ADVANTAGE AND DISADVANTAGE OPC

Companies must have to file some returns with the Ministry of Corporate Affairs, which are mandatory and some of the returns are based on the happenings of some of the events at the company can be generally classified as Regular returns and event based returns. Companies Act 2013 provides several legal compliance that are to be made by every company like reporting of financial results, reporting of changes in management, maintenance of statuary registers, auditing of accounts etc. All the compliances provided under the Company Law may be divided in 2 parts for making it easy to understand:

1. Mandatory Compliances: These are the compliances which are mandatory for all Companies irrespective of their capital and nature of business etc.

2. Event Based Compliances:These are the compliances which are to be made on occurrence of an event in the Company like change in directorship, alteration in capital clause, alteration in object clause etc.

Following are the mandatory compliances that are to be made by Private Limited Company in compliance with the provisions of Companies Act, 2013 in every financial year after incorporation of Company.

Mandatory Compliances:

Post incorporation every private limited company has to do the following mandatory compliances

Meeting of Board of Directors:

First Meeting of Board of Directors is required to be held within 30 days of Incorporation of Company and thereafter 4 meetings are required to be held in every financial year in such a manner that the gap between 2 Board Meetings should not be more than 120 days. In case of a small company it is enough to have only 2 Board meetings per year and there must be a minimum gap of 90 days between one meeting and the other Board Meeting.

Appointment of statuary Auditors:

As per the provisions of Companies Act, 2013 every Company is required to get its accounts audited from a Practicing Chartered Accountant in India. The Company has to appoint any Practicing Chartered Accountant for the purpose of auditing of its accounts, In case of newly incorporated Company Auditor may be appointed either by Board of Directors within 30 days of Incorporation of Company or it may be appointed by members in Extra Ordinary General Meeting within 90 days of Incorporation and then ratification or re-appointment is required in every consequent Annual General Meeting of the Company.

Allotment of Shares and Issuing of Share Certificate:

The company need to allot the shares to the subscribers of the memorandum of the company and to issue Share Certificates to the subscribers of memorandum within 60 days of Incorporation of Company.

Minutes of proceedings of Meeting of Board of Directors, General Meeting:

mandatory for every company to cause minutes of the proceedings of every meeting of Board of Directors, General meeting within 30 days of conclusion of meeting concerned.

Filling of Disclosure of interest by Directors:

to give disclosures about their interest in any other business entity in first Board Meeting in which they participate as a Director and thereafter in First Board Meeting of every financial year in FORM MBP-1 to the Company.

Approval and Signing of Financial Statements:

The financial statement shall be approved by the Board of Directors before they are signed on behalf of the Board at least by chairperson of the Company where he is authourised by the Board or by two Directors out of which one shall be managing director and the chief executive officer, if he is a director in the Company, The Chief Finance officer and the Company Secretary of the Company, wherever they are appointed for submission to the auditor for his report thereon.

Report by Board of Directors:

There shall be attached to statements laid before a company in general meeting, a report by Board of Directors of Every Company which details the state of the company and its compliance with a set of financial, accounting and corporate social responsibility standards.

Filling of Financial Statements or Financial Results:

Every Company is required to file its Financial Statements within 30 days of its Annual General Meeting with Registrar of Company in E-FORM AOC-4 which shall be digitally signed by at least one Director and is required to be certified by A Company Secretary in Practice/Chartered Accountant in Practice/ Cost Accountant in Practice if the Company is not a Small Company.

Filling of Annual Return:

It is mandatory for every company to file its Annual Return with Registrar of Companies within 60 days of Annual General Meeting in E-FORM MGT 7 which shall be digitally signed by at least one Director and is required to be certified by A Company Secretary in Practice if the Company is not a Small Company.

Maintenance of Statuary Registers:

Following registers are required to be maintained by every company:

  • MGT-1: Register of Members
  • MGT-2: Register of Debenture Holders
  • MGT-3: Foreign register of members, Debenture Holders other security holders or beneficiary residing outside india
  • FORM SH-2: Register of renewed and duplicate share certificate
  • FORM SH-3: Register of Sweat Equity Shares
  • FORM SH-6: Register of Employee Stock Options.
  • FORM SH-10: Register of Shares or Securities bought back
  • FORM CH-7: Register of Charges
Event Based Compliances:

Besides Annual Filings, there are various other compliances which need to be done as and when any event takes place in the Company. Some of the Instances of such events are listed hereunder :

  • Increase of Authorized Capital
  • Further issue of Shares
  • Offers of shares in Private Placement
  • Allotment of Shares
  • Change in Authorised Capital of the Company.
  • Transfer of shares
  • Giving Loans to other Companies.
  • Giving Loans to Directors
  • Appointment of Managing or whole time Director and payment of remuneration.
  • Loans to Directors
  • Opening or closing of bank accounts or change in signatories of Bank account.
  • Appointment or change of the Statutory Auditors of the Company.
  • Change of Registered office with in the state or from one state to other.

Different forms are required to be filed with the Registrar for all such events within specified time periods. In case, the same is not done, additional fees or penalty might be levied. Hence, it is necessary that such compliances are met on time.