HandBook - After Incorporation of Limited Company by binoychacko


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On Compliance requirements of a

Limited Company

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Being a registered entity, Limited Company is treated as artificial legal person in relation
to regulatory compliance provisions. After registration of a Company, it has to comply the
legal and regulatory requirements of various laws.

The individual Promoters / Directors are required to ensure the compliance of the
provisions of respective Acts and rules while conducting the business activities and
regulatory procedures.

Corporate Compliance is an essential part of a corporate function failing which stringent
penalties are imposed under the provisions of Companies Act.

While running the business, regular compliance of Company can be broadly classified in

   a.   Companies Act
   b.   Accounting and Audit
   c.   Taxation
   d.   Other compliances specific to the industry where the business relates

Limited Company
While running the business, a company has to comply and adhere to various legal process
and procedures as required under the Companies Act and Rules. The compliance process
in a company is ensured by way of meetings of directors and shareholders, maintenance
of Minutes, Registers and Records, appointment of company secretary, maintenance of
accounts and audit, Filing of periodic and event based returns to Registrar of Companies.

Board of Directors and Meetings

Directors are appointed by shareholders and the day to day management of company is
vested with the Board of Directors. The Board of Directors manages the company subject
to the provisions of Companies Act and Rules.

The Board carry out the management through decisions taken at their meetings. The
decisions at the meeting of directors are carried by way of resolutions. The Board of
Directors has to meet at least once in every three months and at least 4 meetings shall be

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held in every year. Minutes of Board Meeting should be recorded and kept signed by the
Chairman of the meetings.

Shareholders and Meetings

Shareholders are the ultimate owners of the company and thus they are the ultimate
decision making authority for matters such as appointment of directors etc.

Every year, the company has to convene an Annual General Meeting (AGM) of the
shareholders for adopting the Annual Accounts and appointment of Auditors for the
following year. Any meetings of shareholders other than the Annual General Meeting are
called Extra Ordinary General Meetings (EGM). In case of any items that requires
shareholders approval and cannot be waited for next AGM, usually decided at an EGM of
shareholders. Minutes of General Meetings of the company should also be recorded and
kept signed by the Chairman of the meetings.

Though the day to day affairs are managed by the board of directors, there is certain
decision that requires the approval of Shareholders meetings. Considering the
requirements of majority for passing, resolutions can be classified in to Ordinary
resolution and Special resolution.

Ordinary Resolution:

Where the votes casted in favour of the resolution exceed the votes casted against the
resolution in a general meeting by members or by proxies attended the meeting and
entitled to vote.

Special Resolution:

Where the vote’s casted in favour of the resolution are not less than three times the
number of votes casted against the resolution in a general meeting by members or by
proxies attended the meeting and entitled to vote.

Company Secretary

Every company having a paid up capital of Rs.5 Crore or more shall appoint a whole time
Company Secretary and every company having a paid-up share capital of Rs.10 Lakhs to
Rs.5 Crore shall obtain the Secretarial Compliance Certificate from a Company Secretary
in whole-time practice and have to file the same with the Registrar of Companies.

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Minutes / Registers / Records and Common Seal

A company is required to maintain and preserve a set of records as required under
Companies Act. The records and registers should be made available for inspection by
Directors/ Shareholders and Regulatory authorities as and when required subject to
restrictions under the Act.

To ensure timely compliance of requirements in a systematic manner, the following
records, registers and stationery is required by a company.

   1. Share Certificate

      Share certificate is the proof of share holding in a company. The company has to
      issue share certificate to the subscribers of Memorandum on receipt of subscription
      money as agreed in the Memorandum of Association and for all subsequent share

       A Share certificate is required to be issued under the authority of board resolution
      with the common seal of the company and is required to be signed by two directors
      and an authorized signatory. Stamp duty is to be paid on share certificate according
      to the respective state stamp rules.

   2. Minutes Book

      The decision taking process in a company happens through Meetings of Board of
      Directors and Members. Minutes of these meetings are required to be recorded,
      serially numbered, each page should be initialed and the last page should be dated
      and signed by the Chairman of Meetings as required under Companies Act.

