Considering 1.28 lakh companies were removed from the records of the Registrar of Companies (ROC), being in compliance with terms set by the government is crucial. Companies that are allowed the use of the “Pvt. Ltd.” suffix are listed with the ROC under the Companies Act 2013.
While there is always talk of annual compliance for private limited companies and meeting these norms among experts, let’s gain a simpler look into what this is.
An Overview of Annual Compliances
When it comes to operating a Private Limited Company, a very important aspect is keeping up with legal and regulatory norms. This comes in the form of annual compliance for private limited companies. With the help of accountants and an audit team, the companies have to provide a range of documents that act as proof for compliance measures.
By going through business records, tax records, ledgers, and other financial documents, auditors have to check that all the operations are in line with the standards set by the government.
Key Obligations During Compliance Filing
To meet the standards set by the regulatory authorities, you need to fulfill the below criteria:
- Appoint accountants within 30 days of being established
- Comply with tax laws and file returns such as income tax return filings
- File annual financial statements containing all relevant data
- Hold regular Board Meetings and Annual General Meetings
Documents Needed for Annual Compliance
When working on conducting annual compliance for private limited companies, you need to have the following in hand:
- Verified and audited financial statements such as ledgers, cash flow reports, P/L sheets, and balance sheets.
- Resolutions passed by the Board of Directors and minutes of the meeting from Board Meetings and AGMs.
- File annual returns with the ROC as well as other relevant official bodies.
- File regular tax returns as a record of income and amounts paid as taxes.
Further, registered companies need to submit form ITR-6 as a part of income tax return filing. This is mandatory under the Companies Act 2013 and is a part of maintaining financial compliance.
Importance of Maintaining Compliance
Annual compliance for a private limited company is an essential part of running a business smoothly. The effects of compliance can be better understood in terms of penalties and benefits.
Penalties Faced Due to Non-Compliance
If your company is found to be lacking in terms of annual compliance for a private limited company, you stand to face legal action. Further, the Companies Act 2013 lists the below penalties:
- Missed Meetings
- Board Meetings: a fine up to a value of 1 lakh INR plus an additional charge of 5000 INR for every day the meeting is delayed.
- Annual General Meetings (AGMs): a similar penalty of 1 lakh INR plus 5000 INR for every day the meeting is not conducted.
- Not filing financial statements:
A penalty of 1 lakh INR is levied on the company. Further, Directors may also face a fine of 25000 INR
- Not having or maintaining Statutory Registers
Your company can attract a fine of 25000 INR plus added fines for delays.
- Failure to disclose interests by the Directors
The Directors can be fined anything between 50000 – 1 lakh INR for this misstep.
- Skipping e-voting obligations
Companies may be charged with fines of up to 1 lakh INR plus added fines for delays.
- Failure to submit other forms
This includes income tax return filing, TDS filing, new appointments, and more. In case a Director resigns or is newly appointed, failure to register this change will result in a fine. A similar amount as above is fined for any deviations.
- Not paying annual fees to the ROC
Companies can be fined anywhere between 1000 – 10000 INR.
- Lack of a registered office
An amount of 1 lakh INR plus 1000 INR for delays is fined.
The best way to avoid all of these is by opting for annual compliance for a private limited company.
Benefits of Being in Compliance with Regulatory Norms
By complying with norms set by the regulatory authorities as a part of annual compliance for a private limited company, you stand to gain the below:
- Streamline business processes and increase efficiency
- Build trust and market reputation
- Manage business risks with effective controls
- Avoid legal issues, fines, and penalties
- Ensure transparency and accountability in operations
In combination, these help boost the image of a business and increase the faith that clients have in them. This makes conducting annual compliance for private limited companies crucial.
In Conclusion
Whether you are a smaller company or a multinational corporation, if you are running your business in India, you will be subject to the terms laid down by the ROC and Ministry of Corporate Affairs.
Complying with standards set by the governing bodies is essential when conducting business. One of the best ways to address this is by ensuring annual compliance for private limited companies.
Get your income tax return filing done on time and use this and other documents for the annual compliance.
