Post Incorporation Formalities for PLCs & LLPs

After incorporating a Private Company (“PLC”) or Limited Liability Partnership (LLP), specific regulations in the Companies Act, 2013 and the Limited Liability Partnership Act, 2008 (“LLP Act”) must be followed to ensure compliance with the law. Certain post-incorporation compliances must be met before starting business operations to avoid any issues during the process. These activities exist due to provisions outlined in the Act or state-level laws such as the Shops and Establishment Act, State Stamp Act, and Professional Tax.

LLPs are a unique organizational form with characteristics of both a partnership firm and company and are governed by the LLP Act, 2008. Both PLCs and LLPs are administered by the Registrar of Companies (ROC). The following compliances must be met after receiving a certificate of incorporation.

Incorporation of a Private Limited Company (PLC) is a significant step in starting a business in India. However, it is important to note that certain compliances must be met to avoid penalties and ensure a smooth start to operations. Here are the mandatory post-incorporation compliances for PLCs:

1. Hold the first Board Meeting

According to Section 173, sub-section (1) of the Companies Act 2013, the company must hold the first board meeting within 30 days from the date of incorporation. The meeting must discuss important agenda items such as annual disclosures from directors, authorisation of share certificates, appointment of statutory auditor and such other agenda items. Failure to comply with this can result in a penalty of INR 25,000 for every officer of the company responsible for giving notice.

2. File Form INC-20A

All companies with share capital incorporated on or after November 2, 2018 having share capital, must file Form INC-20A within 180 days of incorporation in order to commence business or borrow funds. Failure to do so can result in a penalty of INR 50,000 for the company and a penalty of INR 1,000 per day for each officer in default during which the default continues, up to a maximum of INR 1,00,000.

3. Issue share certificates to first subscribers

Section 46(1) and 56, (4)(a) of the Companies Act 2013 mandates PLCs to issue share certificates to first subscribers, duly signed by two directors of the company and the company secretary, wherever the company has appointed a Company Secretary, if any, within a period of two months from the date of incorporation. Failure to comply can result in a penalty of INR 50,000 for the company and every officer of the company who is in default.

4. Payment of stamp duty on the share certificates

PLCs are required to pay stamp duty on the total consideration amount mentioned in the share certificates within 30 days of issuance. Failure to do so can result in a penalty as suggested by the Collector or officer in charge.

5. Appointment of first statutory auditor

As per Section 139, sub-section 6 of the Companies Act 2013, PLCs must appoint their first auditor within 30 days of incorporation. However, in case the Board fails to appoint, the shareholders must appoint the auditor within 90 days at an extraordinary general meeting. While there is no fine or penalty for failure to file Form ADT-1 for appointment of the first auditor, it is advisable to do so.

6. Shops and Establishment Registration/License

PLCs are required to obtain Shop and Establishment Registration under respective State’s as applicable. Penalty amount varies from state to state.

7. Professional Tax Registration (PTEC and PTRC)

PLCs must enroll under registration called (PTEC) and pay an annual mandatory fee of INR 2,500. Companies employing people with salaries above a specified limit (which varies from State to State) must obtain Professional Tax – Employee Registration (PTRC) when they begin to employ staff. The penalty amount for non-compliance varies from state to state.

8. Goods and Services Tax Registration

Every business whose annual turnover exceeds Rs. 40 lakhs or Rs. 20 lakhs for service providers, Rs. 10 Lakhs for North-Eastern States, Himachal Pradesh and Uttarakhand and J & K is required to obtain GST Registration under the Goods and Services Tax Act, 2017 and rules. While it is not mandatory to obtain GST Registration immediately upon incorporation, failure to pay tax can result in a penalty of 10% of the tax amount due subject to a minimum of Rs.10,000. In cases of deliberate tax evasion, the penalty will be at 100% of the tax amount due.

9. Trademark Registration

PLCs are encouraged to secure their business name through trademark registration under Section 18 of The Trademark Act, 1999.

10. MSME/SSI Registration

PLCs can also register under the MSME Development Act to get benefits such as collateral-free bank loan, preference in government tenders, and tax rebates.

Starting a Limited Liability Partnership (LLP) in India is a crucial milestone, and it’s essential to ensure compliance to avoid penalties and smoothly operate the business. Let’s go through the post-incorporation compliances required for LLPs:

i. File Form 3

After incorporating the LLP, the partners need to execute the LLP Agreement and file it with the Registrar. The LLP agreement is mandatory, and even in the absence of a specific LLP Agreement, the default LLP agreement given in Schedule I of the LLP Act shall apply. The form must be filed within 30 days of incorporation, and the penalty for non-compliance is Rs. 100 per day with no ceiling on the maximum fine.

ii. Apply for a PAN Card

The Issuance of PAN is integrated with the LLP incorporation process in form FiLLiP.

iii. Open a Bank Account

LLPs must open a bank account and transfer their capital to conduct transactions. No penalty or due date exists for this compliance.

FAQs

Q: When can a private company commence business?

A: A private company can commence business after filing form INC-20A within 180 days of Incorporation..

Q: What is the procedure after incorporation of a company?

A: After the incorporation of a company, the following procedures need to be carried out:

• Hold first Board Meeting
• Open a bank account for the company and transfer initial subscription
• Appoint first a statutory auditor
• Issue share certificates to the shareholders and payment of stamp duty
• Registration for Goods and Services Tax (GST) if applicable
• Registration for Professional Taxes if applicable
• Startup India and Angel Tax exemption, if required
• Obtain such other necessary licenses and permits if required for the business

Q: Which forms need to be filed after incorporation of a company?

A: After the incorporation of a company, the following forms need to be filed:

• Form INC-22: This form is for the notice of the situation or change of registered office of the company, if the Company has been incorporated with a correspondence address
• Form INC-20A: This form is for the declaration of commencement of business.
• Form ADT-1: It is advisable to file this form appointment of first auditor.

Q: What documents are required to be filed at incorporation stage?

A: The following documents are required to be filed at the incorporation stage:

• Spice Part-B: This is the e-form for the incorporation of a company.
• Form INC-33 (E-MOA): This form is for e-memorandum of association.
• Form INC-34 (E-AOA): This form is for e-articles of association.
• INC-35: Agile Pro:Application for Goods and services tax Identification number , employees state Insurance corporation registration pLus Employees provident fund organisation registration, Profession tax Registration, Opening of bank account and Shops and Establishment Registration
• INC-9: Declaration by Subscribers and First Directors

Q: Which is the first meeting to be held after incorporation?

A: The first meeting to be held after incorporation is the board meeting. It shall be held within 30 days of incorporation and typically includes the following agenda items;

• To place the Certificate of Incorporation before the meeting;
• Noting of First Directors;
• To take a note of the disclosure of interest under Section 184(1) and certificate under Section 164(2) of the Companies Act, 2013;
• Authority to open the Bank Account;
• To inform the place of Registered Office;
• To decide the Financial Year of the Company;
• Appointment of First Auditor;
• Adoption of Share Certificates;
• Approval of Pre-Incorporation Expenses;
• Commencement of Business;
• Books and Registers;
• Allotment of Shares and issuance of share certificates to the subscribers of the Memorandum of Association;
• To decide and maintain minutes in Loose Leaf Folder;
• To decide and maintain the Books of Accounts