Overview of the Companies Act Compliances for a Private Limited Company

Every company is incorporated and formed under Companies Act 2013 (as amended from time to time). There are many compliance under Companies Act. This blog provides you the over view of compliances which every private company has to comply in order to run its operations. These are the compliances which are mandatory, pervasive and annually to be performed by a company. 

To be very clear, these are not the only compliances or formalities a private limited company has to perform. There are many compliances, some are one time; some are operations specific and some are eligibility oriented. For example, every company as per Section 12 (2) of the Act read with Rule 25 of Companies (Incorporation) Rules, has to file/furnish Form No. INC 22 with the Registrar within 30 days of its incorporation, this is a onetime compliance (if the address mentioned in the company incorporation application is different).

Fairly advising for accomplishment of Company Law Compliances is to have an annual engagement or contract for Compliances with a CS (Company Secretary) or CA (Chartered Accountant) firm, as it will be a full assurance.  Let’s move ahead with the summarized overview.

1)           Director KYC

As per Rule 12A of Companies (Appointment and Qualification of Directors) Rules, Every DIN holder has to file DIR-3-KYC on or before 30^th September of the immediate next financial year. So a company must ensure that its Directors KYC is done.

2)           Board Meeting

Every company has to have 4 (four) board meeting in a year. There should be 120 days between 2 (two) board meeting.

In case of start-up Company, if there is one (1) board meeting in each half year and gap between 2 (two) meeting is 90 (ninety) days then it will be considered as compliance of the above.

• Notice – Notice for calling meeting must be given 7 (seven) days before board meeting. 
• Quorum - Members to be present in board meeting to validate the meeting. Must be 1/3 of the strength of board or 2 directors, whichever is higher. 
• Minutes of Meeting – Recording of proceeding and discussion of board meeting.
• First board meeting – it should be held within 30 days of incorporation.

3)           Auditor’s Appointment

Every company has to appoint within 30 days of incorporation the auditor of the company.

• Qualification – A CA (Chartered Accountant) or CA Firm in practice, can only be appointed as auditor of the company.
• No Disqualification – Auditor should not be disqualified as per Sec. 141 of the act 
• Notice – Notice for appointment of Auditor is to be given to Registrar in Form ADT-1 within 15 days of meeting in which appointed. 
• Appointment – First appointed shall hold office till the conclusion of 6^th AGM. Appointment shall be subject to ratification in every AGM till the 6^th AGM. 
• Reappointment or rotation – allowed as per rules applicable.
• Written Consent & Certificate – Written Consent for appointment as an auditor and Certificate as per requirement should be received from the prospective auditor.

4)           Annual General Meeting (AGM)

Every company including a private limited company has to mandatory conduct a AGM every year.

• Notice – Notice for calling meeting must be given 21 (Twenty) days clear before the AGM. 
• Quorum – 2 Member to be personally present in the AGM. 
• Minutes of AGM – Recording of proceeding and discussion of the meeting. 
• First AGM – it should be held within 9 (Nine) months from closing of Financial Year (F.Y). 
• Subsequent AGM – Subsequent AGM must not be held later than 6 months from the date of closing of F.Y. 
• Gap between – the gap between 2 AGM cannot be more than 15 months.

5)           Filing of Financial Statements with ROC

As per Sec. 137, every company including a private limited company has to file its financial statement with the Registrar of Companies (ROC) along with Form prescribed.

• Form – Filing of Form AOC -4 with the Registrar of Companies (ROC).
• Last date – It should be filed within 30 days from the date on which the AGM held.
• Fine – In case of non-compliance punishable with fine.

6)           Annual Return

As per Sec. 92, every company including a private limited company has to mandatory file Annual return for every financial year.

• Form – Annual return is to be filled in MGT 7. 
• Last date – It should be filed within 60 days from the date on which annual meeting is held. 
• Singed by – A director and CS (Company Secretary). If no CS in the company then by a PCS (Practicing Company Secretary). One person company, small company and start-ups can get there returns signed by director only if no CS 
• Fine – In case of non-compliance punishable with fine.

