Corporation in India is diverse and complex and a number of private organizations are existing in India. It will be seen that as an important aspect of legal compliance in India, it is mandatory for several private companies to undertake several statutory formalities such as filing of annual returns and other important documents. Noncompliance of these requirements may cause severe consequences and illegality. In this article, this writer from CS Priyam Gupta will endeavour to outline the process for the preparation of annual returns and filings for Indian private companies.
Understanding Annual Returns: What are Some?
In legal terms, an annual return refers to a document that covers vital facts about any firm, including its financial position, shareholders, directors, and so forth, which is submitted once per year. Duly submitted to RoC, an annual return is the consolidated report of the company structure and operation in the preceding financial year.
Key Components of an Annual Return:Key Components of an Annual Return:
- Company Information: Inside and outside layouts of the fronts of the first and second floors as also a comprehensive site plan of the entire area.
- Principal Business Activities: A summary of business activities that the company engages in be it directly or indirectly throughout the course of the financial year.
- Shareholding Pattern: Details of shareholding pattern of the company including the company’s equity shares and preference shares if any.
- Details of Directors and Key Managerial Personnel (KMP): The full names, street addresses or postal addresses, and any other particulars of the directors and the KMP, who were in office during the year of the financial report.
- Indebtedness: Details of borrowings and debts that is any other liabilities of the company.
- Compliance Certificate: As to say that the company has complied with all the statutory requirements during the financial year or not.
Key Legal Provisions:
Section 92: relates to the filing of annual returns.
Section 137 deals with the submission of the balance sheet, profit and loss account, auditor’s report and the annual return.
Section 92(5): Provides for penalties on non compliance with the provisions relating to the filing of annual returns.
Filing Process: Annual returns means the filing of annual accounts and the implies the process of preparing and submitting accounts to the Companies House at least once a year.
Annual returns for private companies in India are as follows; a procedure that would make sure that all statutory provision have been complied with. Here’s a breakdown of the process:Here’s a breakdown of the process:
Preparation of Documents:
Make sure that all the supporting documents such as balance sheet, profit and loss account, Auditor’s report and the Board report among others are well prepared and all the required signatures obtained.
Gather data on share holding structure, liabilities and other statutory particulars.
Conducting the AGM:
Private companies have to hold an AGM within a period of six months from the closing of the financial year.
In the AGM, shareholders are required to ratify the financial statements and other papers that may be presented.
Filing Forms with RoC:
Traders form: This is used in filing the annual return this is the main form used in the conducting of the trading business. It has to be lodged within sixty days from the date of the meeting of the shareholders known as the annual general meeting.
This form is filed to provide the company’s financial statements, the form being known as the AOC-4. In as much as it needs to be filed within thirty days after the Annual General Meeting of the company.
ADT 1 This is the form that has to be used to intimate the appointment of auditors and it has to be filed within a period of 15 days beginning from the AGM.
Payment of Fees:
That is on submission of the forms, there are the statutory filing fees which have to be tendered. The fees differ depending on the amount of the authorized capital of the company.
Verification and Submission:
On completion of the form, they have to be stamped and signed by a company secretary or any director of the company. On completion of all the above verification processes, the completed forms are forwarded electronically to the RoC.
Acknowledgment:
An acknowledgment receipt is as well produced by the MCA portal after the successful submission of the online return. Proper filing of this document can be proved by this serving the genuine proof of filing This document needs to be filed for the following reasons:
Common Challenges and Solutions
This makes it possible for a potential investor to deduce the overall performance of a given private company from the filed annual returns, and other statutory documents though in practice there are many challenges that accompany filing. Such challenges make it hard for organisations to complete them on time or at all, making it possible for the legal requirements of an organisation to be violated, hence its consequences. Here are some common challenges and how to overcome them:Here are some common challenges and how to overcome them:
Inaccurate Information:
See to it that everything filled in the annual return is correct. Compare the information with the records of the company to prevent fallacies.
Missing Deadlines:
There are operational challenges that make the companies to lag behind in filing their returns as required by the law. To do this, one must ensure that there is a compliance calendar used and followed to the letter.
Technical Glitches:
The MCA portal is frequently vulnerable to technical drawbacks, most especially during the surge of filing. To tackle this, it is okay to file the returns way before the stipulated time.
Lack of Awareness:
Some of the private companies particularly the start-ups and those very young companies may not have adequate information concerning the filing requirements. Hiring this particular professional, a company secretary can assist in the management of such issues.
Penalties for Non-Compliance
Failure to meet with the filing requirements has serious consequences. Under the Companies Act, 2013, the penalties for non-filing of annual returns are stringent: Under the Companies Act, 2013, the penalties for non-filing of annual returns are stringent:
Monetary Penalties: Any company, and each of its officers who defaults is subject to a penalty which is ₹50000 and may go up to ₹500000.
Prosecution: Chronic violation may attract prosecution where the directors and other officials may be liable to the law.
Guidelines for Compliance
To avoid the pitfalls of non-compliance, private companies should adopt best practices that ensure timely and accurate filing of annual returns: To avoid the pitfalls of non-compliance, private companies should adopt best practices that ensure timely and accurate filing of annual returns:
Maintain Accurate Records: Make it a habit always to update all records that are being used at the time of filing so that some of the information on file is up to date.
Engage Professionals: To do this, ensure that you either employ a company secretary or seek the services of a lawyer well conversant with legal requirements.
Set Reminders: One could also utilize compliance management software or schedule the tasks to remind one or the whole team not to miss some deadlines.
Regular Audits: Internal audit must be done frequently in order to discover any violation and fix them.
Conclusion: Understanding the Why: Why Compliance Matters
It has been noted that annual returns as well as other filings are not just legal requirements but they are a testament to a company’s appreciation of corporate responsibility. CS Priyam Gupta is well aware of all the challenges that may be associated with the compliance of your business corporation, thus we provide professional services to make your company complaint with the legal requirements of the authorities. Therefore, by following these filing requirements of India, all private companies can evade legal issues and enjoy stakeholders’ confidence and hence concentrate on their success.