Compliance Requirements for Private Limited Companies in India

Introduction

Private Limited Companies (Pvt Ltd) are among the most popular business structures in India due to their distinct advantages, such as limited liability, separate legal identity, and ease of ownership transfer. However, running a Private Limited Company also entails adhering to various compliance requirements mandated by the Companies Act, 2013, and other regulatory frameworks. Ensuring timely and accurate compliance not only helps maintain the company's legal standing but also builds credibility and fosters growth.

This blog delves into the key compliance requirements for Private Limited Companies in India, segmented into four essential areas.

Annual Compliance

Private Limited Companies are required to meet several annual compliance obligations to ensure transparency and proper governance. These include:

1. Filing of Annual Returns

Every Private Limited Company must file its annual return in Form MGT-7 with the Registrar of Companies (RoC). This document provides details such as the company’s shareholders, directors, and financial performance for the financial year.

2. Financial Statements

The company is obligated to file its audited financial statements using Form AOC-4. These statements include the balance sheet, profit and loss account, cash flow statement, and auditor’s report.

3. Annual General Meeting(AGM)

Though AGMs are not mandatory for Private Limited Companies with two members, those with more members must conduct AGMs to approve financial statements and appoint/reappoint auditors.

4. Income Tax Filings

Private Limited Companies must file income tax returns annually by the due date, usually 30th September, and ensure compliance with tax audit requirements if applicable.

Event-Based Compliance

Certain events or changes in a company's structure or operations trigger additional compliance requirements. These include:

1. Change in Directors

When there is a resignation or appointment of directors, the company must file Form DIR-12 with the RoC within 30 days.

2. Change in Registered Office

A shift in the company’s registered office requires filing Form INC-22 with the RoC.

3. Allotment of Shares

If the company issues new shares, it must file Form PAS-3 and update its shareholding structure.

4. Significant Beneficial Ownership (SBO)

Companies must declare and disclose any individual who owns 10% or more of the company’s shares or voting rights in Form BEN-2.

Secretarial Compliance

To maintain proper governance, Private Limited Companies must adhere to specific secretarial practices.

1. Maintenance of Statutory Registers

Companies must maintain statutory registers, including those of members (MGT-1), charges (CHG-7), and directors’ disclosures.

2. Board Meetings

A minimum of four board meetings must be conducted annually, with a gap of not more than 120 days between two meetings. Detailed minutes of these meetings must be recorded and maintained.

3. Auditor Appointment

Under Section 139 of the Companies Act, 2013, companies must appoint an auditor within 30 days of incorporation and ensure regular filings with the RoC regarding the auditor’s tenure and changes.

4. Compliance Certification

Certain companies may require a Company Secretary (CS) to issue compliance certificates as per SEBI and RoC regulations.

Statutory Compliance

Statutory compliance involves adhering to labour, tax, and environmental laws.

1. Goods and Services Tax (GST)

If applicable, companies must register for GST and file monthly, quarterly, or annual GST returns based on turnover and category.

2. Employee Provident Fund (EPF)

Companies employing more than 20 workers must register under the EPF Act and deposit employee and employer contributions monthly.

3. Professional Tax

Companies operating in states where professional tax is applicable must deduct and deposit the tax on behalf of their employees.

4. Other Industry-Specific Compliances

Companies operating in specific sectors, such as pharmaceuticals or food, must adhere to additional compliances under the Drugs and Cosmetics Act or Food Safety and Standards Act, respectively.

Conclusion

Adhering to compliance requirements is not just a legal obligation for Private Limited Companies in India but also a means to safeguard the company's reputation and financial health. Non-compliance can result in hefty penalties, legal challenges, and potential loss of business opportunities. By staying updated on compliance mandates and leveraging professional expertise when needed, companies can focus on sustainable growth and ensure seamless operations in a competitive business environment.