All You Need to Know About Corporate Compliance for Indian Companies

Introduction

In India, a wide range of company structures such as private companies, public companies, and listed entities have been established to serve various business purposes. To safeguard the interests of investors and enhance transparency between companies and their stakeholders, the Government of India enacted the Companies Act, 2013, which replaced the earlier Companies Act of 1956. The Companies Act, 2013 lays down a comprehensive legal framework governing all aspects of a company's lifecycle from incorporation and daily operations to eventual liquidation ensuring statutory compliance, accountability, and improved corporate governance.

Statutory Compliance Requirements for Private Companies: Key ROC Filings and Disclosures

The Companies Act, 2013 and associated rules mandate a set of annual and half-yearly filings with the Registrar of Companies (ROC) to ensure corporate transparency and accountability. The following is a structured summary of these key compliance requirements for private limited companies.

I. Annual Director Disclosures

1. Form MBP-1 - Disclosure of Interest by Directors

• Requirement: Every director must disclose their interest in other companies, LLPs, and entities in which they hold a significant interest.
• Timeline:
• At the first Board meeting of the financial year.
• Whenever there is any change in disclosed interest.
• Note: A new MBP-1 must be submitted for each such change.
• Penalty: The director in default shall be punishable with imprisonment which may extend up to 1 year or with fine which may extend to a maximum of Rs 1 lakh or with both.

2. Form DIR-8 - Declaration of Non-Disqualification

• Requirement: Every director must file a declaration with the company stating that they are not disqualified under Section 164(2) of the Companies Act, 2013.
• Timeline: Annually, at the beginning of each financial year.
• Penalty: One lakh for non-disclosure of disqualification

3. Form DIR-3 KYC - Director KYC Compliance

• Requirement: All directors who have been allotted Director Identification Number (DIN) must complete KYC compliance by filing DIR-3 KYC.
• Timeline: On or before 30th September every year.
• Note: In case the director who is supposed to file the e-Form does not file it by above mentioned timeline on MCA portal, the department will mark the DIN of such director as Deactivated due to non-filing of DIR-3 KYC.

If a director wishes to reactivate his/her DIN in future by filing the missed out e-Form DIR-3 KYC, he can do so after paying a late fee of Rs. 5,000/-.

II. Annual Compliance Filings

4. E-Form DPT-3 - Return of Deposits

• Requirement: Filing return of deposits or particulars of transactions not considered as deposits.
• Exempt: Every company except a Government company, Banking company, Non- Banking Financial Company, Housing Finance company registered with National Housing Bank, any other company as notified under proviso to Sub Section 1 to Section 73 of the Act.
• Timeline: On or before 30th June, based on the company's financial position as on 31st March.
• Penalty:

5. E-Form MGT-14 - Filing of Resolutions

• Requirement: Filing of Board resolutions approving the Directors' Report and Financial Statements.
• Applicability: All companies.
• Timeline: Within 30 days of passing the resolution.
• Penalty:

6. E-Form AOC-4 - Filing of Financial Statements

• Requirement: Submission of audited financial statements, including:
• Balance Sheet,
• Statement of Profit and Loss,
• Cash Flow Statement,
• Directors' Report,
• Auditor's Report.
• Timeline: Within 30 days of holding the Annual General Meeting (AGM).
• Penalty:

7. E-Form MGT-7 - Filing of Annual Return

• Requirement: Filing of the Annual Return for the financial year (1st April to 31st March).
• Timeline: Within 60 days of holding the AGM.
• Note: For public companies, the Annual Return must be signed by a Company Secretary in employment.
• Penalty: The penalty for not filing an annual return has been remarkably increased in 2018 to Rs. 100 (Rupees Hundred) per day of default.

III. Half-Yearly Compliance Requirements

8. E-Form MSME-1 - Disclosure of Outstanding Dues to MSMEs

• Requirement: Reporting outstanding dues to MSME vendors where payments have been delayed for more than 45 days.
• Note: Filing required only if such payments remain unpaid for more than six months.
• Timelines:
• April to September: By 31st October.
• October to March: By 30th April.

