A private company is an entity under private ownership in which the shareholders cannot transfer/trade the shares on public exchanges/securities. The Companies Act, 2013 has replaced the Indian Companies act of 1956. The primary purpose is to make provisions and regulate all the listed and unlisted companies in India.  As per Section 2(20) of the Companies Act, 2013, a company is an association of a person registered under the present Act or the Indian Companies Act, 1956. Such compliance is mandatory for every company irrespective of the turnover of such a company or capital amount. All the companies registered under the Companies Act, 2013 must abide by the rules and regulations set by the Act. Non -compliance with any law prescribed might attract a penalty. In this article, we will focus on the compliances and rules for private limited companies in India. 

Compliances to be maintained by the Private Limited Company

Compliance means the ability to comply with the orders, rules and requests. The compliance requirements have been changing due to modifications or amendments in the Act. 

Following are the latest  rules that need to be followed by the Private Limited Company in India : 

• Commencement of business within 180 days of incorporation of the company: Every registered private limited company with the required share capital shall obtain a commencement of business certificate before official comment of the business or exercise of any powers coming from the incorporation of the company.  The commencement of business must start within 180 days of incorporation. 
• Board’s report and financial statement: As per Section 134 of the Companies Act, 2014, a report by a company’s board directors, including a number of meetings of the Board director’s responsibility statement, shall be attached along with the company’s financial statements.
• Annual General meetings: A Private limited company is required to hold an annual general meeting. They are required to keep their general meetings in six months in a financial year. Such meetings should take place during business days and not public holidays—where such a meeting shall be conducted in the city where the registered office is situated.
• Auditor: All Private limited companies shall appoint a statutory auditor after incorporation of the company. As per Section 134 of the Companies Act of 2013, the auditor’s report shall be attached to the company’s financial statements. 
• Income tax: All the Private limited companies shall file their income tax return before the due date of every financial year. The private limited companies are required to make the quarterly payment of the advance taxes. Moreover, if the company’s gross receipts exceed Rs 1 crore in the previous financial year, a tax audit is filed by such a private limited company. 
• Directors identification numbers ( DIN) digital KYC: The company’s directors must have filed for the DIN eKYC or DIR eKYC( new form launched by the Ministry of Corporate Affairs). These forms are required to update the KYC of all the directors of the company. The directors shall provide their email addresses and contact details in that form. 
• Filing of MCA ( Ministry of Corporate Affairs) form AOC-4: All the registered private limited companies have to file for MCA form AOC-4 before the due date set for submission in every financial year. 
• Filing for MCA form MGT-7: All the registered private limited companies shall file MCA form MGT-7 before the due date set for submission in every financial year. 
• Director’s Report: All the directors have to disclose any details about their directorship in another company ( if any). The director/s give a declaration in writing to the company. In addition to this, at least one of the directors should reside in India for not less than  182 days.
• Board meetings: A board meeting shall be conducted within 30 days of incorporation of the company. A minimum of 2 directors or 1/3rd of the total number of directors shall be present at the Board meeting. Moreover, notice in advance should be given to the members attending such meetings. The notice shall include the date and timing of the meeting and should be given at least seven days in advance.
• Other compliances: There can be specific instances apart from the annual filings. In such a case, the company must file a different form for that particular event with the registering officer within a specific period of time as may be prescribed by the Companies Act, 2013. 

Penalty for non-compliance of rules for private limited companies 

If a private limited company fails to comply with the rules for private limited companies set by the Companies Act of 2013, a specific penalty is levied on them. 

Following are the penalties levied on a company in case of violation of any of the rules mentioned here:

• A penalty of  Rs 50,000 for the company and Rs 1000 per director is levied on failure to obtain a commencement of business certificate within time.
• A penalty of Rs 300 per month is levied on the company for failure to appoint a statutory auditor. Without such an appointment, a company is not allowed to commence its operations. 
• A penalty of Rs 200 per day of default is levied on failure to file MCA form AOC-4 on the company.
• A penalty of Rs 200 per day of default is levied on failure to file MCA form  MGT-7 on the company.
• A penalty of Rs 5000 is levied on failure to file the DIN KYC.

Conclusion 

A private limited company is the most recommended form of company for the small scale business. However, all the compliances and rules set by the Companies Act, 2013^[1] are to be mandatorily abided by. Before starting a business, all the rules and regulations from incorporation, the operation to dissolution should be considered.   Such compliance will also help the company gain the consumers’ trust and build a good image in the market. Also, it will help the company to function smoothly and protect against any penalty that comes upon non-compliance with the rules for private limited companies set by the Companies Act of 2013.

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