Post Incorporation Compliances by a Private Limited Company

10 Steps Immediately After Incorporation of Company

Obtaining the Certificate of Registration for your Company is an exciting moment in your business start-up journey. You might have gone through the process of arranging needful documents as per prescribed standards of Ministry of Corporate Affairs and also insisted by the professionals who have assisted  with certifications for your Company Registration. Now you know the selecting a name for your Company is more difficult than naming your baby.

Your Company is born as an artificial legal person with certain inherent features, rights, powers and liabilities. Shareholders are the owners of the Company and the Directors are the brains and organs of a registered Company. In other words you the Shareholders and Directors are the Parents and Guardians of your Company. As a Parent and Guardian of your Company, you are responsible for the actions and inactions of a registered Company and are personally responsible to answer the regulatory authorities for any non-compliance of any legal requirements by a Company.

Obtaining the Certificate of Incorporation is only a starting point for a series of compliances a company has to follow under various legislations in India from time to time.

'IGNORANTIA JURIS NON EXCUSAT' : IGNORANCE OF LAW IS NOT AN EXCUSE

At this point of starting your business, please keep in mind the famous legal maxim Ignorantia juris non excusat, which means "ignorance of law is not an excuse” It is legal principle holding that a person who is unaware of a law may not escape liability for violating that law merely because one was unaware of its content.

So, the directors and shareholder are required to be aware about the legal and process compliance requirements a Registered Company should follow under various laws from time to time.

We request to spare few minutes periodically to review the timely compliance of requirements from time to time. Compliance requirements may vary from business to business depends on type of organisations and nature of business activities.

IMMEDIATE STEPS AFTER COMPANY INCORPORATION

The following are the immediate 10 steps to be taken by the Company after registration

WITH IN 30 DAYS

1. Filing Verification of Registered Office (Form INC-22) 

If the company was registered with a temporary address while filing SPICe Form INC-32, the details of permanent registered office has to be filed filing of INC-22 for Verification of its Registered Office in Form INC 22 with in 30 days of Company registration.

2. Opening Bank Account in Company Name

After incorporation of the Company, it is necessary to open a Current Account in the name of the Company with any  Bank in India. All the transactions in the name of the company should be transacted through the Company Bank Account only.

The following are the documents and details required for opening. A Current Account with a bank:

• Certificate of Incorporation of the Company
• Copies of Company Incorporation documents such as Memorandum and Articles of Association of the Company.
• Permanent Account Number (PAN) of the Company
• Board Resolution of Opening and operation of bank Account
• KYC details for Directors and Shareholders of the Company
• Cheque for initial deposit of amount to Open Bank Account (This deposit can be considered as the initial capital infusion by the shareholder)

Also, the details and documents and initial deposit may vary from bank to Bank. There are banks offering ‘Zero’ balance Accounts as well subject to conditions. 

3. Books and Accounts of Company. 

Every business is required to under Income Tax Compliances such as Tax Deduction at Source (TDS) and Advance Tax Payments from time to time.

Every company has to prepare and keep the books of account in double entry system of accounting on accrual basis. The Company has to maintain the Books of Accounts of all receipts payments and to comply legal requirements under Companies Act and other various laws. The books of accounts and financial statements shall give a true and fair view of the state of the affairs of the company, including its branch office or offices.

Bookkeeping and Accounting starts with recording of accounting transactions such as Receipts and Payments. It is advisable to maintain physical records of each transactions through Payment Voucher & Receipt Voucher (Click the link to download formats). To record a transaction, use the voucher as a cover note for every payment and receipt transactions with relevant supporting documents such as Supplier Invoices / Receipts with Transaction details. These vouchers and supporting documents are the primary reference for each transactions.

The books of account should be kept at its registered office or such other place in India as the Board of Directors may decide from to time. The books of account can be maintained in electronic mode subject to conditions under Companies Act.

4. Appointment of First Auditors by Company

The Board of Directors of the company have to appoint a Chartered Accountant who holds a valid certificate of practice as the First Auditor of Company within thirty days from the date of registration of the company.

In case the Board fails to appoint the first auditor with in the timeline, the shareholders have appoint the first auditor at an extraordinary general meeting. The fist auditor appointed by the Board Meeting or General Meeting shall hold office till the conclusion of the first annual general meeting.