Penalty:

IV. Additional Filings for Directors and KMP

9. E-Form MR-1 - Appointment or Reappointment of KMP

• Requirement: Filing of return for the appointment or reappointment of:
• Managing Director (MD),
• Whole-time Director (WTD),
• Manager.

Penalty: A fine of up to Rs. 50,000/- can be imposed. In addition, if it fails to comply, further penalties of Rs. 500 per day are imposed on the company until its directive is obeyed.

This compliance checklist is vital for private companies to meet their statutory obligations and avoid penalties or disqualifications. Timely and accurate filings not only ensure legal compliance but also uphold corporate governance standards.

Statutory Compliance Requirements for Public Companies: Key ROC Filings and Disclosures

The above-mentioned compliances of private company shall also applicable to the public company. In addition to the above, below compliances with the Companies Act, 2013 and related rules shall be followed by public companies.

Half-Yearly Compliance Requirements

1. E-Form PAS-6 - Reconciliation of Share Capital Audit Report

• Requirement: Filing of half-yearly reconciliation of share capital audited by a practicing Company Secretary.
• Timelines:
• For April to September: By 30th November.
• For October to March: By 30th May.

Penalty:

General Penalty: If no specific penalty or punishment is provided for non-compliance with any provision of the Companies Act, 2013, or the rules made thereunder, the following penalties apply:

Fine: The company and every officer of the company who is in default, or any other person, shall be punishable with a fine which may extend up to Rs. 10,000.

Continuing Contravention: In case the contravention continues, an additional fine of up to Rs. 1,000 per day can be levied for every day after the first during which the contravention continues.

2. E-Form MR-3 - Secretarial Audit Report

Applicability: E-Form MR-3 is applicable to the following entities:

1. Every listed company
2. Every public company having a paid up share capital of Rs. 50 crores or more,
3. Every public company having a turnover of Rs.250 crores or more
4. Every company having outstanding loans or borrowings from banks or public financial institutions of Rs. 100 crores or more.

Penalty: For companies: Minimum Rs. 1,00,000/- to Maximum Rs. 5,00,000/-

For individual in default: up to Rs. 2,00,000/-

Post-Incorporation Compliances for Listed Companies

Listed companies are subject to a robust framework of compliance obligations post-incorporation. The following quarterly timeline outlines the key statutory filings and disclosures required under the Companies Act, 2013, SEBI (LODR) Regulations, and other applicable laws:

The above-mentioned compliances of private & public company shall also applicable to the listed company. Additional compliances that a listed company must follows are as follows:

Quarter 3 (October to December)

1. E-Form MGT-15 - Report on Annual General Meeting

• Applicability: It is applicable to every listed public company.
• Requirement: Preparation and filing of a detailed Report on AGM proceedings.
• Timeline: Within 30 days of the AGM.
• Penalty:

Compliance of LODR regulations in case of listed companies

Applicability of the regulations [Regulation 3]

The SEBI (LODR) Regulations, 2015 shall apply to the listed entity which has listed any of the following designated securities on recognized stock exchange:

• Specified securities listed on main board or SME Exchange or Institutional Trading Platform (ITP)
• Non-convertible Debt Securities (NDS), Non-Convertible Redeemable Preference Shares (NCRPS), Perpetual Debt Instrument, Perpetual Non-Cumulative Preference Shares
• Indian Depository Receipts
• Securitized Debt Instruments
• Security receipts
• Units issued by mutual funds
• Any other securities as may be specified by the SEBI.

Provisions of the SEBI (LODR) Regulations, 2015 which become applicable to listed entities on the basis of market capitalization criteria shall continue to apply to such entities even if they fall below such thresholds.

Listed companies are required to comply with various SEBI (LODR) Regulations, 2015 on a periodic and event-based basis. These compliances can broadly be categorized into quarterly, annual, and event-based obligations, each with specific timelines and disclosure requirements.

