Compliances for Private Ltd. Companies under the Companies Act, 2013

 

The Companies Act, 2013 came into force from 1st April, 2014. As per the Companies Act, 2013, annual compliances for Private Ltd. Companies are as follows:-  

Legal Requirement for a Private Ltd. Company

Minimum number of Shareholders and Directors required to form a Private Limited Company along with maximum limit has been tabulated as shown below:-

Limit

No. of Directors

No. of Shareholders

Minimum

2

2

Maximum

15*

200

*As per section 149(1) of the Act, a Company may appoint more than 15 directors after passing a Special Resolution.
Requirement of a Resident Director: – Every Company shall have at least one Director who has stayed in India for at least 182 days in the previous calender year.
Newly incorporated companies between 1st April, 2014 and 30th September, 2014 should have a resident director either on the date of incorporation or within six months of that.
Requirement of a whole-time Company Secretary: – All Companies having a paid up capital of Rs 5 crores or more has to mandatorily appoint a Company Secretary in whole time employment.
Requirement of Internal Financial Controls over Financial reporting: – All Companies are required to design and implement Internal Financial Controls over financial reporting.
Rule 8(5)(viii) of the Companies (Accounts) Rules, 2014 requires the Board of Directors’ report of all companies to state the details in respect of adequacy of internal financial controls with reference to the “financial statements”.
Maintenance of Cost records: – Companies with an overall turnover of Rupees thirty five crore or more during the immediately preceding financial year are required to maintain Cost records. For more information, please click here.
Minimum Paid up Capital Requirement: – As per the Companies Amendment Act, 2015, minimum paid up capital requirement has been done away with. The initial authorized capital of the company is to be  mentioned in the Memorandum of Association of the company. Authorized Capital of the company can be increased at any time after taking approval of the shareholders.
As per Section 2(8) of the Companies Act, 2013
“authorised capital” or “nominal capital” means such capital as is authorized by the memorandum of a company to be the maximum amount of share capital of the company.
Based on above provisions and amendments, we can say, that authorised share capital can also be Re 1.

Incorporation of a Private Company under the Companies Act 2013

A Company can be incorporated in two ways : –
a) Using non Integrated Forms (i.e. a series of forms)
b) Using new Integrated Form INC 29 
For details on steps required to be followed to incorporate a new Private Company, please click here

Board Meetings

  • Every Company shall hold the first meeting of the Board of Directors within 30 days from the date of its incorporation.
  • Every Company other than One Person Company, Small Company, Dormant Company shall hold minimum four Board meetings in every calendar year.
  • Gap between two consecutive Board meetings should not be more than 120 days in every year.
  • One Person Company, Small Company, Dormant Company shall be deemed to have complied with the meeting requirement, if at least one Board Meeting has been conducted in each half of a calendar year and gap between the two meetings is not less than 90 days.
  • Section 118(10) of the Companies Act, 2013 impose an obligation on Companies to observe Secretarial Standards with respect to General & Board Meetings. For more detailed analysis of Secretarial Standards on meetings of the Board of Directors and the members, please click here.
  • A meeting of the board shall be called by giving 7 days notice to every director at his registered address through hand delivery or by post or by electronic means.
  • A Board meeting may be called at shorter notice to transact urgent business.

Consequences if notice not served:

  • If notice is not given even to a single director, then Board meeting shall be rendered invalid and resolutions passed will be inoperative.
  • The proceedings of the board meeting will not be invalid, if notice is not given as required, but all the directors attend the meeting and do not object to the absence of notice.

General Meetings

Annual General Meeting: –

  • A Company should hold first annual general meeting within 9 months from the date of closing of the first financial year of the company.
  • In other cases, an annual general meeting should be held within 6 months from the end of the financial year.
  • If a company holds its first annual general meeting as aforesaid, then it shall not be necessary for the company to hold any annual general meeting in the calendar year of its incorporation.
  • The Registrar may extend the time within which annual general meeting (other than first annual general meeting) can be held by a period not exceeding 3 months.
  • As per section 129 (2), the board of director of the company shall present a financial statement before every annual general meeting of the Company.
  • As per section 129(3), if the Company has one or more subsidiaries, then consolidated financial statements shall also be presented before the annual general meeting with the prescribed statement under section 129(2).

