14 February 2021
A Private Company being a creation of law is required to comply with the provisions of the Companies Act, 2013 - that prescribes certain specific activities to be performed immediately after incorporation of the PLC/LLP. Before kick starting business operations, there are still a few post incorporation compliances that a PLC/LLP needs to follow in order to avoid any hiccups in the smooth operations. These activities are warranted because of specific provisions under the Act or under other state-level laws like that of Shops and Establishment Act, State Stamp Act or professional Tax.
A LLP is a hybrid form of organisation having features of a partnership firm under the Partnership Act, 1932 and a company under the Act. LLPs are governed by the LLP Act, 2008. Both PLCs and LLPs are administered by ROC (Registrar of Companies). These compliances become applicable after the PLC/LLP receives a certificate of incorporation. The post incorporation compliances are stated below in tabular form. (the serial number of the table is for ease of reference and does not suggest the order in which compliance necessarily needs to be done)
|Sr. No.||Particulars||Statute||Time period||Penalty for Non-compliance|
|Post Incorporation Compliance for PLCs|
|1||Hold the first Board Meeting
The Company shall hold the first board meeting to discuss agenda items like, inter alia, taking on record annual disclosures from directors, take note on, letterheads etc., authorise any two directors to authenticate share certificates, appointment of statutory auditor and authority to certify forms to be filed with the RoC and several other preliminary Agenda.
|Section 173, sub-section (1) of the Act read with Secretarial Standards I on Board Meetings.||Within 30 days from the date of the company’s incorporation||As per Section 173(4) of the Act, a Penalty of INR 25,000 is charged on every officer of the company whose duty is to give notice under this section|
|2||Every Company incorporated on or after November 02, 2018, having Share Capital, shall not commence any business or exercise any borrowing power unless Form INC-20A is filed after receiving subscription amounts from the first subscriber to the Memorandum i.e the Shareholders whose names are mentioned in the MOA||Section 10A of the Act and Rule 23A of The Companies (Incorporation) Rules, 2014||Within 180 days of the date of incorporation||A penalty of INR 50,000 will be levied on the company and every such officer in default shall be liable to a penalty of INR 1,000 per day for each day during which the default continues subject to a maximum of INR 1,00,000|
|3||Issue share certificates to first subscribers
Duly signed by two directors of the Company and Company Secretary, if any
|Section 46(1) and 56, (4)(a) of the Act||Within a period of two months from the date of incorporation.||Where any default is made in complying with the provisions, Company and every officer of the company who is in default shall be liable to a penalty of INR 50,000|
|4||Payment of stamp duty on the share certificates
Stamp duty will be paid on the total consideration i.e the subscription amount.
|Section 3 and first provision of section 32 of the Indian Stamp Act, 1899||Within 30 days of issue of share certificates||The penalty shall be levied up to 10 times of duty and as suggested by the Collector or officer incharge.|
|5||Appointment of first statutory auditor
The first auditor as appointed by the company shall hold office till the conclusion of the first AGM
|Section 139, sub-section 6 of the Act.||By the Board: Within 30 days of the date of incorporation
By the Shareholders: In case the Board fails to appoint, then the Board shall inform the shareholders, who shall within 90 days at an EGM appoint such auditor.
|No fine or penalty, as filing Form ADT 1 is not mandatory for appointment of first auditor since rule 4 (2) of The Companies (Audit and Auditors) Rules, 2014 which mandates filing ADT-1 only for appointment made under section 139 (1)- and not about section 139 (6).
However, it is a good practice to do so.
|7||Shops and Establishment Registration/License
Every Business Establishment is required to obtain Shop and Establishment Registration under respective State Shop and Establishment Act and Rules. 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.
|The Shop and Establishment Act is under state legislation, and each state has framed its own rules and regulations for the same.||Within 30 days of the date of Incorporation||The penalty amount varies from state to state.|
|Specific Need Basis|
|8||Professional Tax Registration (PTEC and PTRC)
Every Company has to enroll under registration called (PTEC) and mandatory Pay 2500 annually. And companies who employ people with more than the specified limit of salary (this limit varies from State to State) have to obtain Professional Tax - Employee Registration (PTRC), when they start employing people.
|The Professional Tax Act is under state legislation, and each state has framed its own rules and regulations for the same.||Within 30 days of the date of incorporation.||The penalty amount varies from state to state.|
|9||Goods and Services Tax Registration
Every business whose annual turnover exceeds Rs. 40 lakhs [(Service providers - 20 lakhs) (Rs. 10 Lakhs for North-Eastern States,Himachal Pradesh and Uttarakhand) (J & K - 20 lakhs)] is required to obtain GST Registration under Goods and Services Tax Act, 2017 and Rules. *Applicable on LLPs as well.
|Goods and Services Act, 2017 and Chapter 3 of CGST Rules, however the registration is state specific in nature.||It is not mandatory to obtain GST Registration immediately after incorporation, as there is no time limit prescribed.||An offender not paying tax or making short payments (genuine errors) has to pay a penalty of 10% of the tax amount due subject to a minimum of Rs.10,000.The penalty will at 100% of the tax amount due when the offender has deliberately evaded paying taxes|
Protection for a business name is secured by Trademark Registration*Applicable for LLPs as well.
|Chapter II of The Trademark Act, 1999||N/A||N/A|
Registration under MSME Development Act to get benefits including, without limitation, collateral free bank loan, preference in government tenders, payment recoveries under delayed payment monitoring system (Samadhaan), tax rebates.*Applicable for LLPs as well.
|MSME Development Act, 2006||N/A||N/A|
|Post Incorporation Compliance for LLPs|
After the LLP is Incorporated, the partners are required to execute the LLP Agreement and file the same with the Registrar. LLP agreement is mandatory for all LLPs and even in the absence of a specific LLP Agreement, the default LLP agreement given in Schedule I of the LLP Act, specifically excluding applicability of any or all clauses/ paragraphs.
|Chapter IV of the LLP Act, 2008||Within 30 days of the date of Incorporation||Rs. 100 per day of default with no ceiling on the maximum fine.|
|2||Form 49A - PAN Application
The duly signed application must be couriered to the NSDL office for issue of PAN card.
|LLP Act, 2008||N/A||N/A|
|3||Opening of a Bank Account
LLP shall open a Bank Account to carry out its transactions.
|4||Depositing of Share Contribution Money into Bank Account
Amount more than Rs. 20,000/- to be deposited cheque or online transfer and not in cash
|N/A||No time limits prescribed by the LLP Act or Rules, shall be governed by the LLP Agreement||N/A|
*Date of incorporation is the date that is mentioned in the certificate of incorporation.
These are just the basics required to be followed instantly after the incorporation of the company. There are various other compliances that are required to be properly monitored. Therefore, mandatory compliance at every step for any Company/LLP is imperative to enjoy a hindrance-free success.
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