PRIVATE LIMITED COMPANY MANDATORY COMPLIANCES

PRIVATE LIMITED COMPANY is a separate legal and kind of independently and privately held small business entity. In this type of business entity, it limits the owner’s liability to their shares. Also, there is a limit in the number of shareholders to 50 and it restricts its shareholders from publicly trading shares. That means the company’s offers cannot be offered in an open stock trade and accordingly it cannot issue shares for public subscription. In general terms, private limited company does not invite public to subscribe its share capital.

In private Limited Company, the company itself is legally responsible for all liabilities, finances and every action that could take place. Means, the owner of the company is completely separated from it.

Today, the Private Limited Company is one of the most popular legal entities amongst every types of business (small, medium and large) due to various ADVANTAGES. Some of them are mentioned below:-

  • Liability – In private Limited Company, the liability of each member is limited to their shares only. Hence, the members cannot be held responsible personally for meeting company’s liabilities.
  • Perpetual Succession – In the eyes of law, the Private Limited Company formed have a completely distinct identity from its members. Due to that, the life of the company does not suffer in case of death of its members and hence will never come to an end.
  • Number of Directors – For the formation of Private Limited Company, there is a requirement of only two directors. This virtue makes it easy to form this type of entity.
  • Savings on Taxes – In Private Limited Company, one can easily saves a lot on unwanted taxes. As this form of business entity has the benefit of tax deductible allowances and costs, which can be redeemed against profits.
  • Subscription – Well, there is a condition that if the company is not able to receive 90% (amount of the shares issued within a certain period of time) of the amount then they are not supposed to commence their business further. But in case of Private limited Company one can easily ignore this condition cause they have a legal right to allot shares to the public without receiving any minimum subscription.

COMPLIANCES OF PRIVATE LIMITED COMPANY

     There are some compliance’s that are required to be followed by every Private Limited Companies. Otherwise, the Government might strike off your company and the directors might also get disqualified by the Government due to non-compliance. Here below a brief overview of some compliance’s to be follow:-

  • APPOINTMENT OF AUDITOR – After obtaining Certificate of Incorporation for your company, it is a foremost step to appoint a first auditor of your company. The Board of Directors must call a board meeting and appoint an auditor within the 30 days from the date of registration of the company. That auditor will be the Chartered Accountant (CA) who will audit the accounts of your company at the end of year. However, if the Board fails to appoint an auditor then it is necessary to intimate the members of the company for the same. And then they may appoint First auditor within the 90 days of such intimation. An auditor will get appointed for the five years and for that it is required to file form ADT-1.
  • HOLDING BOARD MEETING – As per Private Limited Company, it is mandatory to hold first meeting within the 30 days of incorporation of company. Minimum two meetings are required in a year. Means one meeting in each and half calendar year. Minimum gap required is of 90 days between these two meetings. In case, if more than two meetings take place then extra add on meeting will gets ignored.
  • HOLDING ANNUAL GENERAL MEETING (AGM) – It is required for each and every Private Limited Company to hold a meeting of its shareholders at least once in a year, within duration of six months from the date of closing of the financial year. There should also be a gap of 15 months between two AGMs. The discussing topics must cover the strategies, actions plans to be taken, financial statements, remuneration of directors, declaration of dividends, appoint of auditor etc. AGM should be held during the business hours of the day and that should not be the public holiday.
  • ANNUAL ROC FILINGS – It is required for Private Limited Company to file its annual returns and accounts once in a year to the Registrar Of Companies disclosing the details of its shareholders, directors etc. The following forms are required to be filled in this regard :-
  • E-FORM MGT-7 – it is required to file annual return within the 60 days of holding AGM for the period of 1st April to 31st
  • E-FORM AOC-4 – In this form, it is required for Private Limited Company to file its financial statements such as Balance Sheet along with the statement of Profit and Loss Account and Director’s Report.
  • FORM MBP-1 – In the first Board Meeting of Directors, it is required for every Director of the Company to disclose his interest in other business entities in each financial year. Though, in case of any change in the interest of Director from the earlier given MBP-1, a new and fresh MBP-1 needs to be filed.
  • FORM DIR-8 – it is required for every director of the Private Limited Company to file with the company disclosure of non-disqualification.
  • DIRECTOR’S REPORT – it is also mandatory to file Director’s Report every year with covering all the required information like their directorship in other companies under Section 134. It is also necessary to get signed the same by the Chairperson (as authorized by the Board but not so authorized by atleast two Directors).
  • MAINTENANCE OF STATUTORY REGISTERS AND BOOKS OF ACCOUNTS – As per Company Law, a Private Limited Company is required to maintain various statutory records and registers and books of accounts like Register of Directors and their attendance, Register of Members, Shares, Investments, Contracts, financial statements etc. it is also necessary to take utmost care of resolutions of the meetings of Board of Directors, Minutes Book of Board Meetings held, Minutes Book of General Meetings like AGM, Debenture Holder Meetings, Creditors Meetings etc. Such records should be kept open for its members (of course during business hours itself) for working purposes only and accordingly should be kept at the registered office of the company.
  • INCOME TAX COMPLIANCE’S – For Private Limited Company, it is required to do calculations and quarterly payment of Advance Tax. Then, do filing of Income Tax Returns for which Companies are taxable at the flat rate of 30%. If the turnover or gross receipts exceed the limit of Rupees one crore in the previous year then in that case Tax Audit is must. Then the turn comes for filing of Tax Audit Report.

OTHER MANDATORY EVENT BASED COMPLIANCES 

There are many more mandatory event based compliance’s which needs to be follow when the events takes place in the company. These events could be:-

  • Appointment or Resignation of Directors
  • Appointment of Managing Director or Whole Time Director
  • Appointment or Change in the Statutory Auditors
  • Allotment of Shares
  • Change in the Bank Signatories
  • New Allotment of Shares or Transfer of Shares
  • Loans to Directors
  • Change in the Authorized or Paid up Capital
  • Loans to Other Companies
  • Executing Agreement with related parties

So, here now if you are thinking of opening a Private Limited Company then these all of the above mentioned compliance’s you should adhere of. Other wise non-compliance or delays in filings process will attract penalties, fines and punishments. There might also a chance that the additional fees keep on increasing with the time. Thus, it is recommended to not to delay filings procedures related to Private Limited Companies.

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