Post Incorporation Compliances for your Start Up
Once we Incorporate or Launch a Start Up, we are bringing a child to the world which needs proper care and nourishment in order to properly flourish and grow in the manner we want it to, here the care refers to taking care of the proper compliances & filing just after the registration of the company which can be for Ministry of Corporate Affairs, Income Tax Act, Goods & Service Tax Act, FEMA, etc as applicable from case to case. Let's discuss this in brief to have a better clarity on the same for:
- Post Incorporation Compliances for Private Limited Company
- Post Incorporation Compliances for (OPC) Private Limited Company
- Post Incorporation Compliances for Limited Liability Partnership
- Post Incorporation Compliances for Section-8 Company
These compliances have to be done just after you incorporate your company!
Post Incorporation Compliances for a Private Limited Company
Over the years, the process of incorporating a company has been made simpler, which encourages full compliance by the companies. The management should be fully aware of the post-incorporation compliance to avoid any penalties or punishments. The Companies Act 2013 is a stringent act and leaves no room for any mistakes.
“Ignorantia juris non excusat” means “ignorance of law is not an excuse”. This is a legal maxim which goes on to say that one cannot escape liability on the pretext of unawareness of the law. Thus the directors and shareholders will have to be aware of the legal compliance involved post-incorporation of the company.
Part-I Compliances under MCA
Following are the significant actions which need to be taken post company incorporation:
- First Meeting
As per Section 173(1), of The Companies Act 2013, the company shall hold a meeting of the Board of Directors in less than 30 days from the date of its incorporation. Directors are permitted to attend the meeting either in person or through video conferencing.
- Bank Account
Companies need to have a bank account even before approaching the authorities for company incorporation. Since the company is an artificial entity, the transactions cannot be done in the name of any natural person.
- Official Address
As per Section 12(1), a company shall have a registered office within 15 days from the date of incorporation. This address shall be used to receive all official communication from the various authorities. The company shall inform the same to the registrar within 30 days from the date of incorporation.
- It’s all in the name
Every company shall be required to affix its name at all places from where it carries on its business operations. It shall be displayed in the language which is generally used in the locality. Additionally, the company has to get a seal with its name engraved on it, letterheads with appropriate information and printed negotiable instruments.
According to Section 139(1), the first auditor shall be appointed by the Board of Directors (BOD), except for a government company, within 30 days from the time the company is registered. Failing which, the members shall appoint the auditor within 90 days at an extraordinary general meeting. The term of the first auditor shall be until the conclusion of the first annual general meeting.
- Interest disclosure
At the first board meeting, every director shall disclose his interest in any company/firm/body corporate/association of individuals as outlined in section 184(1) of the Companies Act 2013. Any changes in the disclosures shall be intimated to the board in its first meeting held during each financial year. An independent director, if any, must give a declaration that he meets the criteria of independence during the first board meeting as a director.
- Statutory Registers
The company shall be required to maintain statutory registers at the registered office of the company. The same shall be maintained in the prescribed form failing, which the company will be subject to penalties.
- Share Certificate
The share certificate shall be issued to a shareholder within 60 days from the date of incorporation. In case of additional shares being allotted, the time period is taken as 60 days from the date of allotment.
- Books of Accounts
As per section 128, every company shall maintain proper books of accounts which shall represent an accurate and fair view of the state of affairs of the company. The double entry system shall be followed, and the accounting is done on an accrual basis.
- Commencement of Business certificate
Within 180 days, the company shall obtain a certificate of commencement of business by filing form INC-20A. There is a requirement to file a disclosure made by the directors of the company stating that every subscriber has paid the amount due on the shares.
Part II: Compliances under GST Act
Company in India is required to register under GST Act i.e Goods Service Act. The government will issue a GSTIN to be used for the future correspondences of the business of the company
The Company is required to file the periodical (monthly & annually) returns as prescribed by the government on the prescribed due dates to provide detail regarding sale and purchase of goods & services and for claiming the input credit also.
Part III: Compliances under FEMA, RBI/FDI Reporting
Within 30 days from the date of allotment of subscription money, Form FC-GPR has to be filled on FIRMS, RBI Portal. And to report the FDI, the Company should register itself with the Entity User and Business user on FIRMS, RBI Portal.
Filling of Annual Return of Assets and Liabilities (“FLA Return”) by 15th day of July every year in respect of FDI on FLAIR portal of RBI and to file FLA Return, the Company should register itself on the FLAIR portal of RBI
Note: In case the subscribers to the memorandum of association of the Company are foreign nationals or the funds have been received by the Company from the country other than India, then the FDI Reporting under FEMA Regulations, 1999 has to be complied with.
