The ability to follow commands, rules, or requests is referred to as compliance. A private limited company incorporated in India must ensure that all the requirements of the Companies Act, 2013 are met.

The Companies Act of 2013 governs the appointment, qualification, salary, and retirement of company directors, as well as other matters such as the conduct of board and shareholder meetings. All registered Private Limited Companies must comply with the RoC. The corporation must comply with the annual compliance obligation regardless of its entire turnover or capital amount.

Every year, all firms registered in India, such as a private limited company, a one-person company, a limited company, and a section 8 company, must file annual returns and income tax returns. Though company registration is the most common way to start a business, there are several regulations that must be followed once the company is incorporated.

Managing the day-to-day operations of the business while adhering to the complex corporate regulations can be a demanding chore for the entrepreneur. As a result, it is always preferable to get expert assistance and understand the legal requirements to ensure timely completion of these compliances and avoid penalties or fines.

Benefits of Annual filing of a company:

    1. Avoid being a defaulter 

If a private limited company fails to file its annual compliance documents on time, it will face harsh fines and additional fees.

    2. Potential Investors Are Invited

The financial value of the organization is scrutinized by possible investors to assure the company's creditworthiness. On the MCA portal, an investor can make a direct request to the company or check the regular filing status. As a result, potential investors prefer to invest in a company that files its Annual Compliance for Private Limited Company on a regular basis.

    3. Ensures trustworthiness

Every organization must comply with the law. The regular filing of annual compliances for a private limited company plays an important condition to establish the company's trustworthiness for various players such as investors, ministry tenders, and for loan assistance purposes.

After the conclusion of each financial year, all companies (Private Limited Company, Limited Company, One Person Company) are required to file an annual return. The process of filing an annual return for a private limited corporation is straightforward and can be handled by a financial professional. The procedure for filing an annual return for a private limited corporation is discussed ahead.

    1. Keeping a Book of Accounts

It is critical for all businesses to have accurate books of accounts, not only to comply with the law, but also to maintain control over their operations.

The Companies Act of 2013 mandates that all businesses keep books of accounts in a specific manner. Furthermore, without a book of accounts and appropriate accounting procedures, the Board of Directors may not even know whether the company is losing money or making money. Without a solid book of accounts, regulatory filings such as service tax returns, VAT returns, TDS returns, and so on would be problematic. As a result, it is critical that the Company keep accurate books of accounts that include the following information:

    • All cash received and expended by the company, as well as the matter in which the transaction occurred; all sales and acquisitions made by the company; all the company's assets and liabilities.

    • Any and any other financial or commercial dealings.

Accounting software like Tally or QuickBooks can make it simple to keep track of a company's finances.

    2. Creating the Company's Financial Statements

The preparation of financial statements based on the Book of Accounts is required of all businesses. The term "financial statements" refers to any statement that provides information on an assesses financial position, performance, and changes in financial position, and includes the balance sheet, profit and loss account, and other statements and explanatory notes that are part of it.

    3. Appointment of a Company Auditor

Within one month of the company's registration, the first auditor must be appointed. The Auditors of the Company might be appointed by anyone who is a practicing Chartered Accountant or a firm of Chartered Accountants. However, the following individuals or entities are not eligible to serve as a company's auditor:

    • A person who is a Partner or Director of the company; a person who is indebted to the company; a body corporate; an officer or employee of the company (regardless of whether he or she is a qualified Chartered Accountant); a person who is a Partner or Director of the company; a person who is indebted to the company.

    • A person who works full-time somewhere else.

It is critical to note that the company's auditor must be impartial and free of any bias against the company.

The term of an Auditor's appointment would end at the completion of the Company's Annual General Meeting, and the company could choose to re-appoint the same Auditor or replace him or her.

    4. Auditing the Company's Financial Statements

Audit plays a critical part in the Company's management. According to the Companies Act of 2013, every company must engage an auditor to audit the firm's accounts and give a report on the accounts. Following the appointment of the Auditor by the Company, the Auditor would audit the Company's financial statements and provide a report to the members on the accounts of the Company. The Auditor must also state in his report if the Company's accounts present a true and fair picture of the company's financial situation.

If the Auditor is dissatisfied with the information or clarification provided in the Company's financial statements, or if the Auditor has any reservations about the account or book of accounts maintained by the Company, he or she can Qualify the Audit report and bring the facts to the attention of the stakeholders.

