance of share certificates within the stipulated time frame may result in penalties and legal repercussions.

Additionally, private limited companies must maintain a register of members containing the details of all shareholders, which should be regularly updated and made available for inspection by shareholders and regulatory authorities.

Due Date for Issuance of Share Certificates Assuming a company, ABC Private Limited, is incorporated on 1 April 2022, the issuance of share certificates should be completed within 60 days of the allotment of shares. This implies that the share certificates should be issued by 29 May 2022, provided that shares are allotted in the first board meeting.

INC-20A

Under the Companies Act, private limited companies are obligated to file a declaration of commencement of business, commonly known as INC-20A, within 180 days of its incorporation. This filing is mandatory and must be submitted to the Registrar of Companies (ROC). The declaration confirms that the company has started its business operations and complied with all the legal formalities.

Additionally, private limited companies must open a bank account in the company’s name and conduct all business transactions through it, to ensure transparency and accountability in the company’s financial affairs. The bank account must be opened within 30 days of incorporation, and its details updated with the ROC. Failure to comply with these provisions may result in fines and legal action.

For example, if XYZ Private Limited Company was incorporated on 1st April 2022, the due date for filing Form INC-20A for the commencement of business would be 27th September 2022, which is 180 days from the date of incorporation.

Annual General Meeting

Private limited companies are obligated to hold an Annual General Meeting (AGM) once a year. The AGM must be conducted within six months of the conclusion of the company’s financial year.

This meeting is a crucial platform for shareholders to discuss and approve various matters, such as financial statements, dividends, appointment of auditors, and appointment of directors. It also provides an opportunity for shareholders to interact with the board of directors and express any concerns or queries they may have. Non-compliance with these provisions can result in substantial fines and legal action against the company and its directors.

In the case of XYZ Private Limited Company, which was registered on April 1, 2022, the due date for its first Annual General Meeting (AGM) would be within 9 months from the end of the financial year, i.e., December 31, 2023.

For a company that has been in operation for a longer period, the due date for AGM would be September 29, 2023. Subsequent AGMs should be held within six months of the end of the financial year. Therefore, the due date for the second AGM would be September 30, 2024.

Minutes of Meeting

Taking accurate minutes of meetings is a critical requirement for private limited companies to maintain transparency and ensure compliance with legal formalities. Here’s an example of the minutes of a meeting held by XYZ Private Limited Company:

Minutes of Meeting for XYZ Private Limited Company Date: 1st May, 2023 Time: 2:00 PM Location: Registered Office, Mumbai

Present: Mr. A, Mr. B, Mr. C, and Mr. D

Agenda:

• Approval of the Minutes of the Previous Meeting
• Appointment of New Director
• Discussion on the Financial Performance of the Company
• Any Other Business

The meeting commenced with the approval of the minutes of the previous meeting held on 1st April, 2023, which was unanimously approved by the Board.

Next on the agenda was the appointment of a new director. Mr. E was appointed as a new director of the Company. The Board extended a warm welcome to Mr. E and wished him success in his new role.

The Board then discussed the financial performance of the Company for the quarter ended 31st March, 2023. The Board expressed satisfaction with the performance and approved the financial statements.

There was no other business to transact, and the meeting concluded with a vote of thanks to the Chair.

These minutes were maintained in a prescribed format and signed by the Chairman of the meeting, ensuring compliance with legal formalities. The minutes are available for inspection by shareholders and regulatory authorities, ensuring transparency and accountability.

Books of Accounts

Maintaining accurate and up-to-date books of accounts is a crucial aspect of running a private limited company. These books of accounts provide a comprehensive record of the company’s financial transactions, and they serve as a vital tool for making informed business decisions. As per the Companies Act, private limited companies are required to maintain their books of accounts in a prescribed format, and these books need to be updated regularly on an accrual basis.

At the end of each financial year, the company needs to prepare financial statements, including the balance sheet, profit and loss statement, and cash flow statement. These statements need to be audited by a qualified auditor and approved by the board of directors before being presented to the shareholders at the AGM.

Maintaining proper books of accounts is not only a legal requirement but also a best practice that can help the company in various ways. Accurate and up-to-date books of accounts can help the company in monitoring its financial performance, identifying areas of improvement, and making informed decisions.

Non-compliance with these provisions can attract hefty penalties and legal action against the company and its directors. Therefore, it is essential for private limited companies to maintain proper books of accounts and ensure compliance with all the legal provisions.

