Checklist of Annual Compliance for Private Startups

A private limited company is obligated to adhere to certain terms and conditions when filing returns and ensuring compliance. These requirements are outlined by various legislative acts and administrative bodies to ensure proper governance and transparency. Some of these responsibilities include, but are not limited to:

1. Periodic Filing and Payments:
- Compulsory payment of Tax Deducted at Source (TDS) and Tax Collected at Source (TCS).
- Fulfilling Goods and Services Tax (GST) liabilities and making timely payments.

2. Non-Registrar Abidance of Periodic Returns:
- Filing of annual returns, as well as periodic returns such as quarterly and monthly returns for GST, TDS, and other applicable regulations.

3. GST Returns:
- Filing of GST returns on a monthly or quarterly basis, as required by the GST law.

4. TDS Returns:
- Quarterly filing of TDS returns, which report tax deductions made on payments to contractors, professionals, etc.

5. Evaluation and Payment of Advance Tax:
- Regular assessment and payment of advance tax in installments, as required by the Income Tax Act.

6. Filing of Tax Audit Report:
- Submission of a Tax Audit Report conducted by an authorized Chartered Accountant, in accordance with the Income Tax Act.

7. Filing of Income Tax Returns:
- Submission of Income Tax Returns at a flat rate of 30%, in addition to Education Cess, as per the provisions of the Income Tax Act.

8. Administrative Assessment:
- Compliance with various acts of law that pertain to the nature of the business, such as the Environment Protection Act, Competition Act, Prevention of Money Laundering Act, Factory Act, etc.
- Ensuring that business operations align with the legal requirements set out in these acts.

Maintaining proper compliance with these obligations is crucial for the smooth functioning and legitimacy of the private limited company. Failure to meet these requirements can lead to penalties, legal issues, and even the potential dissolution of the company. It's advisable for private limited companies to work closely with legal and financial experts to ensure that they remain in full compliance with the applicable laws and regulations.

Benefits of Annual Compliance

Maintaining compliance and filing annual returns is essential for a private limited company for several reasons:

1. Increased Credibility: Regular compliance with the law, including timely filing of annual returns, enhances the credibility of a company. The company's commitment to meeting legal requirements is displayed on the Master Data of the Ministry of Corporate Affairs (MCA) portal. This dedication to compliance can positively impact the company's reputation and standing, which is crucial for gaining trust and respect from stakeholders, including clients, partners, and customers.

2. Attracting Investors: When seeking investments or loans from investors or creditors, one of the primary aspects they assess is the financial health and compliance record of the company. By maintaining a consistent track record of filing annual returns, a private limited company demonstrates its financial stability and commitment to transparency. Investors are more likely to be interested in companies that have a solid compliance history, making it easier for them to make informed investment decisions.

3. Active Status Maintenance: Timely filing of annual returns is essential to keep a company's status active and avoid legal complications. Failure to file returns can lead to penalties and even a change in the company's status to "default." This can result in heavy fines and potential removal from the Register. Additionally, company directors may face disqualification from future appointments. Since July 2018, a daily penalty fee for delays in filing has been introduced, which accumulates until the return is filed.

Documents Required for Annual Filing of Company

These documents are crucial for the incorporation and ongoing operation of a private limited company in India. Let's break down their significance:

1. Certificate of Incorporation: This is the official document issued by the Registrar of Companies once the company is successfully incorporated. It certifies the company's existence as a separate legal entity. It includes details such as the company's name, registration number, date of incorporation, and registered office address.

2. PAN Card: The Permanent Account Number (PAN) is a unique alphanumeric identifier issued by the Income Tax Department to individuals and entities. A PAN card is essential for tax purposes and is required during various financial transactions. It's a fundamental requirement for any legal entity, including private limited companies.

3. Memorandum of Association (MoA) and Articles of Association (AoA): These documents outline the company's objectives, rules, regulations, and internal management structure. The MoA defines the scope of the company's activities, while the AoA lays out the rules governing its internal affairs.

4. Audited Financial Statements: Financial statements, including the balance sheet, profit and loss statement, and cash flow statement, provide an overview of the company's financial performance and position. These statements must be audited by an independent auditor to ensure accuracy and transparency.

5. Board Report and Audit Report: The board report is a comprehensive document that provides insights into the company's operations, financial performance, and future plans. The audit report is prepared by the independent auditor and includes their assessment of the accuracy and reliability of the financial statements.

6. Digital Signature Certificate (DSC): A DSC is an electronic form of signature that is used to sign electronic documents and filings. It ensures the authenticity and integrity of the documents being submitted to regulatory authorities. At least one director of the company must possess a valid and active DSC.

These documents collectively establish the legal and operational foundation of a private limited company. They facilitate transparency, compliance, and effective management, all of which are essential for the company's success and credibility. It's important for company founders and directors to be aware of these requirements and work with legal and financial professionals to ensure accurate and timely submission of these documents throughout the company's lifecycle.

Mandatory Annual Compliances:

1. First Meeting of Board: A meeting with all directors must be held within 30 days of incorporation. Notice of the meeting should be given at least seven days prior.

2. Subsequent Board Meetings: Minimum of 4 board meetings per year, with a gap of 120 days between two meetings. Directors' disclosures of interests are required to be filed (Form MBP-1).

3. Appointment of First Auditor: First auditor should be appointed by the Board within 30 days of incorporation. Filing ADT-1 is not mandatory.

4. Appointment of Subsequent Auditor: Auditor to be appointed in the first AGM, informing ROC through ADT-1 within 15 days.

5. Annual General Meeting (AGM): Private limited companies must hold an AGM on or before 30th September each year, with a 21-day notice.

6. Filing of Annual Return (Form MGT-7): Annual return should be filed within 60 days of AGM.

7. Filing of Financial Statements (Form AOC-4): Balance sheet, Director's report, and Profit and Loss account to be filed within 30 days of AGM.

8. Statutory Audit of Accounts: Audited financial statements must be prepared and audited by a Chartered Accountant annually.

9. Directors Report: This report should cover all relevant information as required by Section 134.

10. Maintenance of Books of Accounts and Registers: Various statutory registers, minutes of meetings, books of accounts, and financial statements must be maintained and updated.

11. Circulation of Annual Financial Statements: These documents, including the Directors Report and Auditors Report, should be sent to members at least 21 days before the AGM.

Event-Based Compliances: These are actions that trigger specific compliance requirements, such as changes in directors, share capital, registered office, etc. Timely completion of these steps helps avoid penalties and additional fees.

Consequences of Non-Compliance: Failure to comply with these requirements can lead to fines, penalties, and potential legal issues. The longer the non-compliance persists, the higher the penalties can become.