Event based Compliances

In addition to the above compliances for Private, Public and Listed companies, following compliances based on happening of any specific event shall also be complied with.

CHG-1: Creation of Charge

• Applicability: Every company must file CHG-1 on the time of creation of charge or modification of charge with ROC.
• Timeline: Within 30 days from the creation. However, the registrar may allow registration beyond this deadline, up to 30 days for charges created on additional fees.
• Penalty: Companies and their directors are liable for a penalty of Rs. 1,000 per day, up to a maximum of Rs. 10,00,000/- for failing to file the form.

Fee:

Form DIR-12: Related to KMP

• Applicability: It is a document filed with the Ministry of Corporate Affairs (MCA) to report changes, appointments, or resignations of directors and key managerial personnel (KMP) in a company.
• Timeline: within 30 days of any relevant event, such as a director's appointments, resignation, cessation, or change in designation.

Penalty

Fees

E-Form ADT-1 - Appointment of Auditor

• Applicability: Every company needs to file ADT-1 at the time of appointment of auditors.
• Requirement: Filing of auditor appointment for a term of five years.
• Timeline: Within 15 days of the AGM.
• Penalty:

Fee

Form SH-7 : Changes in company share capital

• Applicability: Company needs to file this form to notify the ROC about any changes to a company's authorized share capital, including increases, decreases or reclassifications.
• Timeline: The form must be filed with the ROC within 30 days of the alteration.
• Penalty: Rs. 500 per day for both company and defaulting officer and maximum up to Rs. 1,00,000/- for defaulting officer and Rs. 5,00,000/- for company.
• PAS-3: Allotment of shares/securities
• Applicability: Every company needs to file this form to inform the ROC about share/security allotments, ensuring transparency and compliance.
• Timeline: Filing must be within 30 days of the allotment.

Penalty:

Fee

INC-22: Change in registered office

• Applicability: The Company is required to furnish to the registrar verification of its registered office after corporation or any change in their registered office in INC-22.
• Timeline: Within 30 days from incorporation or there is any change in their registered office then in 15 days.

Penalty:

Fee

CSR-2: Corporate Social Responsibility

Applicability: Every company having

1. Net worth of rupees 500 crore or more, or

2. Turnover of rupees 1,000 crore or more or

3. A net profit of rupees 5 crore or more during the immediately preceding financial year

Reporting: Every company covered under the provisions of Sub-Section (I) to Section 135 shall furnish a report on Corporate Social Responsibility in Form CSR-2 to the Registrar. For FY 2021-22 & onwards: As an addendum to Form AOC-4 or AOC -4 XBRL or AOC -4 NBFC (Ind AS), as the case may be.

Timeline: December 31st for every year.

Penalty: A maximum of Rs. 2 lakh rupees in case of a company and 50,000 rupees in case of an officer who is in default or any other person.

SH-1: Share Certificate

• Applicability: Every company needs to file Form SH-1 post incorporation evidencing that the person named in the certificate is owner of number of shares of company as specified in the Certificate.
• Timeline: In case of Incorporation, it should be delivered within 2 months from the date of incorporation to the Subscribers to Memorandum.
• In case of Allotment, it should be delivered within 2 months from the date of allotment of shares.
• In case of Transfer, it should be delivered within 1 month from the date of receipt of instrument of transfer by Company.
• Penalty: For company at least Rs. 25,000/- but not more than Rs. 5,00,000/- while for defaulting officers fine could be at least Rs. 10,000/- but not more than Rs. 1,00,000/-.

Compliances related to Other Acts

Labour laws

Employees' State Insurance Act, 1948

The Employees' State Insurance (ESI) Act provides a social safety net for employees, granting medical care and financial assistance in cases of health-related incidents. This is a joint contribution between the employer and employee, ensuring that workers have access to essential medical services.