Audit Outline

To conduct an effective audit, the following outline is generally followed:

• Preliminary Review – The auditor will review the company’s books of accounts and other relevant documents to understand the nature and scope of the audit.
• Planning – The auditor will plan the audit, including identifying the areas of high risk and determining the audit approach.
• Fieldwork – The auditor will conduct fieldwork, including gathering evidence, testing the internal controls, and verifying the financial transactions.
• Reporting – The auditor will prepare the audit report, which includes the auditor’s opinion on the financial statements and any instances of non-compliance with the applicable laws and regulations.

Follow-up – The auditor may conduct follow-up procedures to ensure that the company has taken appropriate corrective actions on the instances of non-compliance identified during the audit. It is important for private limited companies to ensure that they comply with the audit requirements to maintain the trust of their shareholders and other stakeholders. Non-compliance can result in significant financial and reputational damage to the company.

Directors Report

Private limited companies are legally mandated to prepare a comprehensive report of the board of directors in accordance with the Companies Act. The report includes crucial information about the company’s financial performance, operations, and future growth prospects. It also encompasses a statement regarding the company’s compliance with applicable laws and regulations. Approval by the board of directors and inclusion in the annual report are necessary steps for the completion of the board report.

The board report plays a vital role in providing valuable insights to shareholders and stakeholders about the company’s performance and future plans. Non-compliance with these regulations can result in severe penalties and legal action against the company and its directors.

MCA Annual Filing

The two essential e-forms that need to be filed are AOC-4 and MGT-7.

AOC-4 is the annual financial statement that provides information about the company’s financial performance, including the balance sheet, profit and loss statement, and cash flow statement.

On the other hand, MGT-7 is the annual return that contains details about the company’s shareholding pattern, board composition, and other critical information. It is imperative for private limited companies to file these e-forms within the prescribed timelines. Failing to comply with this requirement can attract penalties and legal action against the company and its directors. Therefore, companies must ensure timely and accurate annual filings to avoid any compliance-related issues.

Annual Compliance Checklist for private limited companies Income Tax Act:

Private limited companies are required to comply with the provisions of the Income Tax Act when it comes to advance tax payments. The following is a timeline for advance tax payment that private limited companies need to adhere to:

1st Instalment – 15% of estimated advance tax liability by 15th June

2nd Instalment – 45% of estimated advance tax liability by 15th September

3rd Instalment – 75% of estimated advance tax liability by 15th December

4th Instalment – 100% of estimated advance tax liability by 15th March

It is crucial for private limited companies to assess their advance tax liability and make timely payments to avoid any interest and penalties.

Income tax return Tax audit

ITR for companies is shall be filed by before 30^th Sept, 2023,

Tax audit; The purpose of a tax audit is to ensure that the company has maintained proper books of accounts and complied with the tax laws and regulations. The auditor will examine the company’s books of accounts, verify the accuracy of the financial statements, and ensure that all taxes have been paid correctly.

In case the tax auditor finds any discrepancies or errors in the financial statements or tax payments, the company will be required to rectify them and pay any additional tax liability or penalty, if applicable. Failure to comply with the tax laws and regulations can result in penalties and legal action by the tax authorities, which can be detrimental to the company’s reputation and financial health.

Therefore, private limited companies should ensure that their accounts are maintained accurately and in compliance with tax laws and regulations. They should also ensure that their income tax returns and tax audit reports are filed on time to avoid any penalties or legal action by the tax authorities.

TDS Return Filings

Under the Income Tax Act, private limited companies are required to comply with the TDS (Tax Deducted at Source) provisions. This involves deducting TDS from payments made to vendors, contractors, employees, and other parties as mandated by the law.

The TDS deducted must be deposited with the government within the prescribed timelines, and private limited companies must file TDS returns periodically, usually on a quarterly basis. Moreover, it is essential for private limited companies to issue TDS certificates to parties from whom TDS has been deducted. Timely compliance with TDS provisions is critical to avoid interest, penalties, or legal action. Thus, private limited companies should ensure that they adhere to the TDS provisions in a timely and accurate manner.

GST Annual Compliance 

As per the Goods and Services Tax (GST) regime, companies are required to comply with the GST provisions. Currently, there are two regular returns that companies need to file: GSTR-1 and GSTR-3B.

GSTR-3B is a summary return for reporting outward supplies, ITC details, payment of taxes, etc. It needs to be filed by every company on a monthly basis by the 20th of the subsequent month.

On the other hand, GSTR-1 is a detailed return for reporting outward supplies. It requires companies to file invoice-level details. Companies with an annual turnover exceeding Rs. 1.5 crore need to file it monthly, while other companies can file it quarterly.

Additionally, companies with a turnover exceeding Rs. 2 crore need to file an annual return, which is a reconciliation return.

The due date to file the annual return for FY 2022-23 is up to 31st December 2023. It is imperative for companies to ensure timely and accurate compliance with the GST provisions to avoid any interest, penalties, or legal action.

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