Post Incorporation Compliance:

We experienced that once the Company is incorporated, generally Company activities pause. However, this is the time when utmost planning, care and action are needed. This is the stage when there is a need to work on various dimensions. A business suffers or does not start, if necessary registrations/approvals/compliances/actions are not done e.g. if timely & needful steps are not taken to open bank account, the same may lead to non-availability of funds and will lead to delay in Company business propositions. Further, there may be many other kinds of effects if post-incorporation planning & action is not there.

In the Indian legal framework, there are various regulatory requirements under various laws, which generally need to be taken care of. Once the Company is incorporated, below are the general compliances to be complied with.

Once the Company is incorporated, the Company needs to take various steps to make it functionalized and also to keep various compliances in order. Following are various compliances where we can support you :

Commencement of Business (Section 10A)

A company incorporated after the commencement of the Companies (Amendment) Ordinance, 2[2019] and having a share capital shall not commence any business or exercise any borrowing powers unless—

  • A declaration is filed by a director within a period of one hundred and eighty days of the date of incorporation of the company in such form and verified in such manner as may be prescribed, with the Registrar that every subscriber to the memorandum has paid the value of the shares agreed to be taken by him on the date of making of such declaration; and
  • The company has filed with the Registrar a verification of its registered office as provided in sub-­section (2) of section 12.

If any default is made in complying with the requirements of this section, the company shall be liable to a penalty of fifty thousand rupees and every officer who is in default shall be liable to a penalty of one thousand rupees for each day during which such default continues but not exceeding an amount of one lakh rupees.

Where no declaration has been filed with the Registrar under clause (a) of sub-section (1) within a period of one hundred and eighty days of the date of incorporation of the company and the Registrar has reasonable cause to believe that the company is not carrying on any business or operations, he may, without prejudice to the provisions of sub-section (2), initiate action for the removal of the name of the company from the register of companies under Chapter XVIII.

Board Meeting:

The affairs of the Company are managed by the Board of Directors. It is, therefore necessary that the Directors should often meet to discuss various matters regarding the management and administration of the affairs of the Company in the best interest of the Shareholders and the public (public refers to persons interested in the Company i.e. creditors, vendors etc.)  Section 173 of the Companies Act, 2013, prescribes that in case of every Company the first meeting of the Board of Directors shall be held within 30 days of its incorporation and thereafter hold a minimum number of four meetings of its Board of Directors every year in such manner that not more than one hundred and twenty days shall intervene between two consecutive meetings of the Board.

The agenda for the first meeting to include but not restricted to, appointment of additional directors if any, appointment of statutory auditors under Section 139(6) of the Companies Act, 2013, opening bank account(s), to take on record the Certificate of Incorporation, to issue shares to the subscribers to the Memorandum of Association of the Company, to adopt the Common Seal of the Company to authorize the one or more of the Directors to apply and register for PAN, TAN, GST, Import Export Code and all other registrations under the related Acts.

General Meeting:

Every Company shall in each year hold in addition to any other meetings a General Meeting as its Annual General Meeting and shall specify the meeting as such in the NOTICE calling the Meeting as required under Section 96 of the Companies Act, 2013. The First Annual General meeting of the Company needs to be held within 9 months from the date of closure of the first financial year of the company and in any other case within a period of 6 months from the date of closing the financial year.

Minutes of the Meetings:

Section 118 of the Companies Act, 2013 requires that the minutes of the General Meeting of Every Class of Shareholders, Resolution Passed by Postal Ballot or of meeting of the Board of Directors should be maintained in a separate book meant for that purpose. Minutes of the meetings of the Board meeting has to be signed (within thirty days) by the Chairman of the meeting or the Chairman of the next succeeding meeting.

In case of General Meetings the minutes has to be signed by the Chairman of the meeting (same meeting) within thirty days and has to be maintained as per Section 118 of the Companies Act, 2013.

Bank Account:

Bank Account is pre-requisite for financial transactions, receipt of share capital etc., Board resolution would be required for the opening of Current Account of the Company. The same to be considered and necessary resolutions need to be passed at the first Board meeting of the Directors.

Issue of Share Certificates to the Subscribers to the Memorandum:

According to Section 46 of the Companies Act 2013, a Share Certificate is a certificate issued to the members by the Company under its Common Seal specifying the shares held by a person shall be prima facie evidence of the title of the person to such shares.

It is a declaration by the Company to the world that the person in whose name the certificate is made out and whom it is given, is a bonafide shareholder of the Company and it is given by the Company with the intention that it shall be so used by the person whom it is given and acted upon in sale and transfer of shares.

As per Rule 8 of the Companies (Issue of Share Certificate) Rules 1960 of the Act, Share Certificates should be printed and the printing shall be done only on the authority of a resolution of the Board of Directors.

