JOURNEY OF A NEWLY INCORPORATED COMPANY

Authors: Rashmi & Harshi

Incorporating a company is the first step. It requires a lot of work to be done after a company is incorporated. There are lots of requirements, compliances which are required to carry it forward. We have tried to provide a comprehensive list of a “to do” after the private limited company is incorporated.

Compliances for Private Limited Companies after Incorporation:

The private limited company registration gives you access to crucial benefits: you can add shareholders, attract the best talent with equity and raise loans easily among other things. But it’s no free lunch. To prove you’re worthy of these advantages, you need to comply with the rules and regulations of the Companies Act, 2013, starting from the day you incorporate. This article serves as a comprehensive guide for all post incorporation compliances required to be completed in two months after incorporation.

1. Convening of First Board Meeting:

The board meetings are meeting of director which is to be held at least one in every quarter (the gap between the two meetings should not be more than 120 days) for a private limited company however, for small company (having capital of fifty lacs and turnover is not more than two crores) minimum of two meetings must be held within the financial year at a gap of six months. There is no limit on a maximum number for which a board meeting can be held. The first meeting of the directors after incorporation of the companies is very important as it must deal with various provisions of the Companies Act and a decision is to have arrived with respect to each such requirement.

2. Appointment of First Auditor

One of the first orders of business after having obtained your company’s Certificate of Incorporation is the appointment of the first auditor of the company. Within 30 days from the date of registration of the company, the Board of Directors must appoint its first auditor for the company. In case the Board fails to appoint an auditor within the above timeline, it is required to inform the members of the company, who may then within 90 days of such intimation, appoint the first auditor of the company at an Extraordinary General Meeting. The tenure of the auditor so appointed is to be till the conclusion of the first Annual General Meeting.

3. Disclosure of Director’s Interest and Declaration Regarding Disqualification

Section 184 of the Companies Act, require every director to disclose his concern or interest, whether directly or indirectly, in a contract or arrangement, or proposed contract or arrangement in the first meeting of a board of directors of the company and thereafter in the first board meeting to be held in every financial year. Any change in the interest of director is to be intimated to the Board of Directors within 30 days of such change. Any non-disclosure shall make any such contract or arrangement voidable at the option of the company. Such disclosure to be made in the prescribed form MBP-1. In case of public limited companies, such disclosure needs to be filed with ROC in prescribed form MGT-14. This is an ongoing compliance as well; directors must disclose their other interests from time to time as required by the Companies Act.

4. Developing of Accounting System for the Company:

Section 128 of the Companies Act, requires every company to prepare and keep at its registered office books of account and other relevant books of account and financial statement of every financial year to give a true and fair view of the state of affairs of the company. The books of account need to be maintained with the accrual & double entry system which needs to be preserved for eight financial years. The accounts need to be maintained at the registered address of the company or at any other place where directors decide with an intimation to ROC.

5. Registered Office

Situation of registered office has to be intimated within 30 days from the date of incorporation to the registrar of companies. Registered office can be registered at the time of incorporation

If it’s not filed at the time of incorporation then within 30 days from the date of incorporation, you need to file e-form INC-22 with the registrar of companies.

As per section 12 of Companies act 2013, a company shall, on and from the 15th day of its incorporation and all times thereafter shall have a registered office. This means the company should enter into a rent or lease agreement within 15 days from the date of incorporation and within 30 days from the date of registration should file INC-22 with ROC. Furthermore, every company must:

i. Paint or affix its name and the address of its registered office and keep the same painted or affixed, on the outside of every office or place in which its business is carried on in a conspicuous position and in legible letters. This board must be in one of the languages in general use in that locality;

ii. Have its name engraved in legible characters on its common seal, if any;

iii. Get its name, address of its registered office and the Corporate Identity Number (CIN), along with telephone number, fax number, if any, e-mail and website addresses, if any, printed in all its business letters, billheads, letter papers and in all its notices and other official publications; and In case of any default in complying with any of these requirements in respect of the registered office etc., a company and every officer who is in default shall be subjected to a penalty of Rs. 1,000 for every day during which the default continues, not exceeding Rs. 1,00,000.