Part IV: Compliances with DGFT (Director General of Foreign Trade)
Application to obtain Import Export Code (“IEC”)
Application for modification in IEC
The Company is required to intimate about the changes in the details given initially at time of applying IEC to the department for modification in the IEC.
Post Incorporation Compliances for a (OPC) Private Limited Company
#1 Opening a Company Bank Account
- Documents Required
- Company PAN Card
- Board Resolution for opening and operating company bank account
#2 Depositing of Share Capital money into Bank Account
- Time frame
- Within 60 days of the Incorporation of the company, the shareholder must deposit the capital into company bank account
#3 Issue of Share Certificates to Shareholders
- Time frame
- The company must issue Share Certificates to its shareholders within 2 months of its Incorporation
- A share certificate is a documentary evidence of a number of shares held by an individual in the Company.
- For non-compliance the Penalty is heavy. Fine to the Company range from Rs. 25,000 to Rs. 500,000. To Individual directors, penalty from Rs. 10,000 to Rs. 100,000.
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#4 Disclosure of interest by Directors
- Time frame
- Every Director of the Company in its First Board meeting after incorporation will disclose his or her interest (ownership or shareholding or directorship) in any other company/LLP/Firm.
- This is a very important compliance, which helps board of directors to take transparent decisions in the interest of the Company and to take up related party transaction compliances.
#5 GST Registration
- If your current supply of goods or service is over Rs. 20 lakh, you need to get a GST Registration (if your business operates exclusively in the North Eastern states, Rs. 10 lakh).
- Expert Tips
- Anyone supplying goods or services to another state, need to apply for GST regardless of turnover.
- Even online service provider serving customers in another State will instantly attract GST registration.
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#6 MSME /SSI Registration
- MSME registration is the procedure to get your company registered under MSME development Act for SME benefits.
- Get MSME registration in 1 day @ Rs. 999 through TAXAJTAXAJ
#7 Trademark Registration
- Many brands in the world value their trademark more than their any other physical assets and want to protect it through; Trademark Registration.
- Get Trademark registration in 1 day @ Rs. 1499 through TAXAJ
#8 Accounting Process
- Get your Invoicing, book keeping and cash flow management set right from the beginning
- TAXAJ gives away free Online Invoicing and cash flow management software with automatic account syncing for its AMC clients which starts @ Rs.1500 per month.ts AMC clients which starts @ Rs.1500 per month.
#9 Company Minutes Book & Statutory Registers
- An OPC Company with multiple directors has to maintain and update from time to time 7 to 8 mandatory registers like Register of shares, Register of Member, Register of Directors etc, besides Minutes of the Board Meetings and Annual General Meeting.
- Statutory Registers and Minutes book are documentary evidence of decisions of the Company.
- For non-compliance the Penalty is heavy. Fine to the Company range from Rs. 50,000 to Rs. 300,000. In addition to Rs. 1,000 per day for continuing default
- TAXAJ gets you Statutory Registers and Minutes binders free of cost with its AMC services. its AMC services.
#10 Board of Directors Meeting
- The First Board meeting of multiple director OPC Company shall be conducted within 30 days of Incorporation.
- Further, minimum 2 Board Meetings shall be held in a calendar year (one meeting in every 6 months).
- Directors Meeting or Board meetings are very important events in decision making process and management of the company.
- Following the legal procedure is very important for compliance purpose, non-compliance may lead to legal problems in case of disputes among the Directors
- In case of a OPC Company which has 1 Director, Board of Directors meeting is not Applicable. OPC Company which has 1 Director, Board of Directors meeting is not Applicable.
#11 Income Tax Return Filing
- Income Tax return is a statement of Company's earnings from various sources of income, tax liability thereon, details of tax paid and any refunds that have to be given by the government.
- Filing of Income Tax return is an annual event and need to done once in a year.
- Non-filing of Income Tax Return attracts interest, penalty, prosecution and scrutiny from the Income Tax Department.
- IT return is mandatory even if the company does not make any income during the year.
#12 OPC ROC Filing of Annual Return
- Every OPC is required to file its Annual Return (MGT-7) with the ROC within 60 days of the event date.The Financials including Balance Sheet, Profit and loss account (AOC-4) to be filed within 180 days from end of the Financial Year. The Auditor Appointment (ADT-1) to be filed within 15 days from the AGM.
- The ROC Annual Filing is an annual event giving details of Management, Financial performance and Governance to the ROC under whose jurisdiction the Company registered office is located.
