Five Compliance Requirements that are a Must for Every Private Limited Company
For any new business entity to run its operations smoothly and effectively, compliance measures become a mandatory step to follow. Before we move forward with further discussion, it is important to understand what the true meaning of compliance is and why is it important for any private limited firm to follow it diligently? We call a private limited company compliant when it runs its operations and routine tasks based on certain regulations or guidelines set by the authorized dignitaries. In other words, compliance is anything that assures that a company is functioning in its operations and tasks on the basis of approved and appropriate measures essential for its long-term survival.
Board Meetings, Annual General Meeting (AGM), Appointment of Statutory Auditors, Annual Filing of Forms by the Directors and Maintenance of Statutory Register are some of the mandatory compliance requirements with the provisions of Companies Act, 2013 for a private limited company to function steadily.
Let us discuss each of the points mentioned above in detail for a clear vision.
Board Meetings are a Must
At least two board meetings in one financial year are required to be conducted in the presence of two or 1/3 of the total number of board of directors from the time of a company's inception. Why? Here is your answer.
Conducting board meetings at the prescribed intervals is mandatory for small business entities because they act as an essential part of the compliance structure that incorporates a methodological approach concerning the yearly work flow of a business entity smoothly. Thus, if you are a startup company, conducting a board meeting within 30 days from the date of its commencement should be a regime to be pursued diligently.
Annual General Meeting (AGM) An Essential Part of the Compliance Structure
Annual General Meetings are conducted in the presence of the company's shareholders once a year. The agenda behind holding such meetings is to decide upon new strategies within budgets. These include approval of financial statements, declaration of dividends, appointment or re-appointment of auditors; appointment and remuneration of directors etc.
Appoint a Statutory Auditor for Clean Account Records
Audit plays an important part in the compliance structure for a private business entity. Audits ensure whether companies accounts are managed as per the approved compliance measures and that there are no fraud cases. Thus, companies appoint statutory auditors to get their account records audited at timely intervals. These auditors are appointed by the Board of Directors within 30 days from the company's incorporation. They are also sometimes re-appointed if required at the consequent Annual General Meeting.
There are certain requirements that should be fulfilled in this category also. Like for example, it is necessary for every private limited company to file its Financial Statements within 30 days of its Annual General Meeting (AGM) with The (ROC) Registrar of Company in E-FORM AOC-4. Before its submission to the ROC, at least one of the Board of Directors should sign the form digitally. All such forms are certified by a Company Secretary or Chartered Accountant in practice.
Maintenance of Statutory Register
Maintenance of Statutory register is yet another mandatory compliance requirement to be fulfilled by all the companies. Statutory registers are books that hold the names of all the members of the company, debenture holders, and foreign members or security beneficiaries or holders. Each one of the categories is listed in registers as MGT 1, MGT 2 and MGT 3. However, all the shares, stocks, and charges related information is registered in FORM SH-2, FORM SH-3, FORM SH-6, FORM SH- 10 and FORM SH-7.