Friends saying clearly this is just an overview, each compliance mentioned above is huge in it. The aim of this blog is to make to aware with the basic compliances so you can understand them better. A profession CA or CS can perform it with expertise. 

Disclaimer :

The above blog is purely for educational and  guidance purpose. It's just the reflection of the author's personal experience and judgment. The author has just provided the general information & understanding and its not at all an alternative of any legal advice or practitioner. It has no connection with the websites mentioned in its contents. The content stated in the blog should be used by the reader at his own discretion and sole responsibility. The content of the blog can be only used for any other document, write-up, article, blog and any written or printed material whether on paper or digitally in any form, with the prior permission of the author.

Compliance For "BENEFICIAL INTEREST" As Per Companies Act 2013

Investment in shares is a usual segment of an Investment portfolio of individuals and organisations. There are many lucrative corporations whose shares and voting rights are always high in demand. This situation gives a rise to phenomenon, "Beneficial Interest". But before moving ahead with the Compliance, first let's understand beneficial interest, registered owner, and beneficiary owner.

Beneficial Interest in Shares

If you go for the dictionary meaning then as per the Cambridge Business English Dictionary, beneficiary Interest means the right to receive income, profits, interest etc. from a business, contract, or investment.

As per Section 89 sub-section (10) of the Companies Act 2013, beneficial interest in a share includes, directly or indirectly, through any contract, arrangement or otherwise, the right or entitlement of a person alone or together with any other person to -

(i) exercise or cause to be exercised any or all of the rights attached to such share; or

(ii)receive or participate in any dividend or other distribution in respect of such share.

Registered Owner

He is the Person or entity whose name is entered as shareholder in the Register of Member.

Beneficial Owner

He is the Person or entity whose name is not entered as shareholder in the Register of Member but derived or receives all the benefits arising from the shares like dividend, voting rights etc.

 

Let’s take a practical example, Mr X. opens a Demat account with “CDSL” (Central Depository Service (India) Ltd) who is a Depository though the Depository Participant (DP), Mr. Broker. Now as securities are held in dematerialised form. When there is a purchase of shares, the shares are registered in the name of “CDSL” in the register of issuing company and not in the name of Mr. X.

Here, the registered owner is “CDSL” but the beneficiary owner will be Mr. X.

Compliance under Companies Act

As per Section 89 of the Companies Act 2013 as amended for time to time, there is compliance to be accomplish in case of "Beneficiary Interest in shares" by Registered Owner, Beneficiary Owner and Company. To ensure clarity, we will discuss them one by one.

Compliance in Case of Registered Owner

• The registered owner has to give a “Declaration” to the Company with details of Beneficiary owner in the manner prescribed. 
• Form – Declaration is to be given in Form No. MGT. 4. 
• Time – 30 days from the date of entering name in the register of members of such company. 
• Further change in the beneficiary interest – then again the registered owner has to give a “Declaration” to the Company with details of Beneficiary owner in Form No. MGT.4 within 30 days from the date of change.

Compliance in Case of Beneficiary Owner

• The beneficiary owner has to give a “Declaration” to the company specifying his interest, details of registered owner and others prescribed. 
• Form – Declaration is to be given in Form No. MGT. 5. 
• Time – 30 days from the date of acquiring such beneficiary interest. 
• Further change in the beneficiary interest – then again the beneficiary owner has to give a “Declaration” to the Company with details of change in Form No. MGT.5 within 30 days from the date of change.

Company

• Once the declaration is received by the company from the registered owner or beneficiary owner. The company has to file a Return with ROC (Registrar of Companies) with fee. 
• Noting in Register of Member - The Company make a note in the register of members. 
• Return – Return is to be made in Form No. MGT. 6. 
• Time - 30 days from the date of receipt of declaration. 
• Days counting – 30 days will be counted from the date of receipt of declaration of Registered Owner and Beneficiary Owner, whichever is later.