   3. Statutory Registers

      The following are the Registers that are mandatory to be kept by a company

         i.   Register of Members
        ii.   Register of Directors
       iii.   Register of Directors Shareholding
       iv.    Register of Companies / Firms in which Directors are interested
        v.    Register of Contacts in which Directors are interested
       vi.    Register of Charges

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      vii.    Register of Investments not in the name of Company
      viii.   Register of Loans and Guarantee
       ix.    Register of Investments
        x.    Register of Share Transfers

   4. Common Seal

      Common seal is an official seal used by the company. Use of common seal leaves an
      indentation or impression on the paper.

      Common seal is usually used for the following purposes

      a. Issue of Share certificates
      b. Contracts and deeds to be executed by the company

      The common seal is required to be used under the authority of board of directors
      and is required to be witnessed by directors as stipulated in the Articles of
      Association of the company.

Filing of Returns with office of Registrar of Companies (ROC)

Compliance mechanism under Companies Act mandates a company to file documents
and Returns to office of Registrar of Companies (ROC) from time to time.

Compliance related filing of returns / documents with the office of Registrar of Companies
can be broadly classified in two categories;

   1. Annual Statutory Compliances
   2. Event Based / Process Compliances

   1. Annual Statutory Compliances
        a. Annual Accounts.

              Every company has to prepare financial accounts consisting of Balance Sheet
              and Profit and Loss account on a yearly basis duly audited by a Chartered
              Accountant and the same has to be placed before the Annual General
              Meeting (AGM) of the company. Copy of the Annual Accounts has to be
              filed with the Registrar of Companies within 30 days from AGM.

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         b. Annual                                                                 Return.
            Every year a company shall file a return with the Registrar of Companies
            within 60 days of AGM containing the particulars such as address of
            registered office, register of its members, register of its debenture holders,
            shares and debentures, indebtedness, members and debenture holders, past
            and present, and directors, managing directors, past and present.

         c. Secretarial Compliance Certificate.

              In case of companies having paid-up share capital of Rs.10 Lakhs to Rs.5
              Crore shall file the Secretarial Compliance Certificate with the Registrar of
              Companies within 30 days from AGM.

   2. Event Based / Process Compliances

      The following are few instances that require a filing of a return with the Registrar of

         Events that requires filing of Returns

         a. Allotment of of Shares
         b. Increase Authorised Capital
         c. Creation / Modification / Satisfaction of Charges
         d. Change in Registered Office of the company
         e. Filing of certain Resolutions Passed by the Board / General Meetings and
            Agreements entered by the company
         f. Appointment of Directors / Managing Director and changes among them.

         Process related Filing requirements

         g.   Change of Company Name
         h.   Obtaining Certificate of Commencement of Business by a Public Company
         i.   Statutory Meeting of a Public Limited Company
         j.   Conversion of Private Company to Public and vice versa
         k.   Various Approvals from the office of Central Government / Regional
              Director / Company Law Board /Registrar of Companies

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Accounting & Audit

If finance is the life blood of Business, accounting is the function that of a heart. A
Company or LLP is required to maintain proper books of accounts with respect to

      a. Sums of money received and expended
      b. Sales and purchase of goods and services
      c. Assets and liabilities

As per Companies Act, books of accounts to be maintained according to double entry
system on accrual basis in accordance with the Indian accounting standards and the same
shall be maintained at the registered office of the company.

A company has to close its accounts every financial year and such financial year may be
less more than a calendar year but it shall not exceed fifteen months. The account of a
company has to be audited by a Chartered Accountant. The requirement of audit is
applicable to all companies irrespective of size and turnover.

In case of companies where annual turnover is Rs.60 Lakhs or more, there is an additional
requirement of audit under Income Tax Act by a Chartered Accountant and the report to
be submitted along with the Annual Tax Returns.

Every Annual General Meeting (AGM), the board of directors shall place the accounts of
the company consisting of Balance sheet as at the end of the financial year and a Profit and
loss Account for that period along with the report of auditors.

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Tax Compliances

A. Income Tax Compliances

Income Tax law compliances for a company / LLP are as follows:

1) Tax Deduction / Collection at Source (TDS/TCS) and filing of Returns

Company or LLP while making specific payments has to deduct tax at source. TDS is
applicable to payments such as Salary, Interest, Dividend, Rent, Fee for professional and
technical services, Commission and brokerage etc. The collection tax will be made at the
source where income arises or accrues. The Incomes Tax Act mandates the payer to
deduct specific percentage from the payment and pay the balance to recipient. The payer
has to file quarterly returns to Income tax department with details of payee, date of
deduction and date of remittance to department etc. The die dates for filing the quarterly
returns are as follows:

Quarter                              Filing Due dates
First Quarter (April to June)        July 15th
Second Quarter (July to Sept)        October 15th
Third Quarter (Oct to Dec)           January 15th
Fourth Quarter (Jan to March)        May 15th

2) Advance Tax Payments

Income Tax laws mandate payment of Income Tax in Advance in case of assesses total tax
liability for a financial year exceeds Rs.10000 or more after deducting the tax deducted at
source from the gross tax payable on the current income.

