Mandatory Annual Compliance for Private Limited Companies in India

Private Limited Companies are plenty in India. It is a company that is privately owned by small businesses. The rules and regulations followed by private companies are a bit different than those of other firms. The liability of the members of the company is limited to the shares held by them. The most important point is that the shares of private limited companies cannot be traded publicly.

If you are interested in starting a private company, the process is pretty simple. There should be a minimum of 2 people and a maximum of 200 people to run a company. This is according to the provision of the Companies Act, 2013. 

Even with the number of members, the liability of the members is limited, which means that even if the company faces severe loss, the shareholders are liable to sell their assets for payment. Along with this, even in the case of the death of a member, insolvency, or bankruptcy, the company continues to exist in the eyes of the law. A private limited company also mandatorily requires 2 directors to initiate the operations. To make it easy, every private company will have the word Private Limited after its official name. 

Important Compliance Requirements for a Private Limited Company

There are several advantages of a private company. Even with that, companies have to carefully maintain the rules and act according to the law. The management and operational capacity of a private company are decided in terms of its members. Decision-making is always a tricky part in public companies, whereas it is much less in a private company as the shareholders are fewer in number.

Once a private limited company is registered, the firm must comply with the rules and regulations of the country. Here, let us look at the mandatory annual compliance that is expected from a private limited company.

Meeting of the Board of Directors

Every private company should have its Board of Directors as specified in the law. They will be the most influential bodies in the industry and the meeting will be addressed by Section 173 of the Companies Act. Most importantly, the first board meeting should be conducted within 30 days of its incorporation. Also, 4 meetings are required to be held every year.

Issue of Share Certificate

Private companies are required to hand over the share certificates within 2 months of the allotment of shares. In the case of allotted share letters, the company must send the certificates through the post. This should be followed by Section 53 of the Companies Act, 2013.

Appointing Auditors

This is one of the most important aspects that have to be done within the specified time. According to the Companies Act of 2013, a company must appoint auditors within 30 days of its incorporation. In case of any delay, they must hold an extraordinary general meeting within 90 days to appoint and decide on the same.

Filing of Disclosure of Interest by Directors

Directors have the right to disclose their conflict of interest in a company at the time of the board meeting. On the other hand, if a director enters the company without disclosing their interest, it is basically considered a breach of trust among the directors.

Filing Annual Returns

According to the Companies Act, 2013, every company must file their Annual Return with the Registrar of Companies within 60 days of the Annual General Meeting. The returns must be signed by at least one director and have to be certified by a company secretary who is in practice then. 

A private limited company is less complicated when compared to a public company. Eat, with such laws prevailing in the industry, any company breaching the law will be penalised, and every person held accountable will be severely punished. This is best avoided if companies follow the rules and regulations set.