Post Incorporation Compliances for a Limited Liability Partnership (LLP)
Obtaining the Certificate of Registration for your Limited Liability Partnership (LLP) is an exciting moment in your business start-up journey. You might have gone through the process of arranging needful documents as per prescribed standards of Ministry of Corporate Affairs and also insisted by the professionals who have assisted with certifications for your LLP Registration. Now you know the selecting a name for your LLP is more difficult than naming your baby.
Your LLP is born as an artificial legal person with certain inherent features, rights, powers and liabilities. Partners are the owners of the LLP and the Partners/Designated Partners are the brains and organs of a registered LLP. In other words you the Partners and Designated Partners are the Parents and Guardians of your LLP. As a Parent and Guardian of your LLP, you are responsible for the actions and inactions of a registered LLP and are personally responsible to answer the regulatory authorities for any non-compliance of any legal requirements by a LLP.
Obtaining the Certificate of Incorporation is only a starting point for a series of compliances a LLP has to follow under various legislations in India from time to time.
'IGNORANTIA JURIS NON EXCUSAT' : IGNORANCE OF LAW IS NOT AN EXCUSE
At this point of starting your business, please keep in mind the famous legal maxim Ignorantia juris non excusat, which means "ignorance of law is not an excuse” It is legal principle holding that a person who is unaware of a law may not escape liability for violating that law merely because one was unaware of its content.
So, the Designated Partner sand Partners are required to be aware about the legal and process compliance requirements a Registered LLP should follow under various laws from time to time. We request to spare few minutes periodically to review the timely compliance of requirements from time to time. Compliance requirements may vary from business to business depends on type of organisations and nature of business activities.
IMMEDIATE STEPS AFTER LLP INCORPORATION
The following are the immediate 10 steps to be taken by the LLP after registration
WITH IN 30 DAYS
1. LLP Agreement
Immediately after incorporation of the LLP, the Partners of a Limited Liability Partnership are required to execute an LLP Agreement and a copy has to be filed with the Registrar or Companies in LLP Form 3 with in 30 days of incorporation of LLP. LLP Agreement has to stamped as per Stamp Act of respective state where the LLP is registered.
The delay in filing LLP agreement shall attract penalty of Rs.100.00 per day till the date of fling Form 3 with ROC.
Every LLP has to obtain a Permanent Account Number (PAN) from Income tax department, Government of India. PAN is an identification number for every tax payer under Income Tax Act. For obtaining a PAN, the LLP has to make an application with a copy of its Certificate of Incorporation.
Also, Every LLP has to obtain a Tax Deduction and Collection Account Number (TAN) from Income tax department, Government of India. Certain category of payments requires Tax Deduction at Source (TDS) and the tax so deducted must be remitted to the government. To enable the TDS remittance, Tax Deduction and Collection Account Number (TAN) is required.
4. Opening Bank Account in LLP Name
After incorporation of the LLP, it is necessary to open a Current Account in the name of the LLP with any Bank in India. All the transactions in the name of the LLP should be transacted through the LLP Bank Account only.
The following are the documents and details required for opening. A Current Account with a bank:
- Certificate of Incorporation of the LLP
- Copies of LLP Incorporation documents – Form FiLLiP and Form 3 Filed with ROC and LLP Agreement.
- Permanent Account Number (PAN) of the LLP
- Resolution by partners of Opening and operation of bank Account
- KYC details for Designated Partners and Partners of the LLP
- Cheque for initial deposit of amount to Open Bank Account (This deposit can be considered as the capital infusion by the partners)
Also, the details and documents and initial deposit may vary from bank to Bank. There are banks offering ‘Zero’ balance Accounts as well subject to conditions.
Every business is required to under Income Tax Compliances such as Tax Deduction at Source (TDS) and Advance Tax Payments from time to time.
Every LLP has to prepare and keep the books of account in double entry system of accounting on accrual basis. The LLP has to maintain the Books of Accounts of all receipts payments and to comply legal requirements under Companies Act and other various laws. The books of accounts and financial statements shall give a true and fair view of the state of the affairs of the LLP, including its branch office or offices.
Bookkeeping and Accounting starts with recording of accounting transactions such as Receipts and Payments. It is advisable to maintain physical records of each transactions through Payment Voucher & Receipt Voucher (Click the link to download formats). To record a transaction, use the voucher as a cover note for every payment and receipt transactions with relevant supporting documents such as Supplier Invoices / Receipts with Transaction details. These vouchers and supporting documents are the primary reference for each transactions.. To record a transaction, use the voucher as a cover note for every payment and receipt transactions with relevant supporting documents such as Supplier Invoices / Receipts with Transaction details. These vouchers and supporting documents are the primary reference for each transactions.
