Compliance for companies and in India is crucial to ensure adherence to legal and regulatory requirements mandated by the Ministry of Corporate Affairs (MCA) and other relevant authorities. These compliances help maintain the legal status of the entity, protect stakeholders’ interests, and avoid penalties. Here’s a detailed guide on the key compliances for companies in India:
Company Compliances
1. Annual Filings
2. Board Meetings and Minutes
3. Statutory Registers and Records
4. Compliance Certificates
5. Income Tax and GST
6. Corporate Governance
7. Other Compliances
Best Practices for Compliances
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Company compliance refers to adhering to the various laws, rules, and regulations set by the government and regulatory authorities, such as the Companies Act, 2013, Income Tax Act, and rules set by the Ministry of Corporate Affairs (MCA), SEBI (for listed companies), and others. These rules ensure that a company operates legally and ethically.
The key compliance requirements include:
- Annual General Meeting (AGM): Must be conducted within six months from the end of the financial year.
- Annual filing with the RoC, including Form AOC-4 (financial statements) and MGT-7 (annual return).
- Board meetings: At least four board meetings per year with a gap of not more than 120 days between two meetings.
- Income tax return (ITR): Filed annually by the company.
- Director’s KYC: All directors must file their KYC details using DIR-3 KYC.
Companies must:
- Maintain books of accounts, including all receipts, sales, purchases, and expenses.
- Prepare financial statements: balance sheet, profit & loss account, and cash flow statement.
- Conduct a statutory audit by a qualified chartered accountant annually, regardless of the company’s turnover.
- Ensure timely filing of Form AOC-4 for financial statements and Form MGT-7 for the annual return.
Every company, except One Person Companies (OPCs), must hold an AGM within six months from the end of the financial year, typically by September 30th of each year. In the AGM, shareholders approve financial statements, appoint/reappoint directors, and declare dividends, among other matters.
The penalties for non-compliance can vary based on the type of violation:
- Late filing of returns may attract fines ranging from ₹100 per day of default.
- Failure to conduct board meetings or AGMs can result in penalties on directors.
- Non-compliance with statutory audit requirements or other mandatory filings can lead to fines, imprisonment, and the company being marked as a dormant company or struck off from the register.
Every director of a company must have a Director Identification Number (DIN) issued by the MCA. It is mandatory to update the KYC details of the DIN annually through DIR-3 KYC. Failure to file the DIR-3 KYC will result in deactivation of the DIN and a penalty of ₹5,000.
The company must file its annual return in Form MGT-7 within 60 days from the date of the AGM. The return includes details about the company’s shareholders, directors, and financial status. Private limited companies must also submit financial statements through Form AOC-4 within 30 days from the AGM.
Newly incorporated companies must:
- File a declaration of commencement of business (Form INC-20A) within 180 days of incorporation.
- Appoint the first statutory auditor within 30 days of incorporation.
- Hold their first board meeting within 30 days of incorporation.
- File their financial statements and annual return for the financial year in which they are incorporated.
Taxation compliance involves:
- Filing of annual income tax returns (ITR).
- Payment of advance tax if the tax liability exceeds ₹10,000 in a year.
- Tax audits if the company’s turnover exceeds ₹1 crore (for businesses) or ₹50 lakhs (for professionals).
- Deducting and depositing TDS (Tax Deducted at Source) on salaries and payments to contractors, professionals, etc.
- Filing GST returns if the company is registered under the Goods and Services Tax (GST).
Listed companies must comply with additional requirements, including:
- Filing quarterly financial results with SEBI.
- Maintaining a vigil mechanism for directors and employees.
- Ensuring compliance with corporate governance norms under SEBI’s Listing Obligations and Disclosure Requirements (LODR).
- Conducting secretarial audits and filing reports annually.
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