Printing of Memorandum & Articles of Association:

Memorandum of Association (MOA) and Articles of Association (AOA) is the most wanted document by all the statutory authorities, vendors, clients, bankers of the Company, creditors etc., who are associated with the business of the Company. MOA & AOA will be the primary document of evidence which would enable them to enter into any contracts with the Company. It is mandatory for the Company to provide the copy of MOA & AOA to such persons associated with the business of the Company on their request. Hence it is advised to print sufficient numbers of Memorandum and Articles of Association of the Company on Incorporation.

Common Seal:

Since a body corporate is not a living person who can sign, therefore every Company should necessarily have an instrument known as the Common Seal which is used for making a physical impression to act as its signature on certain important documents.

The following deeds and contracts are not valid unless executed under the seal of the Company.

  1. Power of attorney which would be required to be made in favor of a person executing the deeds on behalf of the Company.
  2. Share Certificates
  3. Share Warrants
  4. Any deeds as required by the Articles (AOA).

A Common Seal is to be adopted by the Directors in first Board Meeting. The Common Seal should be kept in safe custody and only be used on the authority of a resolution of the Board of Directors.

Accounts and requirement of keeping of Books of Accounts:

For preparation of annual accounts the maintenance of proper books of accounts is a must. Section 128 of the Companies Act, 2013 requires every Company to keep at its registered office proper books of accounts with respect to the following transactions:

  1. All sums of money received and expended by the Company and the matters in respect of which the receipt and expenditure took place.
  2. All sale and purchase of goods by the Company.
  3. The assets and liabilities of the Company
  4. In the case of a Company engaged in production, processing, manufacturing or mining activity, such particulars relating to utilization of material or other items of cost as may be prescribed relating to certain class of companies as the Central Government may require.

True and Fair View of Accounts

The books of accounts should be kept on accrual basis and according to double entry system of accounting. Further, they must give a true and fair view of the affairs of the company and explain its transactions. The books of account should not suppress any transaction nor should they contain any fictitious transactions. These and other books and papers shall be open to inspection by Directors during business hours, as also by the Registrar or any other officer authorized by the Central Government.

Statutory Books:

As prescribed by the Companies Act 2013, every company is required to maintain the following Statutory Books:

  1. Register of investments in securities made by the Company but not held by it in its own name [Section 187]
  2. Register of Charges [Section 85]
  3. Register of Members [Section 88(1)(a)]
  4. Register of Debentures Holders [Section 88(1)(b)]
  5. Books for Recording Minutes of proceedings of General Meetings and Board Meetings [Section 118]
  6. Register of Contracts, companies and firms in which Directors are interested directly or indirectly [Section 189]
  7. Register of Directors and Key Managerial Personnel and their Shareholding [Section 170]
  8. Contract of employment with managing or whole time director [Section 190]

Statistical Books:

In addition to the books of account and statutory books mentioned above, a company shall maintain a number of statistical books in order to keep complete records of the numerous details connected with the business operation. The keeping of these books has become necessary although there is no legal compulsion for the same:

  1. Share Application and Allotment Books
  2. Share Certificate Book
  3. Share Transfer Book
  4. Directors Attendance Register
  5. Members Attendance Register
  6. Register of Declarations
  7. Register of Common Seal.

Annual Filings with ROC:

As per Section 137 of the Companies Act 1956, all Companies are required to file with the Registrar of Companies (ROC) every year the Financial Statements along with all the documents which are required to be or attached to such financial statements under the Act, i.e Notice of the Annual General Meeting, Directors Report, Auditors Report duly adopted at the Annual General Meeting in such manner within 30 days of the date of Annual General Meeting failing which the company shall be punishable with fine of one thousand rupees for every day during which the failure continues.

Section 92 requires that every Company should prepare a return (Annual Return) in the prescribed form containing the particulars as they stood on the close of the financial year regarding its registered office, principal business activities, particulars of its holding, subsidiary and associate companies; its shares, debentures and other securities and shareholding pattern; its indebtedness; its members and debenture-holders along with changes therein since the close of the previous financial year; its promoters, directors, key managerial personnel along with changes therein since the close of the previous financial year; etc., and signed by a director and the company secretary, or where there is no company secretary, by a company secretary in practice. And shall file with the Registrar a copy of the annual return, within 60 (sixty) days from the date on which the annual general meeting is held.

Other returns to be filed on happening of such events, Return of Allotment (PAS-3), Change of Registered office (INC-22), Change among the Directors (DIR-12), Registration and Satisfaction of Charges (CHG-1, 4, & 9) etc., have to be filed within the due date as per the Companies Act, 2013.

In today’s complex legal framework, there is a requirement of experience and planning to comply with various post-incorporation steps. We can formulate a sequential strategy so that all the required steps are timely taken and Directors of the Company can remained focused on its core business. Technical support for all the above post incorporation compliance can be provided on request by the promoters / directors at a additional charge.

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