    5. Organizing a General Assembly

An Annual General Meeting is a gathering of a company's shareholders conducted once a year. The Companies Act of 2013 requires that all companies, except for one-person companies, hold an Annual General Meeting once a year. This is a criterion that all businesses must meet. Any Annual General Meeting must take place within 15 months of the date of the previous Annual General Meeting. The first Annual General Meeting of a newly incorporated company, on the other hand, must be held within 18 months of the firm's incorporation date.

The audited financial statements of the Company, along with the Auditor's Report and Directors Report, are presented to the members of the Company at the Annual General Meeting. After proper analysis, the members of the firm might adopt the Annual Accounts if they are pleased with the financial accounts of the company. Only until the financial statements of a firm have been approved by the company's Shareholders in a Meeting are they considered final.

    6. Filing of the Annual Return of a Private Limited Company

The Annual General Meeting must be concluded, and the Company's audited financial statements must be adopted before being lodged with the Registrar. The filing of an annual return of a corporation is the submission of the company's audited financial statements in the prescribed format to the Ministry of Corporate Affairs. The annual return of the corporation must be filed within 60 days of the date of the corporation's annual general meeting.

If a firm refuses to comply with any of the administrative requirements, the company and each officer who is in default will be fined for the period in which the default continues. As a result, the penalties will continue to rise as the period of non-compliance lengthens.

Annual Compliance Checklist for Private Startups

A startup operating as a private limited company must adhere to the rules of compliance established by several statutes and administrative organizations. These include, but are not limited to, filing tax and other returns on a regular basis, hosting board and other meetings, keeping approved books and accounts, and so on.

    • GST is applied to the payment of periodic dues. Payment of liability, TDS, and TCS is required.

    • Noncompliance with periodic returns by the Registrar – (Monthly, quarterly, annual returns- GST, TDS, etc).

    • GST Returns (Monthly/Quarterly).

    • TDS Returns on a Quarterly Basis.

    • Assessment and payment of advance tax due on a regular basis.

    • Returns on Income (Tax will be obligatory at a flat rate of 30 percent plus Education Cess)

    • Filing of a tax audit report administrative evaluation of enterprise under various statutes (E.g., The Environment and Protection Act, the Money Laundering Act, the Competition Act, and the Factory Act are just a few examples.)

    1. What regulations must a private limited corporation follow?

Once a firm is incorporated, it is necessary to maintain its compliances. The auditor will be appointed within 30 days. In addition, every year, income tax filing and annual return filing are required.

    2. Is it necessary for all businesses to file an annual report?

Yes. Every certified firm must comply with the RoC for 'Private Limited Companies.' The corporation should follow the annual compliance obligations regardless of its total turnover or capital amount. 

    3. What is the penalty for a private company's annual non-compliance?

Companies who fail to comply with the statutory compliance for Private Limited have been penalized Rs 100 each 'day' of delay till the exact date of filing since July 2018. Penalties, in addition to the additional Government fee, can be imposed on both the firm and the directors, including jail, for repeated non-compliance/failure.

    4. Is a private limited business required to be audited?

The statutory audit is a mandatory audit for all firms, as the name implies. Every year, all entities that are not registered as Private or Public Limited Companies under the Companies Act must have their books of accounts audited.

    5. Do directors have to sign director's statements for records if the company has no operations?

According to the most recent Companies Act, the corporation must file an annual return with the MCA and submit a signed Director Report for each fiscal year. The Director Report is attached to the MGT-7 form as an attachment.

    6. What is the company's annual compliance?

The corporation must comply with the annual compliance obligation regardless of its entire turnover or capital amount. Since the company's first financial year, the annual compliance is due following the AGM.

    7. Is it possible to submit an updated Annual Filing eForm that has already been submitted?

Yes, except for Form 23AC/ACA and Form 23AC-XBRL/ 23ACA-XBRL, revised filing of all Annual filing eForms can be done in respect of Forms already filed, but the fees for subsequent revised filing will be charged, as if it were a new filing.

    8. How can the company's defaulting status be removed?

For the financial years for which it has been listed as defaulting, the corporation must file all required annual returns and balance statements. The company's defaulting status will be lifted once the documents are filed, and the company will be allowed to file properly.