Compliances required after Incorporation of Company

We often hear about newly established companies achieving success and contributing to the growth of our country. With the support of funding and IPOs, many businesses are adopting a formal company structure. From its formation to its dissolution, a company must comply with all relevant laws in the country, including company law, income tax laws, goods and service tax laws, and labor laws. Therefore, it is crucial for business operators to be aware of the necessary compliances that a company must complete.

After incorporating your company, you might be wondering what steps to take next. This article outlines essential post-incorporation formalities that can help ensure your company remains compliant. Use this guide as a checklist to stay on track.

1.  Immediate compliances

Opening Bank Account

• It is necessary to have a bank account in order to conduct financial transactions on behalf of a company.
• According to Company law, share certificates must be issued to shareholders within 60 days of subscription. Therefore, the Company must receive the subscription money within that timeframe.
• It is advisable to open bank account with such banks which are offering facility to pay Government dues like GST, Income Tax, PF &ESI etc.

Conveying First Board and Shareholders’ Meetings

• The first board meeting must be held within 30 days of the company’s incorporation to discuss business activities and secretarial compliance.

The first annual general meeting of shareholders, except for One Person Companies (OPCs), must be conducted within 18 months of a company’s incorporation. This meeting presents the company’s first financial results and future plans and strategies.

Obtaining Statutory Registrations

• A Company can’t operate merely by obtaining a certificate of incorporation.
• A Company is required to get itself registered under different statues depending upon the applicability  of such act on a company such as:
  • GST Registration: If a company’s aggregate turnover is expected to exceed the threshold limit or if GST registration is required from day one under GST law.
  • EPF & ESI: If the number of employees exceeds the specified limit.
  • Food License-FSSAI if company is opearating in food and beverage business.
  • MSME Registration
  • Trademark registration
  • Shop and establishment registration

Appointing first Statutory Auditor

• It is mandatory for every company to conduct an annual audit of their financial records and appoint an auditor accordingly.
• The board of directors must appoint the first auditor of a non-government company within 30 days of incorporation.
• If shareholders fail to appoint an auditor within 90 days, an extraordinary general meeting must be held to do so.
• The appointment of first auditor needs to be intimated to the Registrar in Form ADT-1 within 15 days of his/her/its appointment.

 Intimating registered office address to the Registrar

If a company has provided a correspondence address in their incorporation application because they haven’t finalized their registered office yet, they need to inform the Registrar about their registered office address within 30 days using Form INC-22. They must also provide proof of address through a rent agreement for rental property or a sale deed for owned property.

Making the name of a company vocal with affixation of name

• After obtaining its incorporation certification, the Company must complete the following tasks promptly to avoid any complications:
• Affix the company name in the local language at all business locations including registered offices, warehouses, and branches.

Prepare a common seal with the company name engraved on it and print letterheads with the name and address for all communications.

Interest disclosure of Directors

Directors must declare their interests, including shareholding, in any other company, body corporate, firm, or association of individuals in FORM MBP-1 at the first board meeting of the company.

Allotting shares and issuing share certificate

• A private company can issue shares through private placement, while a public company can issue shares through both initial public offering via prospectus and private placement.
• According to the Company Act, shares must be allotted within 60 days of receiving subscription money.
• If an allotment cannot be made within 60 days of receiving subscription money, the entire amount must be refunded to applicants within 15 days. Otherwise, it will be treated as a public deposit and will accrue interest at a rate of 12% per annum.
• Further, share certificates are to be issued within a period of 60 days from the date of allotment.

Commencing business or exercising borrowing power

• Every company having a share capital is not allowed to commence any business or exercise any borrowing powers unless it has filed a declaration in Form INC-20A with the Registrar about the commencement of business.
• Form INC-20A should be filed within 180 days of the date of its incorporation.
• The declaration confirms that every subscriber to the MOA has paid the share value taken by him and the contents of the said form have to be verified by a company secretary a chartered accountant or a cost accountant, in practice.

Maintenance of books of account

Every company is required to maintain proper books of account showing the state of affairs of the company.

2. Subsequent annual compliances

Statutory Audit of books of account

According to Section 134 of the Companies Act, 2013, a company’s Board of Directors must present financial statements and an audit report to shareholders during an annual general meeting.

Hence, it’s crucial for every company to have their books of accounts audited by an external auditor who can provide an audit report on the accurate and unbiased representation of financial statements at the end of the financial year.

Holding subsequent board and general meetings

Board meetings: After the first board meeting, the board of directors needs to meet in a year between frequent intervals as given below.

• First Annual General Meeting (AGM): First AGM should be held by a company except One Person Company on the earliest of the following dates:
  • Within 9 months from date of Financial Year
  • Further, length of Financial year can be extend upto 15 months
• Subsequent Annual General Meeting (AGM): A company is required to hold AGM every year at earliest of the following dates:
  • 15 months from the date of the last annual general meeting.
  • 6 months from the close of the financial year (September 30th).

Filing income tax returns and conducting tax audit

• A company is required to file its income tax return in a specified form for the previous year relevant to the assessment year, as it is treated as a person under Income Tax Law.. 
• Companies are required to file ITR-7 for declaring income of every previous year.
• Companies with sales/turnover over INR 1 crore must conduct tax audit yearly under section 44AB of Income Tax Act, 1961.
• This threshold limit of sales or gross receipts or turnover for businesses is increased to INR 10 crore w.e.f. 1^st April, 2021 where digital transactions are at least 95 per cent of total transactions.

Filing GST returns and conducting GST Audit

• A company with an annual turnover over INR 5 crore must file GSTR-1 (outward supplies) and GSTR-3B (summary of inward and outward supplies) monthly.
• A company having annual aggregate turnover below INR 5 crore has option to file GSTR-1 and GSTR-3B quarterly while making monthly tax payments.
• A company that is registered under GST and has a turnover exceeding INR 2 crore must submit an annual return in Form GSTR-9 by December 31st of the relevant financial year..

If the combined turnover of any of the mentioned companies goes beyond INR 5 crores, the taxpayer must provide a self-certified reconciliation statement in Form GSTR-9C. There is no obligation to conduct a mandatory audit through a practicing chartered accountant.

Maintenance of statutory registers

As per the Companies Act of 2013, various registers such as the register of members, debenture holders, directors and key managerial personnel, beneficial owners, deposits, share certificates, and charges must be regularly maintained and updated. Additionally, some of these registers may be subject to inspection.

Filing financial statements and annual return in Form AOC-4 and MGT-7

• Financial statements : A copy of the financial statements, auditor’s report, and board report adopted at AGM must be filed with Registrar within 30 days.
• Annual return: Every year, within 60 days of the annual general meeting, a company is required to file an annual return in Form MGT-7 (Form MGT-7A for small companies and OPCs) with the Registrar. The company should also upload this form on its website.

Updating annual KYC of directors on MCA portal

Directors must update their KYC on the MCA portal using Form DIR-3 by September 30th of the following financial year.

3. Event-based Compliances

In addition to annual compliances, there are specific corporate compliances that must be addressed when certain events occur. These may include changes in auditors or directors. The table below outlines the formalities that must be completed when any of these events take place.

Disclaimer:

The views expressed are strictly of the author and Complianto Consulting LLP. The contents of this article are solely for informational purpose. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon.