MANDATORY CORPORATE COMPLIANCES BY PRIVATE COMPANIES IN INDIA
Author: Ms. Jayshree Navin Chandra, Senior Partner and Ms. Nitika Bakshi, Associate at Zeus Law
Published in asiancommunitynews.com on 26th February 2023
The Companies Act, 2013 read with relevant rules (“Act”) provide for the various corporate governance norms and compliances that are essential for proper corporate operation and management and for protecting the rights of various stakeholders. The offences with associated penalties for violations of the various norms are laid out, requiring the corporate entities to meet the compliances prescribed.
This Article aims to discuss certain annual key compliances required of private limited companies.
- An individual who is to be appointed as a director of a company, is required to apply for and obtain a Director Identification Number. Further, every company is required to file the particulars of its directors and key managerial personnel with the Registrar of Companies (“ROC”) within 30 (thirty) days from the date of appointment and any change taking place in their designation.
- Every director is required to, at the first meeting of the board in which they participate as a director, and thereafter at the first meeting of the board in every financial year or whenever there is any change in the disclosures already made then at the first board meeting held after such change, disclose his concern or interest in any company(ies) or body corporate(s), firm(s) or other association of individual(s) as prescribed under the Act including directorship, partnership interest and shareholding in other companies.
- Each Director is also required to file, with the company in each financial year, the disclosure that they were not disqualified to be a director in the previous financial year.
Board Meeting Compliances
- The first board meeting of the company must be held within 30 days of the date of its incorporation. A company needs to conduct at least 4 meetings of its board of directors every year, with the interval between 2 such meetings not being more that 120 days.
- The Act prescribes that the quorum of the board meeting for private limited companies be 1/3rd of the total number of directors of the company or 2 directors, whichever is higher. Participation by video conferencing or other audio-visual means is also counted for the purpose of quorum.
- Notice calling the meeting, along with agenda and the notes to agenda, should be sent to all the directors at least 7 days before the date of board However, the board meeting may be called at a shorter notice to transact urgent business.
- The Annual General Meeting (“AGM”) provides members with an opportunity to collectively discuss the affairs of the company and to exercise their control over the management of the company. Numerous matters significant and integral to the company are transacted in this meeting including, consideration of financial statements, reports of the board of directors and the auditors, declaration of dividend, appointment of directors in place of those retiring and approval of appointment of auditors and fixing their remuneration. Further other items of business, referred to as special business, may also be transacted at an AGM.
- The AGM must be conducted each year within 6 months from the date of closing of the financial year. There should not be more than 15 months gap between the date of an annual general meeting of a company and that of the next.
- The notice is to be circulated to the shareholders, auditor and directors of the company at least 21 clear days prior to the AGM or AGM may be held at a shorter notice by obtaining consent from at least 95% of the members entitled to vote thereat.
- A copy of the financial statements, giving true and fair view of the state of affairs of the company and which is duly adopted at the AGM of the company, is required to be filed with the ROC within 30 days of the date of the AGM.
- A balance sheet, profit and loss account, cash flow statement, along with any other explanatory statement attached in these documents, form part of the financial statements.
- Private Limited Companies are required to file with the ROC, within 60 (sixty) days of the holding of the AGM, their annual return containing the particulars pertaining to the company for the previous financial year. The particulars should include its registered office; principal business activities; particulars of its holding, subsidiary and associate companies; shares, debentures and other securities and shareholding pattern; particulars of members and debenture holders along with changes therein; promoters, directors, key managerial personnel along with changes therein; meetings of members, board and its various committees along with attendance details; and remuneration of directors and key managerial personnel. The annual returns of private limited companies, having paid-up share capital of Rs. 10 Crore or more or turnover of Rs. 50 Crore or more, are required to be certified by a company secretary.
- All companies, who get supplies of goods or services from micro and small enterprises and whose payments to micro and small enterprise suppliers exceed 45 days from the date of acceptance of the goods or services, are required to submit a half yearly return to the Ministry of Corporate Affairs (“MCA”), by 31st October for the period from April to September and by 30th April for the period from October to March, stating the amount of payment due and the reasons of the delay.
- Further, companies are required to maintain certain statutory registers such as register containing particulars of its directors and key managerial personnel; register of members, debenture-holders and any other security holders; register of investments and securities held, loan, securities and guarantees register; and register of contracts or arrangements in which directors are interested.
The MCA has been periodically reviewing the compliances required under the Act and the Rules made thereunder with an objective of creating and preserving a conducive business and economic environment while encouraging transparency, enhancing accountability and protecting investor interests. It is imperative for foreign investors investing in India, whether in wholly owned entities or as joint ventures, to be cognizant of the mandatory compliances.
(This Article is solely for information purposes, does not constitute legal or professional advisory and should not be relied upon or used as a substitute for legal advice from attorney.) About the Authors: Jayshree Navin Chandra, Senior Partner at ZEUS Law, has been a practicing lawyer since 2001 with extensive corporate and transactional advisory experience. She manages and oversees the Corporate & Commercial, M&A, Infrastructure & Real Estate and Technology practice at the firm and advises and represents clients ranging from Fortune 500 companies to start-ups as well as Central and State Government departments and public bodies in a wide range of domestic and cross border transactions, across industries. Nitika Bakshi, is an Associate at ZEUS Law and works in the Corporate, Commercial & Technology practice vertical. ZEUS Law Associates is an ISO certified full service corporate commercial law firm with a team of dedicated and experienced lawyers well versed in handling domestic and cross border transactions across sectors, jurisdictions and regulatory landscapes. The firm’s practice areas include Corporate & Commercial Law, M & A, Infrastructure & Real Estate, Litigation, Alternate Dispute Resolution, Indirect Tax, Technology & E-commerce and NRI Services.