Significance of Compliance.


“If you think Compliance is expensive, trynon-compliance!!”

Dear readers,

As you all are aware; in presence scenario Government is getting more and more strict considering irregularities happened in past few years in Indian Corporate sectors. Many Corporate houses have taken undue advantage of loopholes in Laws. In consequent to that

Government put its efforts to stop the irregularities and non-compliances. Government

sent notices to lacs of Companies intimating them to comply with mandatory rules and laws of Companies Act, 2013 also it de-registered many defunct companies, deactivated DIN’s of many directors. Some companies have also knocked the door of NCLT and filed the petitions for restoration of Companies, but it’s so time consuming and expensive thing that small companies or promoters cannot even afford it.

Thousands of people get their companies registered every year in India. They also show a great enthusiasm for following the further companies regularly. But unfortunately; due to lack of knowledge and awareness many people fails to pay attention on compliance part and consequently faces huge penalties and other legal difficulties.

In last few years Government has given some relief to those who want to do business by forming company viz. very less documentation, withdrawal of government fee up to a certain limit of Capital), fastest process to get Companies formed, easy name reservations and many more; but unfortunately perspective promoters are not still aware of it.

By below brief instance/case, it would be very clear to all that to what extend one has to face serious consequences of non-compliance;

In one of my client’s case it was happened that; Company’s operations were running with very good business, also lots of transactions were taken place in Company’s Account in that particular period, but the Company has not got its mandatory Returns filed/compliances done. Unfortunately; the Company got caught in the flow of Government’s Company “de-registration initiative’ and their company also got strike off by Government sue moto in addition to this Company bank account also got frozen at the very same time when he had to pay some huge amount of advances to his material supplier.

This is the case of negligence on the part of company’s Board of directors for which they had to pay cost and faced those extremely serious actions by Government Authorities.

At a time when compliance is becoming more and more important, knowing that you are compliant is essential, with the assistance Corporate Professionals, you can be confident that your business entity is complying with all relevant Laws and rules as prescribed by Government.

Although it is consultant’s responsibility to look after necessary compliances once business entity gets registered; but clients are equally accountable to co-operate to professionals to get compliances done timely.

There are various Laws and Government Authorities who keep watchdog and put some legal obligations upon Corporate to fulfill certain regulatory compliances regularly viz. SEBI, ROC, RBI, IT Dept., GST Dept., Stock Exchanges & other departments. There are specified penalties levied by each Dept. for non-compliance. Among all, we are here to discuss solely about Company Law Compliances and consequences thereof.

Companies Act, 2013 has prescribed certain Legal & Secretarial obligations which, the Company is bound to comply with. There are some annual & event based compliances which a Company is required to file with Registrar of Companies. Hence it is crucial to fulfill compliance obligations on time in order to avoid legal and penal consequences.

There are very little compliances; the companies are bound to fulfill at different timelines (Please refer Compliance chart enclosed). To a Company; there are just little basic compliances; which the Company has to file annually, viz. Audit of Accounts and filing the same with Income Tax Department and Registrar of companies, but in that also people fails to do so and faces huge penalties from respective departments in addition to that they have to face some unavoidable actions from Government also as mentioned earlier.

For the further reference of readers; I have enclosed chart depicting Annual & Event Based compliances applicable to a private Company.

Compliance Calendar:

S.N Compliance Requirement Description & Timeline e-Form
1 Appointment of Auditor Intimation to RoC about Appointment of Auditor Within 30 days of Incorporation of or within 15 days of first AGM as the case may be. ADT-1
2 Statutory audit of Accounts Every Company shall prepare its Accounts and get the same audited by a Chartered Accountant. The auditor shall provide an Audit Report and Financial Statements for the purpose of filing it with the Registrar.
3 Filing of Annual Return Every Company is required to file its Annual Return within 60 days of holding Annual general Meeting. MGT-7
4 Filing of Financial Statements Every Company is required to file its Audit Report, Balance Sheet along with statement of Profit & Loss Account, Board Report and other documents within 30 days of holding Annual General Meeting AOC-4
5 Filing of KYC documents Each Director is required to file his KYC documents with RoC for every year. DIR- 3KYC
5 Appointment or Resignation of Director Intimation to RoC about Appointment or Resignation of Director within 30 days of the of Board Meeting. DIR-12
6 Charge filing Intimation to RoC for Creation/Modification/ Satisfaction of Charge within 30 days of the of creation/Modification/ Satisfaction of charge. CHG-1/ CHG-4
7 Change in Regd. Office address. Intimation to RoC for Shifting of the Regd. Office address of the Company within 30 days of the Board meeting. INC-22
8 Allotment of Shares Intimation to RoC of Allotment of Shares (Increase in paid up capital) within 30 days of the Board Meeting. PAS-3
9 Increase in Authorized Capital Intimation to RoC of Increase in Authorized Capital of the Company within 30 days of the EGM SH-7
10 Special Resolution Filing of Special Resolution for certain Compliances. MGT-14
11 Minutes On the basis of events

Through this brief write up, I tried to throw light on “Significance of Compliance’s”!! I hope all my dear professional colleagues and reader found it useful.

CS. Anand Jain,
Anand Jain & Co.