The books of account should be kept at its registered office or such other place in India as the Board of Designated Partners may decide from to time. The books of account can be maintained in electronic mode subject to conditions under Companies Act.
6. Shop and Establishment Registration
Every Business Establishments are required to obtain Shop and Establishment Registration under respective State Shop and Establishment Act and Rules within 30 days of registration.
This is a state specific mandatory registration for all the business and establishments. The LLP has to obtain the Shop and Establishment Registration in every state wherever they have offices and establishments.
7. Professional Tax Registration – Employer & Employee
Every LLP is required to obtain Professional Tax – Employer Registration (Enrolment Certificate) within 30 days of incorporation. This again is a state specific labour registration mandatory for all registered business whether you have any employees or not. This registration is subject to renewal every year after payment of prescribed fee. Delay in obtaining the registration will attract penalty to business on yearly basis.
Also, every LLP who employs people with more than the specified limit of salary (this limit varies from State to State) has to obtain Professional Tax – Employee Registration (Registration Certificate), when they start employing people. For this purpose, the Partners / Designated Partners shall be treated as employees if they are drawing salary beyond the specified limits. Also, the employer must deduct the Professional Tax from the salary of employee and pay to the State Govt. on monthly basis.
WITH IN 60 DAYS
8. Infusion of Initial Capital by Subscribers to Memorandum
The initial partners of LLP has to bring the amount of capital contribution as stated in the subscription documents and LLP Agreement at the time of LLP registration within 60 days of incorporation.
Though there is no explicit conditions in LLP Act as to this time limit for bringing the capital, it is advisable to bring the subscribed capital with 60 days of incorporation.
Every LLP whose capital contribution exceeds Rs.25 lakhs or annual turnover exceeds Rs.40 lakhs has to get the accounts audited by a Chartered Accountant in Practice. There is no mandatory audit requirement for other LLP’s.
WITH IN 180 DAYS
10. Goods and Services Tax (GST) Registration
Every business with annual turnover exceeds Rs. 40 lakhs (Service providers 20 lakhs) is required to GST Registration under Goods and Services Tax (GST) Act and Rules.
It is not mandatory to obtain GST immediately after incorporation of the LLP. The LLP can obtain this registration as and when required.
In case the LLP has to produce its GSTIN to any third parties or authorities for its business, the LLP may. has to obtain the GST Registration immediately after registration of LLP.
11. Trademark Registration
Registering a Company or LLP with a name does not provide complete protection to the name or brand name. The protection of Company /LLP name under the Companies Act / LLP Act is limited to the extent that another Company or LLP will not be registered with the same or a closely-resembling name.
If a trademark is used for goods and services under different classes, separate applications are required to be filed under each class to get protection of trademark for the respective goods and services.
Also, there are many more regulatory compliance requirements a LLP has to follow under LLP Act and other various laws as may be applicable to the nature of business of LLP.
Post Incorporation Compliances for a Section 8 Company
Some attractive features of Section 8 Company
- Charitable Object: Sec 8 companies are purely formed with an objective of charity for social welfare of the society.
- Limited Liability : The liability of members is limited. Members of sec 8 company cannot have unlimited liability.
- Government License: Sec 8 company can commence business only after obtaining Government license
- Benefits and Privileges: owing to the objective of sec 8 company, the government has accorded some benefits and exemptions as compared to other forms of companies.
In simple words, section 8 Company is a legal entity for non-government or non-profit organizations. Once the company gets registered successfully on Ministry of Corporate (MCA) site, there are some post incorporation compliance for Sec 8 Company to be complied. Non compliance of same shall attract penal provisions and even suspension of license in certain cases. Thus Section 8 company post registration shall comply with compliances.
Post incorporation compliance check list for Sec 8 Company
No doubt Sec 8 company enjoys lot of benefits and exemptions from government still there are some common post incorporation compliances that needs to be mandatorily followed by sec 8 company too. Here are some major post incorporation compliance check list for Sec 8 Company as non-compliance of which may attract various penal provisions as per Companies Act, 2013.
