Compliance for the Private Limited Company
The reason behind the introduction of the new Companies Act 2013 was to take a big step towards globalization and it was promulgated to meet the changing environment regarding business. It is more progressive and more sound technologically.
Private Limited Company is the most popular form of business being practiced; it is a very complex affair too. The Companies Act 2013 provides mandatory Compliance that has to be followed for successfully running a Private Limited Company. Non compliance of principles can lead to heavy penalties. Thus it requires professional help to manage it.
Section 2(68) defines Private Company “as a company having a minimum paid-up share capital of one lakh rupees or such higher paid-up share capital as may be prescribed, and which by its articles: –
- restricts the right to transfer its shares;
- except in case of One Person Company, limits the number of its members two hundred:
Provided that where two or more persons hold one or more shares in a company jointly, they shall, for the purposes of this clause, be treated as a single member:
Provided further that—
- persons who are in the employment of the company; and
- persons who, having been formerly in the employment of the company, were members of the company while in that employment and have continued to be members after the employment ceased, shall not be included in the number of members; and
- prohibits any invitation to the public to subscribe for any securities of the company;
All the above features and policies must be complied with for starting a Private Company.
Section 3 (1) b describes the minimum number of members required for starting a private company by saying “two or more persons, where the company to be formed is to be a Private Company.”
All the Private Company must have have their own memorandum and articles of association as prescribed under section 4 and 5 of Companies Act 2013 respectively.
Section 4 also make its compulsory for a company to use the word private limited everywhere while describing the name of Private Company.
A company must acquire a Corporate Identity Number and a Permanent Account Number before starting its daily affairs. The company also must appoint the minimum number of directors also as per as the provisions of the statute.
Also there are certain restrictions on Private Companies which they have to follow otherwise there are penalties, like Private Company cannot issue their securities directly to the public.
After incorporating the Private Limited Company there are certain general practices and compliances that have to be followed for successfully managing a Private Limited Company on daily basis.
Other Mandatory Compliances
Statutory Audit of Accounts – The Companies Act mandates statutory audit of accounts by a Chartered Accountant at the end of every financial year. It is submitted before the ROC (Registrar of Companies) by the auditor.
Appointment of Auditor – An auditor must be appointed within one month of date of incorporation of the company and shall hold the office for 5 years and new auditor should be selected after 5 years.
Filing of Annual Report– After the holding of annual general meeting within 60 days of such meeting annual report for the period of 1st April to 31st March must be filed.
Annual General Meeting – Every Private Limited Company should hold its annual general meeting within six months from the date of closing of the financial year.
Section 134 of The Companies Act 2013 requires the preparation of director’s report with all the necessary information required.
All the above Compliance have to be followed for the successful management of private companies. And such compliance should be done easily with the help of professionals both manually and with the help of online expertise.
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