Schedule of Advance Tax Payment by Companies and LLP

 Instalment                     Due Date                  Percentage
 First                          15th June                 15%
 Second                         15th September            45%
 Third                          15th December             75%
 Fourth                         15th March                100%

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If the advance tax payment is not made in time, interest will be applicable for the delay in

3) Filing of Income Tax Returns

As per Income Tax Act, company or LLP has to close its financial year as on 31 st March
every year and has to file the returns with Income Tax Department. In case of Company /
LLP whose annual turnover is more than Rs.60 Lakhs, the accounts have to be audited as
required under Income Tax Act as well.

A company / LLP have to file its Income tax Returns on or before the due dates as follows:

 Company / LLP whose accounts are not 31st July of every year
 required to be audited under any Law
 Company / LLP whose accounts are 30th September of every year or such
 subject to Audit under any Law       other date as may be notified by the
                                      Income Tax authorities.

B. Service Tax

A company / LLP providing taxable services have to obtain Service Tax Registrations
when the annual turnover is more than Rs.10 Lakhs in any of the previous financial year.

   (i)    Payment of Service Tax

          The service provider has to collect service tax at such rate from the recipient of
          services and to pay to the government as follows on receipt basis:

           Company                          Service tax to be paid on or before 20th
                                            day of the following month
           LLP                              Service tax to be paid on or before 20th
                                            day of the following month after each

   (ii)   Filing of Service tax Returns

          The service provider has to file the return to Service Tax Department as follows:
           Monthly          / Company                     Monthly Return to be filed

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           Quarterly returns                              on or before 20th of the
                                                          following month
                                LLP                       Quarterly return to be filed
                                                          on or before 20th day of the
                                                          following month after each
           Half         yearly Company / LLP              Quarterly return to be filed
           returns                                        on or before 20th day of the
                                                          following month after each
                                                          half year
           Yearly returns       Company / LLP             Yearly return to be filed on
                                                          or before 20th day of the
                                                          following month after each
                                                          Financial year


All the companies and LLPs dealing with taxable goods and materials should register
under VAT if the turnover of Company / LLP from taxable goods is above the exempted
limits as prescribed under state VAT Rules.

Value Added Tax (VAT) or Sales Tax is a consumption tax levied on sale of taxable goods
and materials. VAT is a state specific registration and it is applicable to sales within the
state as well as interstate sales. The seller is liable to pay VAT to the government.

As the name suggested this tax is levied on the value added on the product by a dealer.
For example X sells a product at Rs.1100.00 (including 10% VAT) to Y. Y adds margin of
Rs.200 and sells the product to the customer at Rs.1320.00 (ie., 1200+10% VAT). Tax
liability in this case is follows:

X to Government      Rs.100.00 (10% of Rs.1000.00)
Y to Government      Rs.20.00 (10% of Rs.1200 – Rs.100)

Payment and VAT Returns

The amount of VAT collected should be paid to Government on monthly basis and
Monthly / Quarterly / Half yearly / Yearly returns also to be filed for the same.

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D. Professional Tax

This is a tax on employment and profession. Professional tax is imposed at the state level.
Companies / LLPs employing people with stipulated salary shall have to obtain
registration for Professional Tax. The slab for professional tax defers from state to state.
Business owners, working individuals, merchants and people carrying out various
occupations comes under the purview of this tax.

E. Importer Exporter Code (IEC)

Importer Exporter Code (IEC) is a unique 10 digit code issued by Director General of
Foreign Trade, Ministry of Commerce, Government of India. To carry on import or export
in India, IE Code is mandatory. No person or entity shall make any Import or Export
without IE Code Number.

If there is any change in the particulars of company, changes in directors, change of
address, an application has to be made to Director General of Foreign Trade to effect such
changes in the IEC Records / Certificate.


      For more information and all your Company / LLP Compliance requirements,

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