Applicability: It applicable to all factories and other establishments as defined in ESI Act.

1. No of employees employed: 10 or more (20 or more in some states)

2. Wages: Not exceeding Rs. 21,000/- (Rs. 25,000/- in the case of a person with disability).

3. It also applicable to the following:

1. Shops

2. Restaurants

3. Hotels

4. Cinema theatres

5. Road Motor transport undertaking

6. Newspaper establishments & undertakings

7. Educational institutions

8. Medical Institutions

9. Contract and casual employees of Municipal Corporations or Municipal Bodies

• Contribution: Employer share 3.25%, Employee share: 0.75% Total: 4%
• Timeline: The 15th of every month.
• Penalty: 12% interest per month of delay for late payment.

Further if delays:

Employee Provident Fund (EPF)

Employee Provident Fund (EPF) is a retirement benefits scheme regulated by the Employees' Provident Fund Organization (EPFO). It requires both employees and employers to contribute a portion of the employee's basic salary toward a long term savings fund, which earns interest and can be withdrawn upon retirement or under specific conditions.

• Applicability: Mandatory for organizations with 20+ employees under the EPF Act.
• Contribution: Employee contributes 12% of basic salary to EPF account. Employer contributes 12%, but only 3.67% goes to EPF. The remaining 8.33% is allocated to the Employees' Pension Scheme (EPS).
• Timeline: The 15th of every month.
• Penalty: 12% interest per month of delay for late payment.

Further if delays:

GST Act

GST compliance is the compulsory practice of adhering to the GST Act, rules, and regulations specific to any business. These regulations vary significantly between industries, so the practical aspects of GST compliance must also consider the industry-specific variations in GST compliance guidelines.

• Applicability: It is applicable to all whose companies which are registered under GST Act or liable to registered under GST Act.
• Timeline: Every company needs to file their sales in GSTR1 on or before 11 of every month. Provided they needs to file GSTR3 on or before 20 of every month.

Further, every company needs to file GSTR9 and GSTR 9C on or before 31st December every year.

• Penalty: Tax paid after due date: 18% per annum interest charged.

Excess ITC claimed or excess reduction in output tax: 24% per annum interest charged.

• Late Fee: As per the GST Acts, for intrastate supplies, the late fee should be paid under both the CGST and SGST Act as follows:

The Nil return must pay the below-mentioned late fee:

For nil returns maximum late fee would be Rs. 500/-, for other than nil returns maximum fees would be:

TDS Filing

When an assessee earns income, the person paying to the assessee will deduct the TDS and that will be submitted to the government. It is like an advance tax taken by the government on the income of a person. Under TDS, the tax is deducted by the person incurring the expenditure and not by the person receiving the income.

• Applicability: Every company needs to deduct TDS at time of payment wherever the payment made is exceeding the threshold limit prescribed in the Income Tax Act, 1961.
• Timeline: Every deductor needs to deposit the deducted amount with government on or before 7th of every succeeding month, except for march, TDS deducted in march should be deposited on or before 30th April every year.
• Filing: Every company needs to file their TDS return quarterly on or before 30th of every succeeding month after the end of quarter

Penalty:

In addition, all companies are also required to file their Income Tax Returns and, where applicable, obtain a Tax Audit Report duly certified by a Chartered Accountant in accordance with the provisions of the Income Tax Act, 1961.

Conclusion

In conclusion, maintaining statutory compliance is not just a legal necessity but a cornerstone of sound corporate governance and stakeholder confidence. Whether it is a private company, a public entity, or a listed corporation, timely and accurate filing of ROC forms and statutory disclosures ensures that the company remains in good standing with regulatory authorities and avoids penal consequences. The compliance obligations under the Companies Act, 2013 and SEBI regulations are structured to foster transparency, accountability, and sustainable business practices. By adhering to the detailed compliance calendar outlined above, companies can streamline their governance processes, mitigate regulatory risks, and uphold the trust of shareholders, regulators, and the broader business ecosystem.