Mandatory Corporate Compliances that Small Companies in India must Follow
Companies in India having paid up Share Capital less than INR 5 Million (Appx. USD 76,000) and Annual Turnover less than INR 20 Million (Appx. USD 300 Thousand) are categorized as a "Small Company". There are of-course relaxed compliance norms for ‘Small Companies’, however the following activities must be done:
- Board Meetings: Conduct at least two meeting of Board of Directors (BOD) in a financial year (April-March). Directors can participate in BOD in person or through video conferencing or other audio visual mode which can be recorded.
- Submission of MBP-1 & DIR-8 by directors: Take a letter of disclosure from every Director regarding their ‘interest in the company’ at the first meeting of BOD every year. In case of any change in Interest of director, get forms (MBP-1) in next BOD meeting
- Appointment of Auditors: Appoint an auditor in the BOD meeting within 30 days of Incorporation. Such appointment to be regularized in 1st Annual General Meeting (AGM) i.e. the ‘Shareholders Meeting’ for next 5 (Five) years. File the mandatory form ADT-1 within 15 days of AGM.
- Appointment of Resident Director: At least one director must be ‘Resident in India’. A person who stays more than 180 days in a calendar year India is regarded as a ‘Resident’
- Audit of Accounts: Get the books of Accounts audited by the practicing Chartered Accountant annually. Apparently the Auditor as appointed in 1st BOD meeting will undertake the audit and issue an audit report.
- Annual General Meeting (AGM): Hold a general meeting (meeting of Shareholders) at the Registered Office each year as AGM. Check the due dates in advance to conduct the AGM.
- Declare Annual Corporate Tax Return: File the corporate tax return after making payment of due income tax. Its also compulsory in case there is any ‘Loss’, in order to carry forward the loss in subsequent years.
- File Tax Audit Report: Coordinate with your auditors to prepare and file the Tax Audit Report on the prescribed due dates. It’s a special & separate report required by Income Tax Act in case the Annual Turnover exceeds INR 10 Million (USD 150 Thousand).
- File Transfer Pricing Report: A Transfer Pricing Report also to be filed in case there are international transaction with associated parties. Get this report from your auditors and file before the prescribed due dates.
- Filling of Financial Statements: File the audited financial statements with Registrar of Companies (ROC) together with Form AOC-4 and the consolidated financial statements, if any, with Form AOC-4 CFS. No need to prepare ‘Cash Flow Statement’
- Filing of Annual Return: File an annual return within 60 days from the date on which the AGM is held. The Annual Return can be signed by any director.
We will discuss on applicability of operational compliances e.g. Goods & Services Tax, Employees Provident Fund, Employee State Insurance Act, Professional Tax and other administrative compliances such as Shops & Establishment Act, Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act etc in our next article.
About the Author: With over 15 years of experience, Shashi Mohan has been responsible for the set up and operational management of over 150 overseas brands in India. He is one of member of our ‘Expert Panel’ at Entry India. Shashi can be reached at firstname.lastname@example.org or +91 9818700482