Notice of Meeting: – A general meeting of a company may be called by giving not less than 21 days clear notice prior to the date of the meeting either in writing or through electronic mode. However, it may be called after giving a shorter notice if consent is given in writing or by electronic mode by at least ninety-five percent of the members entitled to vote at such meeting.
Extraordinary General Meeting: –

  • EGM is called for transacting any Business of an urgent nature. There is a gap of around a year or eighteen months between two annual general meetings. Therefore, if an important business arises in between two annual general meetings that require shareholders approval, then an EGM can be called.
  • As per Section 100(1) of the Companies Act 2013, the Board may, whenever it deems fit, call an EGM of the Company.
  • As per Section 100(2) of the Companies Act 2013, the Board shall, at the requisition made by:

In case of Company having Share Capital – Members not having less than one- tenth of the paid up share capital of the Company
OR
In case of a Company not having Share Capital – Members having not less than one-tenth of the total voting power of all the members.
Time, place and day of Board Meetings and General Meetings (AGM & EGM) has been tabulated as shown below:-

Particulars

Board meeting

Annual

General  Meeting

Extraordinary General

Meeting
Time Any time (Even after business hours) During business hours (i.e. between 9 a.m. to 6 p.m) Any time (Even after business hours)
Place Any place in the World At the registerd office of the company or at some other place within the city, town or village in which the registered office of the company is situated Anyplace in the World which is most suitable for its Shareholder.
Day Any day (other than national holiday) Any day (other than national holiday) Any day (other than national holiday)

Quorum  for meetings of the Board

  • As per Section 174 of the Companies Act, 2013, the Quorum for a meeting of the Board of Directors of a company shall be 1/3rd of its total strength or two directors, whichever is higher.
  • If the director has to participate through video conferencing or by other audio visual means, then it shall also be counted for the purposes of Quorum.
  • Any fraction of a number shall be rounded off as one and “total strength” shall not include directors whose places are vacant.
  • Where at any time, the number of interested directors exceeds or is equal to 2/3rd of the total strength, then the number of directors who are not interested and present at the meeting being not less than two, shall be the quorum during such time.
  • A  quorum is required throughout the board meeting. Presence of quorum at the time of commencement of a Board Meeting is not enough. If Board Meeting is held without quorum then it shall be void.
  • If Board Meeting could not be held for want of quorum, then the meeting shall stand adjourned to the same day, time and place in the next week. If a day in the next week is a national holiday then meeting shall be held on the next succeeding day which is not a public holiday. A Quorum is required in adjourned board meeting also.

Books of Accounts

As per Section 128 of the Companies Act 2013, every company is required to prepare and keep books of account and other relevant books and papers and financial statements for every financial year at their registered office. Such books shall be kept on accrual basis and according to the double entry system of accounting.
The Company may keep books of account or other papers in electronic mode.
Companies need to take care of the following while maintaining books of accounts in electronic form :

  • Shall remain accessible in India
  • Shall be capable of being displayed in a legible form
  • Proper system for storage, retrieval, display or printout of electronic records
  • Shall not be disposed of or rendered unusable, unless permitted by law
  • Back-up shall be kept in servers physically located in India on a periodic basis

Company should also intimate to the ROC annually at the time of filing of financial statement the following details –

a)      Name of the service provider

b)      The internet protocol address of service provider

c)      Location of the service provider

d)      If the books of account are maintained on cloud, address as provided by the service provider.

As per Section 2(12) of the Companies Act, 2013 “book and paper “ and “book or paper” includes books of account, deeds, vouchers, writings, documents, minutes and registers maintained on paper or in electronic form.
As per Section 2(40) of the Companies Act, 2013 “ financial statement ” in relation to a company includes:-

i)       A balance sheet as at the end of the financial year;

ii)      A profit and loss account, or in the case of a company carrying on any activity not for profit, an income and expenditure account for the financial year;

iii)     Cash flow statement* for the financial year;

iv)     A statement of changes in equity, if applicable; and

v)      Any explanatory note annexed to, or forming part of, any document referred to in sub clause (i) to sub clause (iv)

*Provided that the financial statement, with respect to one person company, small company, dormant company, may not include the cash flow statement.
 

List of Statutory Registers to be maintained under the Companies Act, 2013:-

Following are the Statutory Registers which are required to be maintained by a Private Ltd. Company :-

 

Serial No.

Form No.

