A Private Limited Company enjoys an identity separate from its Directors.
Thus, in order to maintain its active status, every business is required to file
annual compliances for a private limited company with the Ministry of Corporate
Affairs (MCA). Since the inception of the Companies Act in 1956, the scope of
private limited companies has undergone a myriad of changes.
The Ministry of Corporate Affairs and the Registrar of Companies, in an attempt
to limit the functionalities of private limited companies, issue a lot of
compliances as mentioned under the Companies Act, 2013. These complex
terminologies might be a little difficult to comprehend for a non-professional.
Thus, it is advisable to consult a professional right after private limited
company registration to deal with your annual compliances.
Private Limited Company Compliances
According to Section 149 (1) of the Companies Act, 2013, the minimum number of
directors required to incorporate a private limited company is two and the
maximum is fifteen. In addition to this, it has a threshold limit of 200
members. All the shareholders of a private limited company have a liability,
limited to the extent of the capital invested by them in the firm.
On the other hand, a public limited company registration requires a minimum of
three directors at the time of its incorporation. A public limited company
registration enjoys more benefits in comparison to private limited company
registration, in terms of perpetual existence, ease of transferability and
borrowing capacity. A private company must also file its annual compliance with
the Registrar of Companies, even in case of nil annual turnover.
What are the Annual Compliances for Private Limited Company?
Almost all activities performed by a private limited company are regulated by
the Companies Act, 2013. These include the appointment, qualification,
remuneration, and retirement of the company's directors and other aspects such
as conducting the board meetings and shareholder meetings. It is always a better
choice to seek professional advice to understand the legal requirements and to
ensure timely fulfillment of all mandatory compliances so as to waive off the
penalties. Outsourcing annual compliances for the private limited company after
private limited company registration also allows you to focus on the key areas
of your business.
The due dates for the annual filing of a private limited company are based on
the date of its Annual General Meeting. If a business regularly fails to meet
annual compliances for private limited company, it may lead to the removal of
the company's name from the MCA register and permanent disqualification of the
Benefits of Annual Compliances for Private Limited Company
Greater Credibility: The date of filing annual compliances for private limited company is
displayed on the MCA portal and is visible to everyone. Thus, the regularity
in filing compliances increase your business's credibility, attracting
customers, helping obtain government tenders and attaining loan approvals
Attracts investors:Financial records and compliances are the key points of focus with regard to
investors. Before investing in your business, investors check the regularity of
filing annual returns on the MCA portal. Thus, regular filing of annual
compliances for private limited company is a quintessential part to obtain
Maintain active status of your business:Filing annual compliances for private limited company is essential to avoid
penalties on accounting services. Failure to file may also reduce the status of
your business to default and levy huge penalties. Moreover, the company will
also be declared 'in-operational' and removed from the Registrar of Companies.
The directors of such companies are debarred from all future businesses. With
effect from July 2018, an additional fee of Rs 100 per day will be charged per
day from the due date of filing.
Documents required for Annual Compliances for Private Limited Company
The documents requirement for Annual Compliances for Private Limited Company
- Certificate of Incorporation
- PAN Card of Directors
- MOA (Memorandum of Association) and AoA (Articles of Association) of
- Audited Financial Statements
- DSC (Digital Signature Certificate) of Directors
- Audit Report and Board Report
- Annual Compliances for Private Limited Company
Event-based Annual Compliances for Private Limited Company
Appointment of First Auditor:
The Body of Directors is required to appoint an auditor within thirty days of
incorporation of the company. A private limited company that fails to appoint an
auditor is liable to pay a penalty of Rs 300 per month. In addition, the company
will not be allowed to commence business. He/She is required to stay in the
office till the completion of 1st AGM
A subsequent auditor is appointed to monitor the fair dealings of a company in
terms of its financial position. He/She is appointed in the first AGM and
continues to stay in the same position till the sixth AGM. As per the Companies
Act, 2013, a subsequent auditor is appointed by the filing Form ADT-1.
The first board meeting is required to be held within one month or thirty days
of its incorporation. Four board meetings are required to be held in each
financial year. Also, one should note that the gap between two consecutive
meetings cannot be more than 120 days. Declaration of Board Meetings is to be
duly informed to each director at least seven days before the meeting date.
Annual General Meeting:
An Annual General Meeting, commonly known as AGM, is one of the most essential
annual compliances for private limited company. At the AGMs, the Board of
Directors of the company are required to present its true financial position to
the shareholders. AGM is required to be organized on or before 30th September
every financial year during working hours of the company. The AGM should not be
held on public holidays or after business hours. It must be held on the
registered office after issuance of notice of at least 21 days.
Filing of Annual Returns:
All private limited companies are required to file their annual returns within a
time span of sixty days of holding the Annual General Meeting. This can be done
by filing MCA Form MGT-7. Failure to file annual returns levy a penalty of Rs
200 per day from the due date of non-filing
Filing of Financial Statements:
Every private limited company is required to file their financial statements,
i.e., Profit and Loss Account and Balance Sheet along with Director Report by
filing Form AOC-4 within thirty days of holding the Annual General Meeting.
Failure to file Form AOC-4 levies a penalty of Rs 200 per day.
All private limited companies are required to file Form MBP-1 to disclose their
interest in other companies yearly on the first Board Meeting of every year.
DIR-3 KYC of Directors:
Directors owning DIN (Director Identification Number) with active status are
required to file DIR-3 KYC annually as per the Companies Rules, 2014. Failure to
file DIR-3 KYC will lead to inactive DIN status on the MCA portal. Please note
that no Form of annual compliances for private limited company can be filed if
DIR-3 stands deactivated.
Form DIR-8 is required to be filed by every director of a private limited
company at the time of his/her appointment ascertaining that he/she is not
disqualified/debarred from functioning as a Director of a company.
Commencement of Business Certificate:
The commencement of business certificate is required to be obtained by every
company within 180 days of the incorporation of the business. In case a company
fails to attain this certificate, there is a penalty of Rs 50,000 on the company
and Rs 10,000 per day on the directors.
Apart from annual compliances for private limited companies, there are
event-based compliances that need to be compiled on the occasion of occurrence
of an event. Here are specific instances of a few events:
- Change in the authorized capital or the paid-up capital of the private
limited company (Form SH-7 and PAS-3 respectively
- Allotment of new shares or transfer of new shares
- Offering loans to other companies
- Offering loans to directors of the company
- Appointment of managing or whole-time Director and their payment (to be
filed with the ROC)
- When a bank account is opened or closed, or there is a change in the
signatories of a bank account.
- If there is an appointment or change of the statutory auditors of the
To conclude, annual compliance can make or break your business. It enhances
credibility, brand loyalty and customer faith in your company. The cost of
non-compliance always turns out to be more than that of compliance. Thus, you
should consult a professional who may not only help you at every step of your
business but also coordinate with you in fulfilling all the compliance
requirements for your company while keeping you on the same page. Taxzona is a
comprehensive consultancy company that offers company registration in Mumbai,
with annual compliances, ROC filing and MCA filing effectively and