Overview of Annual Compliance for Private Limited Company

A private limited company incorporated in India has distinct advantages with regard to limited liability and professional structure. However, it also comes with a host of annual compliance requirements. Such mandatory filings and procedural steps ensure the company maintains its legal standing, financial transparency, and good corporate governance as mandated under the Companies Act, 2013, and the Income Tax Act, 1961. Failure to comply with all of these annual requirements, including the compulsory meetings and keeping records, which are also supposed to be filed with the MCA as well as the Income Tax Department, may invite substantial monetary fines, disqualification of directors, and cancellation of active company status.

Compliance Chat for Private Limited Company 

Given below is the list of statutory compliance for a Private Limited Company in India: 

Key Annual Compliance Procedures and Due Dates

The annual compliance process is an interrelated series of steps needed after the financial year, which ends on 31st March.

Statutory Audit of Accounts

Every private limited company has to get its books of accounts audited by an independent Statutory Auditor appointed by the company. The auditor shall examine the financial records of the company with respect to their accuracy and compliance therewith in accordance with prescribed accounting standards. The audit should be completed well in advance of the Annual General Meeting in order to enable accounts to be filed on time.

• It provides the books of accounts, vouchers, and other supporting documents to the appointed auditor.
• The auditor conducts the audit in accordance with auditing standards.
• The auditor issues the signed Auditor's Report together with the Audited Financial Statements.

Board Meetings and Annual General Meeting (AGM)

All mandatory meetings of the company shall be held before any final filing is made with the MCA.

Board Meetings

Every company shall hold a minimum of four Board Meetings in a financial year, such that the gap between two meetings shall not exceed 120 days. The last Board Meeting shall be necessary for:

• Approving the final Audited Financial Statements and the Director's Report.
• Fixing the date, time, and venue for conducting the Annual General Meeting.
• Considering and approving the annual return in Form MGT-7.

Annual General Meeting (AGM)

AGM is the ultimate platform for the shareholders to approve the work done by the management. An AGM must be held within six months of the date of the close of the financial year. Usually, this means on or before September 30th.

• The formal Notice of the AGM, along with the Audited Financial Statements, Director's Report, and Auditor's Report, shall be mailed to all shareholders at least 21 clear days before the meeting date.
• The shareholders meet, discuss the reports, and pass ordinary and/or special resolutions, including:
• Adoption of Financial Statements.
• Declaration of Dividend (if any).
• Appointment or re-appointment of the Statutory Auditor.
• Appointment or re-appointment of Directors, if any.
• The proceedings at the meeting are recorded in the Minutes of the AGM.

Filing of Annual Return (Form MGT-7)

The annual return serves as a snapshot of the non-financial information relating to the company and the structure of its governance.

• Form: Form MGT-7 or Form MGT-7A for small companies and One Person Companies.
• Due Date: Within 60 days from the date of AGM. Normally November 29th of each year.
• Purpose: To file particulars relating to the shareholding structure of the company, changes in directors, meetings held, and its general management structure.27

Director KYC (Form DIR-3 KYC)

This is an annual confirmation of the Director Identification Number details.

• Form: Form DIR-3 KYC or the web-based KYC in case there are no changes in details.30
• Due Date: On or before September 30th of every financial year.31
• Purpose: This form must be filed to update the personal and contact particulars of every person having a DIN with the MCA.32 In case it is not filed, the DIN shall get deactivated, along with attracting a substantial fine. fee 33

Documents Required for Complying with Annual Compliances

The whole annual compliance process is document-intensive. The following are the major documents one needs to complete the filings: The following is a list of the essential documents and records necessary for annual compliance, categorised by purpose:

Financial & Audit Documents

• Audited Financial Statements:
• Balance Sheet
• Profit & Loss Account
• Cash Flow Statement (if applicable)
• Notes to Accounts
• Auditor's Report: Report issued by the Statutory Auditor.
• Tax Audit Report-Form 3CD: Applicable if applicable for tax filing.
• The Books of Accounts comprise Vouchers, General Ledgers, and Bank Statements.

ROC Filing Attachments: AOC-4 & MGT-7

• Director's Report: A detailed report on the financial standing and affairs of the company, signed by the directors.
• Board Resolutions: Certified True Copies of resolutions passed to approve the financials and director's report.
• AGM Notice & Attendance Sheet: Proof that the Annual General Meeting was conducted.
• List of Shareholders and Debenture Holders: A complete and updated list to be filed for the Annual Return (MGT-7).

Statutory Registers & Records

• Minutes Books: Separate bound books for recording the Minutes of:

Board Meetings

General Meetings AGM/EGM

• Register of Members (MGT-1): Records updated regarding all allotments and transfers of shares made.
• Register of Directors and KMP: Records regarding the appointment of directors, resignations of directors and their remuneration.

• CHG-7: Register of Charges - Particulars regarding secured loans availed or repaid.

Director Compliance Declarations

• Form MBP-1: Annual declaration of interest by directors in other entities.
• DIR-8: Particulars Of Directorship End

Tax compliance documents

• Advance Tax Calculation & Proof of Payment: Quarterly tax instalment proofs.
• TDS/TCS Returns: Quarterly returns filed - Example: Form 24Q, 26Q.
• Form 16/16A: TDS Certificates issued to employees/vendors.
• GST Returns: Copy of monthly/quarterly filings, i.e., GSTR-1, GSTR-3 B and annual GSTR-9 in case registered under GST. 

Consequences of Non-Compliance with Compliances of Pvt Limited Company

The stringent penalties ensure that the rigorous compliance framework for private limited companies provides the much-needed discipline and transparency.

• Steep Monetary Penalties: For forms like AOC-4 and MGT-7, the penalty for late filing is ₹100 per day for each form, without any upper limit. This can quickly accumulate into a significant financial burden, especially for small businesses.
• Director Disqualification: The directors get disqualified for five years for non-filing of financial statements, AOC-4, or the annual return MGT-7 for a period of three consecutive financial years, and as such, directors cannot be appointed in any other company during the said period. 
• Company Status: Based on non-compliances, companies can be marked as 'Defaulter' companies. In serious cases, the ROC can strike off the name of the company from the Register of Companies and take away its legal existence. 
• Loss of Credibility and Funding: Investors, banks, and financial institutions carry out extensive due diligence before providing financing or loans. A history of default in compliance is a serious red flag that drastically affects the company's credibility in terms of fundraising or gaining credit. 

The annual compliance cycle for every Private Limited enterprise is an awful lot greater than a bureaucratic hurdle; it constitutes the bedrock on which the legal validity and operational viability of the company rests. Except, the compliances under the companies Act, 2013, and the Income Tax Act, 1961, on account that they're non-negotiable in nature, require an excessive stage of monetary subject starting up from April and persevering with until November every year.