Though India is a large economy among the global countries, many companies that are in the nascent stages still complain that the country is highly complex to run a business. The compliance needs of small businesses are tedious and extensive. Here, you will get to know about the compliance requirements within the Companies Act.
India is one of the largest economies in the world today, but many new companies still complain, and correctly, of the high complexity of running a business here. As compared to many other large economies, compliance requirements of small businesses are extensive and tedious. In this article, we’ll look at what these compliances are, primarily focusing on the Companies Act.
Compliance Requirements under the Companies Act
Companies incorporated in India are primarily regulated by the recently enacted Companies Act, 2013. The Companies Act, 2013, amongst other provisions, specifies various provisions with regards to qualification, appointment, remuneration removal, retirement of directors, conducting board and shareholders meetings, passing of resolutions, related party transactions, the maintenance of books of accounts and the preparation and presentation of annual accounts (matters to be reported upon in the annual reports of the companies), periodical filing of forms with the Registrar of Companies, etc.
Once all formalities required legally for the incorporation are done with, and a certificate of the same is issued, the company is recognized as a legal entity, distinct from its members who have incorporated such entity. Irrespective of whether the company is a private or a public company, there are certain things that need to be done post the incorporation.
Post incorporation compliances
For starters, as soon as the incorporation is done, within 30 days one of the directors of the company must issue the notice for the first ever board meeting, almost seven days prior to the latter being slated for.
The company must also have the name board outside the registered office address, with its name, registered office address, Company Identification Number, e-mail ID, and phone number (which are mandatory now), website address and fax number, if any, stated on it. All the aforementioned details are also to be printed on the business letters, bill heads and all other official documents and publications going through the company.
One must also make sure the company has a PAN and TAN soon after the incorporation. Without these, you would not be able to even open a bank account. The company is also liable to convene regular board meetings throughout the calendar years and also make sure that minutes of the meeting are prepared in a permanent file or folder till the company exists.
These minutes must be prepared within 30 days of the meeting. The company also has to issue share certificates to all those who have been given stakes, and all details regarding the same must be mentioned and maintained in the allotment register. The company is also to file and maintain its balance sheet, a profit and loss account, an auditor’s report, and annual return every financial year before the due date, with the Registrar of Companies.
Other than the aforementioned non-negotiable terms and conditions, there will also be certain instances when the company will have to intimate the registrar of companies. These situations may include appointments of directors, removal and certain other changes in the prescribed manner.
Introduction of CSR rules
The New Companies Act has also introduced the CSR (Corporate Social Responsibility) provisions. Now, under CSR companies are obligated to take on certain philanthropic activities. All companies that adhere to the CSR criteria have to undertake these activities in the financial year.
The above compliance requirements only apply to the Companies Act, 2013. There are further registrations required, depending on turnover and business type, such as service tax, VAT and Profession Tax. It is pertinent to note that the responsibility of a firm to comply with rules and regulations is not a one-time thing, but is a continuous affair.
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