Form Type

Description

Relevant Section and Rule of the Companies Act, 2013

1

 MGT -1 Physical/Electronic  Form Register of Members indicating separately for each class of Equity and Preference shares held by each member. Section 88 (1)(a) and Rule 3 of the Companies (Management and Administration) Rules, 2014.

2

 

 

 MGT -2 Physical/Electronic  Form Register of Debenture holders orother security holders for each type of debentures or other securities separately. Section 88 (1)(b) & 88(1)(c) and Rule 4 of the Companies (Management and Administration) Rules, 2014.

3

 MGT-3 Physical/Electronic  Form Notice of situation or change of situation or discontinuation, of a place where foreign register is kept containing the name and particulars of the members,debenture holders, other security holders or beneficial owners residing outside India. Section 88 (4)  and Rule 7(2)of   the Companies (Management and Administration) Rules, 2014.

4

 SH-2 Physical/Electronic  Form Register of Renewed and Duplicate Share Certificate containing the name of person, the number & date of issue of share certificate in lieu of which the new certificate is issued. Section 46 and Rule 6(3)(a) of the Companies (Share Capital and Debentures) Rules, 2014.

5

 SH-3 Physical/Electronic  Form Register of Sweat Equity Shares entering particulars of Sweat Equity Shares issued under section 54. Section 54 and Rule 8(14) of the Companies (Share Capital and Debentures) Rules, 2014.

6

 SH-6 Physical/Electronic  Form Register of Employee Stock Option entering particulars of options granted under section 62(1)(b). Section 62(1)(b) and Rule 12(10) of the Companies (Share Capital and Debentures) Rules, 2014.

7

 SH-10 Physical/Electronic  Form Register of shares or other Securities bought back. Section 68(9) and Rule 17(12)  of the Companies (Share Capital and Debentures) Rules, 2014.

8

 MBP-2 Physical/Electronic  Form Register of loans and  guarantees given or security provided or acquisition made by the company. Section 186(9) and Rule 12(1) of the Companies (Meetings of Board & its Powers) Rules, 2014.

9

 MBP-3 Physical/Electronic  Form Register of investments beneficially held by the company but which are not held in its own name by the company  along with the reason. Section 187(3) and Rule 14(1) of the Companies (Meetings of Board & its Powers) Rules, 2014.

10

 MBP-4 Physical/Electronic  Form Register of contracts or arrangements with a related party or with company or companies or bodies corporate,  firms or other association of individuals in which any director has any concern or interest. Section 189(1) and Rule 16(1) of the Companies (Meetings of Board & its Powers) Rules, 2014.

11

 CHG-7 Physical/Electronic  Form Register of charges entering particulars of all the charges on any of the property, assets or undertaking of the company along with property acquired subject to a charge. Also modification of charge and satisfaction thereof needs to be recorded. Section 85 and Rule 10(1)  of the Companies (Registeration of Charges) Rules, 2014.

12

 Register of Deposits Physical/Electronic  Form Register of Deposits accepted or renewed separately  for each depositor. Section 73 and Rule 14 of Companies (Acceptance of Deposits) Rules, 2014.

13

 Register of Directors and KMP Physical/Electronic  Form Register of Directors and Key Managerial Personnel along with details of securities held by them in the company or its holding or subsidiary or associate company. Section 170(1)  and Rule 17 of   the Companies (Appointment and Qualification of Directors) Rules, 2014.

 

Above mentioned are majorly the compliances for Private Ltd. Companies

Additional Points:-

  • As per Rule 6(1) of the Companies (Management and Administration) Rules, 2014, every register of members or debenture holders or other securities holders shall include an index of the names entered in the respective registers. Maintenance of the index is not required if the  number of members is less than fifty.
  • The register and index of beneficial owner maintained by a depository, shall be deemed to be the corresponding register and an index for the purpose of the Companies Act, 2013.
  • Section 120 of the Companies Act 2013 lay down provision for maintenance and inspection of documents in electronic form. This is permitted that any document, record, register, minute etc may be kept in electronic form. The record so kept may be inspected in electronic form. The copy may also be furnished in electronic form.

For details on Compliances related to MCA Filings by a Private Ltd. Co. as per the Companies Act, 2013, please click here.
For details on acceptance of unsecured loans by a Private Ltd. Company, please click here.
For details on Related Party Transactions under the Companies Act, 2013 please click here.

Post written by Sonam Gupta.

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