Non-Applicability 

These provisions are not applicable on Trust formed as Mutual Funds or Venture Capital Fund or such other fund as may be approved by SEBI (Security and Exchange Board of India).

Non Compliance

The Non Compliance of Section 89 of the Act will attract fine :- 

In Case of Beneficiary Owner or Registered Owner

• In case of non-compliance by beneficiary owner or registered owner without any reasonable cause. They will be fined upto ₹ 50,000 (Rupees Fifty Thousand). 
• In addition to above if the failure is continuing one. The further fine may be charged of ₹ 1000 (Rupees One Thousand) for every day of continuing default after first failure.

In Case of Company

• In case of non-compliance by the Company. The company and every officer in default shall be punishable with a fine. 
• Fine shall not be less than ₹ 500 (Rupees Five Hundred), which may be extended to ₹ 1000 (Rupees One Thousand). 
• In addition to above if the failure is continuing one. The further fine may be charged of ₹ 1000 (Rupees One Thousand) for every day of continuing default after first failure.

  

I hope this blog will be helpful to all the readers. This is all about beneficiary interest as per Companies Act. Please due share with your friends and family. For any comments and queries please go to the comment box below.

Disclaimer :

The above blog is purely for educational and  guidance purpose. It's just the reflection of the author's personal experience and judgment. The author has just provided the general information & understanding and its not at all an alternative of any legal advice or practitioner. It has no connection with the websites mentioned in its contents. The content stated in the blog should be used by the reader at his own discretion and sole responsibility. The content of the blog can be only used for any other document, write-up, article, blog and any written or printed material whether on paper or digitally in any form, with the prior permission of the author.

 

Composition Scheme - Blessing for Small Businesses

Composition Scheme Under GST

This blog will provide you the complete details about Composition Levy, also known as composition Scheme under GST (Goods and Service Tax). It is a relaxed scheme under GST Regime in which small business can find an ease in terms of compliance. There are simple quarterly and annual returns, no requirement of audit, no ITC (input tax credit) compliance, low tax rates etc.

Initially Composition levy was basically for good's manufacturers & traders and there was only one exception that was Restaurants Service (in legal term defined as; supply of food or any other article for human consumption or drinks excluding alcoholic liquor). But now it is available to Service-Providers w.e.f 1st April 2019. 

The details under this blog are derived from Sec.10 of GST Act read with composition rules and various notifications.

 

Benefits of Composition Levy

Composition Levy is a easy compliance scheme under GST basically drafted in consideration to small business persons. There are many benefits of Composition levy and few of them are mentioned below :

1) Simple return - 4 quarterly return (CMP 08) and 1 annual return (GST 9A)

2) Less burden to maintain various books & records.

3) Low rate of Tax

4) No bothering of ITC (Input Tax Credit).

5) Easy to operate business without many employees. 

6) No need to collect any tax from purchaser or Recipient.

7) No need for GST Audit.

 

Restrictions under Composition Levy

1) Cannot Avail Input Tax Credit (ITC).

2) Cannot provide/forward tax credit to purchaser or Recipient.

3) Cannot issue Invoice (details below).

4) Non compliance will make them ineligible for the scheme. 

Return filing

Under composition levy the return filing compliance is very simple, & less in number. your have to file quarterly return in "CMP 08" by '18th of the month following the quarter" and an annual return in "GSTR 9A/GSTR 4" by '31st of March of the Assessment Year (A.Y.) following the Financial Year (F.Y.)'.

Currently for F.Y. 2018-19 annual return available  is GSTR 9A & GSTR 4 is currently not available.

Rate of Tax

Service along with goods

As per Sec.10 of GST Act, a person who opt composition scheme may provide service of 10% of its turnover or ₹ 5,00,000 (Rupees Five Lakhs) which ever is higher. Exceeding this limit will make the person ineligible for this scheme and his transition will to done to the regular scheme/levy forthwith.