1# Opening of Bank Account
After formation of Sec 8 company, the first and foremost step is opening of Bank Account in the name of the Company. Opening of bank account may require following documents-
- Copy of Articles of Association of the Company
- Copy of Memorandum of Association of the Company
- Challan copy of Spice form
- Copy of Pan Acknowledgement
- Copy of Board Resolution
- Certificate of Incorporation
- Any other document as demanded by bank official
2# First Board Meeting
Section 173(1), of The Companies Act 2013 deals with conduct of Board meeting of the companies. As per the provisions of the section, Sec 8 company shall within 30 days from the date of its incorporation conduct first board meeting of the company. Directors can attend the meeting either in person or through video conferencing.
3# Deposit of Share capital money
Once bank account is opened, the next compliance by sec 8 company is of depositing the share capital money in the bank account within 180 days from the date of incorporation of the company.
4# Issue of Share Certificates and payment of stamp duty
Sec 8 company is under obligation to issue share certificates to the shareholders of the company within 60 days from the date of incorporation of the company and pay stamp duty within 30 days from the date of allotment of shares as per the relevant stamp act applicable on the state.
5# Registered address
As per Section 12(1) of the Companies Act, 2013 a sec 8 company should have its registered office within 15 days from the date of incorporation of the company. This address should be used for all types of future communications from various authorities.
6# Appointment of Auditors within 30 days
As per Section 139 of the Companies Act, 2013 every company is required to appoint its first auditor within 30 days of incorporation by its board of directors and in case the board of directors fails to appoint the auditor within said period of 30 days then they shall call an extraordinary general meeting of shareholders for appointing an auditor. The appointment of auditor through shareholder must be completed within 90 days.
7# Affixing Sign Board
On registration of sec 8 company, every sec 8 company having its office all over India should affix its name at every place from where it is carrying on business.
8# Printing of letter heads
Section 12 mandate sec 8 company to print the following information on all its Business Letterhead / Billheads/Letter Papers etc.
- Name of the Company
- Address of Registered Office
- CIN Number
- Telephone No.
- Fax (if any)
- E-mail Id
- Website address if any
9# Disclosure of interest
At First board meeting, every director is under obligation to disclose his interest in any company/firm/body corporate/association of individuals as outlined in section 184(1) of the Companies Act 2013. Any changes in the disclosures shall be intimated by the director to board of directors in its first meeting held during each financial year. An independent director, if any, must give a declaration that he meets the criteria of independence during the first board meeting as a director.
10# Maintenances of Statutory Registers
It is mandatory as a post incorporation compliance for Sec 8 Company to maintain following statutory registers at the registered office of the company–
- MGT-1: Register of Members
- MGT-2: Register of Debenture holders Register and Index of Beneficial Owner
- MGT-3: Foreign Register of Members, Debenture holders, other security holders or beneficial owners residing outside India
- Form SH-2: Register of Renewed and Duplicate Share Certificate
- Form SH-3: Register of Sweat Equity Shares
- Form SH-6: Register of Employee Stock Options
- Form SH-10: Register of Shares or Securities Bought Back Register of Directors and KMPs Register of Deposits
- Form CHG-7 Register of Charges
- Form MBP-2: Register of Loans/Guarantee/Security and Acquisition by Company
- Form MBP-3: Register of Investments not held in its own name
- Form MBP-4: Register of Contracts or Arrangements in which Directors are interested
11# Declaration of Commencement of Business
As a post incorporation requirements of a company, every sec 8 company is required to file a declaration of commencement of business within 180 days from the date of incorporation of the company in accordance with the Companies (Amendment) Ordinance 2018, Section 10A, in form INC-20A.
12# Books of Accounts
As per section 128, every sec 8 company shall maintain proper books of accounts which shall represent true and fair view of the financial disclosure of the company.
13# Apply Shop Act Registration
As a post Incorporation Compliance for sec 8 Company, the next important step is obtaining shop act license immediately. The basic documents for obtaining shop act license is MOA, AOA, COI, Directors KYC documents etc.
14# Professional Tax Registration of Company and
It is mandatory to obtain Professional Tax registration to sec 8 company and all directors, all designated partners and all employers. However, all Union Territories including NCT of Delhi and certain states like Haryana, Punjab, Rajasthan, Uttar Pradesh etc. does not have any law to tax profession.
15# Trade Mark Registration
Sec 8 Companies should make immediate provisions for safeguarding interest of trademark, copyrights, patents rights by making an application of trademark at Trade Mark site Application of trademark is not mandatory for Sec 8 Company but it is strongly recommended to apply for registered trademark owing to its huge legal infringement of rights benefits.
Company is under obligation to comply with basic legal framework. Post Incorporation Compliance for Sec 8 Company is most essential and basic need from compliance view in order to avoid monetary as well as non-monetary penalties.