5. Shop and Establishment Registration

Every Business Establishments are required to obtain Shop and Establishment Registration under respective State Shop and Establishment Act and Rules within 30 days of registration.

This is a state specific mandatory registration for all the business and establishments. The Company has to obtain the Shop and Establishment Registration in every state wherever they have offices and establishments.

6. Professional Tax Registration – Employer & Employee

Every Company is required to obtain Professional Tax – Employer Registration (Enrolment Certificate) within 30 days of incorporation. This again is a state specific labour registration mandatory for all registered business whether you have any employees or not. This registration is subject to renewal every year after payment of prescribed fee. Delay in obtaining the registration will attract penalty to business on yearly basis.

Every company who employs people with more than the specified limit of salary (this limit varies from State to State) has to obtain Professional Tax – Employee Registration (Registation Certificate), when they start employing people. For this purpose, the partners / Directors shall be treated as employees if they are drawing salary beyond the specified limits. Also, the employer must deduct the Professional Tax from the salary of employee and pay to the State Govt. on monthly basis.

WITH IN 60 DAYS

7. Infusion of Initial Capital by Subscribers to Memorandum 

The subscribers to the Memorandum of Company has to bring the amount of subscribed   capital as stated in the Memorandum of Association at the time of company registration within 60 days of incorporation.

There is no explicit conditions in Companies Act as to this time limit 60 days for bringing the capital. However, the company is required to issue share certificate to the shareholders within 60 days of incorporation. In order to comply requirements of issue of share certificates in time, it is advisable to bring the subscribed capital with 60 days of incorporation. 

Infusion of capital to the Company bank account should happen preferably from the respective shareholders account. Also, the shareholder has to bring the entire amount of subscribed capital as stated in the Memorandum of Association.

In case of LLP, there is no time prescribed for capital infusion. However, we advise to bring the capital to the bank account before starting any activity or before closure of first financial year.

8. Issue of Share Certificate to the Subscribers of MOA

A limited company has to issue Share Certificates to the subscribers to the Memorandum of Association shareholders within 60 days of incorporation.  The Share Certificates has to be issued in the prescribed format of Form SH-1 duly signed by at least two directors of the Company and an Authorised Signatory. Authorised signatory could be the third director, if any, or any person duly authorised by the Board of Directors in this regard. There must be three different signatories to the Share Certificate. 

Also, the share certificates must be duly stamped as per the respective State stamp Act and Rules and the Register of Members and other Registers under the Companies Act are also to be updated. Delay in issue of Share Certificates will lead to non-compliance of Companies Act and also the delayed stamp duty payment shall attract impounding g of share certificates under Stamp Act

WITH IN 180 DAYS

9. Commencement of Business by Company 

Company has to file a declaration of Commencement of Business by Company with the Registrar of Companies that every subscriber to the memorandum has paid the value of the shares agreed to be taken by him on the date of such declaration.

This declaration has to be filed by the company within a period of 180 days of the date of incorporation of the company in Form INC 20A

Company can commence its business operation only after filing the this declaration of Commencement of Business with Registrar of Companies.

If a company makes any default in complying with the above requirements, 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.

Also, if the company has not filed the declaration within a period of 180 days of the date of incorporation of the company, the Registrar may initiate action for the removal of the name of the company from the register of companies on the reasonable belief that the company is not carrying on any business or operations. 

SPECIFIC NEED BASIS

10. Goods and Services Tax (GST) Registration

Every business with annual turnover exceeds Rs. 40 lakhs (Service providers 20 lakhs) is required to GST Registration under Goods and Services Tax (GST) Act and Rules.

It is not mandatory to obtain GST immediately after incorporation of the Company. The Company can obtain this registration as and when required.

In case the company has to produce its GSTIN to any third parties or authorities for its business, the company may. has to obtain the GST Registration immediately after registration of Company.

11. Trademark Registration

Registering a Company or LLP with a name does not provide complete protection to the name or brand name. The protection of Company /LLP name under the Companies Act / LLP Act is limited to the extent that another Company or LLP will not be registered with the same or a closely-resembling name. Ultimate protection for a business name is secured only by Trademark Registration.

If a trademark is used for goods and services under different classes, separate applications are required to be filed under each class to get protection of trademark for the respective goods and services.

MANY MORE....

Also, there are many more regulatory compliance requirements a company has to follow under Companies Act and other various laws as may be applicable to the nature of business of Company.