• Rate of tax will same a manufacturers & traders. 

Eligibility  

Now Composition levy is available to trader, manufacturer and service providers (w.e.f 01/04/2019). A person registered under this scheme cannot issue invoice, in its place has issue "Bill of Supply". But for service providers there are certain additional conditions, so to make it more understandable we will discussing them one by one.

 

For Traders and Manufactures

As per the Notification No. 14/2019 - Central Tax dt. 7th March 2019 of CBIC, a person whose aggregate turnover in the preceding financial year (F.Y.) did not exceed ₹ 1,50,00,000 (Rupees One Crore Fifty Lakhs) may opt for composition scheme. The limit for the following states is ₹ 75,00,000 (Rupees Seventy Fifty Lakhs):

 (i)     Arunachal Pradesh

 (ii)    Manipur

 (iii)   Meghalaya

 (IV)   Mizoram

 (v)    Nagaland

 (vi)   Sikkim

 (vii)  Tripura

 (Viii) Uttarakhand

Here, for the calculation of "Aggregate Turnover" the meaning shall be driven from Sec.2 Clause (6) of the act. 

Aggregate Turnover includes :
1) All taxable sales/supplies.
2) Excluding RCM (Reverse charge mechanism) purchases/inwards.
3) Exempt sales/supplies.

4) Exports.

5) Inter state sales/supplies. 

The following are the conditions :-

1.   He is not a service provider.

2.   He is not supplying goods which are not taxable under GST.

3.   He is not carrying out inter-state sales/supplies.

4.  He is not supplying goods though E-Commerce Operates like Amazon, Flipkart etc., required to Collect TCS (tax collected at source).

5.   He is not a manufacturer of goods as notified by council.

6.   He is not a casual taxable person or a non-resident person.

7.  He has not held stock from : Inter-state purchase, imports, Other state branches, Purchases from Unregistered person or RCM.

8.   He is not a ISD (Input Service Distributor).

9.   He is not a Tax Collector/Tax Deductor. 

10. He has to pay tax like regular levy in case of purchase from Unregistered Person.

11. He has to mention the word "Composition taxable Person" on every notice, signboard and very other place.

12. He has to mention the word "Composition taxable person not eligible to collect tax on supplies" at the top of 'Bill of Supply'.

For Service Provider

A person whose aggregate turnover in the preceding financial year (F.Y.) did not exceed ₹ 50,00,000 (Rupees Fifty Lakhs) may opt for composition scheme.

• Here for calculating aggregate turnover there is a exception, value of supply of exempt services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount, shall not be taken into account.

The following are the conditions :-

1.   He is a registered person under Regular Levy GST.

2.   He is not eligible to pay tax under sub-section (1) of section 10.

3.   He is not engaged in supplies which are not taxable under GST.

4.   He is not carrying out inter-state supplies.

5.   He is not a casual taxable person or a non-resident person.

6.  He is not engaged in supplies though E-Commerce Operates like Amazon, Flipkart etc., required to Collect TCS (tax collected as source). 

7.  He is not engaged in supplies as notified by council.

8.  He is not a Tax Collector/Tax Deductor.

9.  Who all are registered under same PAN will be levied under Composition scheme, if even applied by one.

10. He has to mention the word "Taxable person paying tax in terms of notification No. 2/2019-Central Tax (Rate) dated 07.03.2019, not eligible to collect tax on supplies" at the top of 'Bill of Supply'.

 

This is complied details about the Composition Levy. For any suggestion, comment & query please comment in the comment box below.

Disclaimer :

The above blog is purely for educational and  guidance purpose. It's just the reflection of the author's personal experience and judgment. The author has just provided the general information & understanding and its not at all an alternative of any legal advice or practitioner. It has no connection with the websites mentioned in its contents. The content stated in the blog should be used by the reader at his own discretion and sole responsibility. The content of the blog can be only used for any other document, write-up, article, blog and any written or printed material whether on paper or digitally in any form, with the prior permission of the author.