There are lot of the People and Entrepreneurs in india which are confused about the Compliance for the Private Limited Company in India as per the Companies Act 2013. So Today we clearly explain to you about the some important points which is fall under the compliance for the private limited company. Since the inception of The Companies Act on 1956, the definition and scope of private companies have undergone a lot of changes. It is not at all an easy task to run a private corporation, at least not for a faint-heart. Apart from the business and financial pressures, there are the lot of empty places to be fulfilled such as customer’s demands, employee’s salaries, clients forcing for better performance and this list goes on and on. But all these seem like nothing when you will look at the large legal and regulatory requirements that are prescribed by the Governments and every private company is ought to fulfil all these. Before jumping into the compliances that are made for private enterprises under the Companies Act, 2013, let’s discuss, What Are Private Companies?
This answer has been mentioned explicitly in section 2 clause 68 of the Companies Act 2013. On an apparent rough scale we can define, when any two or more persons form any company, that company is labelled as the private company. But taking a deeper analysis of section 2(68) of the Act, we will find that some strict restrictions form the boundary line of private companies. Those are as follow- 1) there must be some restriction upon the right of its members to transfer their shares in the company. 2) The number of its member should be limited to 200 members. 3) The company must prohibit any invitation to the public to subscribe for its shares. 4) A private company must have paid-up share capital of at least Rs. 1, 00,000 or such higher amounts as may be prescribed.
In spite of many restrictions, private companies enjoy some advantages too. The benefits are as follows- 1) its formation requires only two persons. 2) Public participation by issuing a prospectus is prohibited. 3) A private company is required to have only two directors.
Now coming to the main point, what are the compliances that a private company has to fulfil? It is as below mentioned-
- Financial Year – As per section 2(41), every private company is to follow a financial year from April to March, as prescribed in the Act.
- Change in letterhead, bill, etc. – This provision came into effect on 1st April 2014 according to the Company Act, 2013. Section 12(3)(c) prescribes that every private company should get its name, registered office address, Corporate Identity Number i.e. CIN, telephone number, email and website address if any. These all should be printed in its business letters, billheads, and letter papers and all of its official publication. If not complied with this provision, which will lead to a penalty of 1000rs per day not exceeding Rs. 1, 00,000.
- Resident Director– According to section 149, every company is to have a Board of Directors consisting of individuals as directors. A private company is to have a minimum number of two directors. Newly added provision as mentioned in section 149(3), one of the directors must have stayed for a minimum period of 182 days as per the previous calendar.
- Meetings– According to section 173, board meetings ought to be held in a gap of 120 days, and at least four meetings in a year need to be held. Before every board meeting, a prior seven days notice should be circulated. Apart from the board meeting, an Annual General Meeting should be held to discuss every financial matter.
- Deposits– As prescribed under sections 73 to 76 of the new Company Act, a private company cannot acknowledge deposits from relatives of the directors or shareholders as was allowed under 1956 Act. Any contravention of this provision will lead to a penalty which may extend to Rs. 10,000.
- Allotment of Shares– According to sections 42 and 62, now every private company has to offer share to its existing shareholders first before the outsiders. Any violation of section 42 will lead to a penalty of Rs 2 crore. Previously section 62 was not applied to private companies, but this has been amended by the new Act.
- Social Responsibility– According to section 135 of the Act, every private company having the net worth of 500 crores or more, Or, Turnover of 1000 crore or more, Or, Net profit of 5 crores or more, shall contribute 2% of its net profit to CSR activities. Any violation of such act may lead to a fine of Rs.10, 000 and may extend to Rs. 1, 00, 00.
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