6. Opening of Bank for the Company

One of the main activity post incorporation of the company is the opening of bank account in the name of the company. Since a company is a registered legal entity — recognized by law, the process for opening bank account is relatively simple. As per Reserve Bank of India’s KYC norms, the following are the documents required to open a current account in the name of the Company:

• Self-attested copies of Certificate of incorporation and Memorandum & Articles of Association;
• Board resolution to open bank account for Company ;
• Power of Attorney granted to its managers, officers or employees to transact business on its behalf (if applicable);
• Copy of PAN allotment letter;
• Copy of the telephone bill;

Documents submitted for opening of bank account must be self-attested with seal of the company. Hence, it’s important to obtain company seal and company letterhead after incorporation of the company.

7. Issue of Share Certificates to Subscribers

Within a period of two months from the date of incorporation, every company must deliver the share certificates to the subscribers of the memorandum. This means that the subscriber has to remit the agreed subscription amount within 60 days from the date of incorporation.

Failure by the company to deliver the certificates will attract a fine which shall not be less than Rs. 25,000 but which may extend to Rs. 5,00,000. Also, every officer of the company who is in default shall be punishable with a fine which is not less than Rs. 10,000 but which may extend to Rs. 100,000.

8. Payment of Stamp Duty on Issuance of Share Certificate:

Every state government has made a law imposing stamp duty on the issue of a share certificate, which is to be paid to the respective state government after such an issue. The rates of stamp duty and the method of its payment differs from state to state. However, in most of the state, the stamp duty payable ranges from 0.1% to 0.25% of the market value of the shares. The non-payment of stamp duty is a very serious offence for which apart from punishment imprisonment has also been prescribed.

9. GST Registration:

The Goods and Services Tax, right from its implementation on the 1st of July, 2017, has been the talk of a Nation striving towards fulfilled development.

Who Should Register for GST?

• Companies registered under the Pre-GST law (i.e., Excise, VAT, Service Tax etc.)
• Businesses with turnover above the threshold limit of Rs. 20 Lakhs (Rs. 10 Lakhs for North-Eastern States, J&K, Himachal Pradesh and Uttarakhand)
• Casual taxable person / Non-Resident taxable person
• Agents of a supplier & Input service distributor
• Those paying tax under the reverse charge mechanism
• Person who supplies via e-commerce aggregator
• Every e-commerce aggregator
• Person supplying online information and database access or retrieval services from a place outside India to a person in India, other than a registered taxable person.

10. MSME Registration

For promoting entrepreneurship, the government provides special benefits to the small businesses in the form of subsidies and incentives. For availing those, the small businesses need to register under Micro, Small and Medium Enterprises (MSMEs) act. If a business is registered under MSMEs act, it can avail several benefits like cheaper bank loans, tax benefits, preference during the tender process and access to various schemes and incentives of government.

MSME enterprises of manufacturing sector can be categorized on the basis of amount invested in plant and machinery –

• Micro enterprises– Entities investing less than ₹ 25 lakhs in plant and machinery
• Small enterprises– Entities investing between ₹ 25 lakhs and ₹ 5 crores in plant and machinery
• Medium enterprises– Entities investing between ₹ 5 crores and ₹ 10 crores in plant and machinery

MSME enterprises in the service sector can be categorized on the basis of amount invested in equipment-

• Micro enterprises– Entities investing less than ₹ 10 lakhs
• Small enterprises– Entities investing more than ₹ 10 lakhs but less than ₹ 2 crores
• Medium enterprises– Entities investing ₹ 2 crores but less than ₹ 5 crores.

Therefore, it would be ideal for a company to obtain MSME registration basis the above criteria for availing the benefits.

11. Trademark Registration:

Many brands in the world value their trademark more than their any other physical assets and want to protect it through Trade Mark Registration. Protecting the name is equal to protecting the business. A company can get its trademark registered for brand which it intends to market.

Importance of Trademark

i. Protection against Copycats

ii. Helps in expansion of business

iii. Trademark can be rented for Royalty

iv. Helps in Image Buiding and Credibility

v. Customers give more preference to brands with Trademark Tag.

Company can obtain registration of trademark for the brand which it intends to protect, market & sell it goods and services.

12. Professional Tax Registration:

Professional Tax is the tax levied by the various State Governments of India on salaried individuals working in government or non-government entities, or in practice of any profession, such as CAs, Lawyers, Doctors, etc. or carry out some form of business, are required to pay this professional tax. The states which impose professional tax are Andhra Pradesh, Assam, Chhattisgarh, Gujarat, Karnataka, Kerala, Maharashtra, Madhya Pradesh, Meghalaya, Odisha, Sikkim, Tamil Nadu, Telangana, Tripura, and West Bengal. Therefore, Companies employing staff for their business need to obtain registration with appropriate department designated for compliance of professional tax in a particular state within 30 days of coming under the purview of the applicability of professional tax. Each professional, the Directors of Company, Designated Partners of the LLP or any other employer is under obligation to seek registration as mentioned above and to ensure that professional tax is deducted from the salary of employees. The deducted professional tax from the employees must be deposited in the appropriate office designated by the state government, and a return of professional tax must be filed specifying the payment of professional tax. Every employer is under an obligation to deduct and pay tax on behalf of employees, for this purpose the employer should obtain the registration certificate from the departmental of professional tax within 30 days from the date of his liability.

13. Shops & Establishment Registration (Labour Department):

Every state has either passed its own law or adopted law of other states to regulate shops and commercial establishment from the point of view of working hours and basic facilities to be provided to the employees/labour of the companies. Within 30 days of incorporation of a company, it is liable to obtain a registration under the law of shops and establishment as may be applicable in the respective state. The failure of obtaining shops and Establishment registration is a criminal offence.

14.Checking Company’s Master Data after Incorporation

Certificate of incorporation for a private limited company is the last step in the process of incorporation. Once you received the certificate of incorporation, it means, all legal formalities required for company registration are completed in India.

In India, we have legal consultants like chartered accountants and company secretary who help us in the process of company incorporation and do all such things that are required to complete the registration process.

Now the question is how to cross check to know that the company is incorporated with correct details like authorized share capital, registered office, category, CIN, paid-up share capital, status and date of incorporation etc.

These are the most important thing that every company should keep it right.

If you find any changes or incorrect details then immediately inform to your chartered accountant or company secretary to take necessary actions for its correction.

You need to check following things in company’s master data;

· Authorized share capital

· Paid up share capital

· Registered office address

· Email ID

· Status i.e. Active or Inactive

· Date of incorporation

Companies Master Data can be checked through MCA Website- www.mca.gov.in

15. Need Based Registration and Licences:

Based on the business activity and the goods in which the company is dealing, there are other licences and registration which are required examples are Sales Tax Registration, CST Registration, Drug Licence, Food Licence etc.

Other Compliances:

We have collated few other compliances that companies are required to fulfill immediately after incorporation. These include:

1. Letterhead & Statutory Registers

Every company is under obligation to maintain certain registers like Register of Shares, Register of Members, Directors etc. besides Minutes of Board Meetings and Annual General Meetings under Section 85, Section 88 etc. of the Companies Act, 2013 and required to keep and maintain at its registered office in the prescribed form, any failure in maintaining the statutory register is an offence for which company as well as directors may be fined and prosecuted. Fine to the company ranges from Rs. 50000 to 300000. In addition to Rs. 1000 per day for continuing default. Obtain Letterheads in the company name indiacting company identification number (CIN), registered office address, email ID of the company, website address, if any, and telephone number.

2. PAN & TAN

Obtain Permanent Account Number (PAN) and Tax Account Number (TAN) in the name of the company.

3. Protect Intellectual Property Rights like Trademark, Copyright, Patent and Design:

The companies should not leave any opportunities in securing the intellectual property rights which may be in form of business name, its logo, punchline, name of brand, device marks which shall be attached to products, service marks, name of domain, literature, software codes, inventions and three dimensional shapes.

4. Drafting of Employer Related Documents and HR Policies:

The legal documents such as Employment Agreement, Human Resource Policy, Leave Policy, Standing orders are necessary documents and must be drafted thoughtfully so that the interest of company is protected vis a vis and erring employee.

5. File Audit Report, Financial Statements And Annual Report Before Due Date

A private limited company is required to file its balance sheet, profit and loss account, auditor’s report and annual return every financial year before the due date with the registrar of companies. Non compliance to this provision will attract additional fee in addition to the normal fee that are charged while filing the e-Form.

Now you know mandatory things that promoter or directors of a private limited company should remember after incorporation of a private limited company. In case of any doubt or clarification please contact us by using our comment form.

Information in this blog is intended to provide only a general outline of the subjects covered It should not be regarded as comprehensive or sufficient for making decisions, nor should it be used in place of professional advice.

Nitin Jogad & Associates| Chartered Accountants accept no responsibility for loss arising from any action taken or not taken by anyone using this blog.