Overview: Companies Act 2013
It is the Companies Act 2013 that is responsible for the operation and establishment of companies or businesses in India. Before 2013, the Companies Act 1956 used to be followed. The Act in 1956 used to look over various business structures in the nation. The 1956 Act went through several amendments, but in 2013, some serious changes were made to the act, leading to the formation of the Companies Act 2013.
Companies Act 2013: Features
Now that you know what does the Companies Act 2013 state, let’s learn more about its features:
- The Companies Act 2013 helped shed a lot of light on the firms that remained out of business for 2 years continuously. Such firms are called dormant companies.
- All the documents get collected in one place on an electronic platform.
- As an alternative to gaining a license from the central government, the Companies Act 2013 offers self-authorization and transparency.
- The process of amalgamations and mergers became easy and quick after the passing of the Companies Act 2013.
Compliances under Companies Act 2013
3 main types of compliances come under the Companies Act 2013.
These are:
- Event-based compliances
- After incorporation compliances
- Annual compliances
Event-based Compliances
Some of the compliances should be followed every year, in a timely manner. But the Event-based compliance is the one that is based on specific events and should be done at that time only. These types of compliances can’t be negotiated with and should be fulfilled without skipping. The forms should be filled in time, and if the applicant fails to do so, then he/she will have to face punishments and penalties.
Let’s gain a better understanding of this compliance through examples:
Modification in Registered Office Address
The registrar of the firm should be informed if there is any change in the address of the registered office. There can be several reasons why the registered office address can get modified.
Different cases call for different scenarios:
- If the new office address falls anywhere within the city’s local limits, then the applicant only needs to issue INC-22.
- If the new address is in the outskirts of the city but remains in the same state, then a special guideline is passed, and the applicant should issue an electronic form of INC-22 and MGT-14.
- Lastly, if the office gets transferred to another state, the applicant will have to issue INC-22, MGT-14, and also send an approval request to the Central Government for INC-23. The permit of INC-23 is issued in INC-28.
Modifications in Directorship
In the time of a month, the applicant should connect with the registrar and DIR-12 should be issued if there is any kind of modification in the directorial board. The modification could be of any kind, a modification in designation, appointment, or even cessation.
Company Name Modification
To modify the name of your firm, you will have to follow these steps:
- Look for the name’s availability and then secure it via a RUN technique
- Get the approval for special resolution & issue MGT-14
- Lastly, file INC-24 to get the permit from the central government
Increase in Authorized Capital
To successfully raise the authorized capital of a firm, you need to first get the approval to change the MOA. The applicant will have to issue an MGT-14 to apply for the approval of the authorized capital. Next, issue an SH-4 to ROC.
Registration, Amendment, and Charge Settlement
These are the compliances necessary under the Companies Act, 2013 whenever the corporation creates a charge or security to secure a loan of any size. Before submitting an e-Form CHG-1, a new charge must be made or an existing charge must be amended.In the event of a charge settlement, however, e-Form CHG-4 must be filed.
After Incorporation Compliances
Under the Companies Act, 2013 come some compliances that are needed to get followed as soon as the company incorporation takes place successfully. This is because once the company gets registered, it gains a legal stature of its own and is responsible to follow all the official guidelines that come under the Act. Keep reading to know more about these important compliances:
Display company information
Beyond its business address & above all corporate correspondence, billheads, as well as other legal forms and periodicals, every established firm is expected to exhibit the following items:
- The site, email address, and fax number
- Authentic phone number and company’s registered address
- Name of the business and its CIN (Corporate Identification Number)
Verification of Registered Office
Every firm must complete authentication of its business address with the company registrar after it has been successfully incorporated. They can convey this info through the SPICe Form while registering. If this is not accomplished, the information must be provided to INC-22 in 1 month after registration.
Auditor’s recruitment
Within 1 month of registration, every company hires an auditor in the meeting of the board, who’ll be affirmed or altered at the next annual general meeting.
First Board Meeting
Within 1 month of its formation, every newly established firm is obligated to hold its first meetings of the board.
Director Conflicts of Interest
During the first meeting of the board in 1 month of establishment, each director is expected to submit the information of any other companies listed through Form MBP-1.
Issuance of Share Certificates
Every business must give share certificates to its shareholders listed on the registration documents. All of the firm’s share certificate numbers, as well as incorporation facts, must be included in the firm’s records.
Keeping Statutory Registers Up-to-Date
Every established business is supposed to create and keep certain regulatory records at its business address under Sections 85 and 88 of the Companies Act, 2013. The ROMs (Register of Members), the ROSs (Register of Shareholders), the ROESO (Register of Employee Stock Options), the ROCs (Register of Charges), and various other statutory records are among them.
Maintaining Minutes
Every organization is expected to keep a minute record of all discussions that are organized. These minutes must be drafted in 15 days, and they should be completed within 1 month.
Annual Compliances
After discussing all the After-registration compliances, we will discuss the annual compliances that come under the Companies Act 2013. These need to be done on an annual basis, and in the list below we will talk about all such annual compliances falling under the Act of 2013.
Board Meetings
All the incorporated firms, according to the Companies Act, 2013, are needed to hold at least 4 meetings of the board each year. The permissible gap between two board meetings is only 120 days.
Annual General Meeting
The first general meeting should be held in 9 months starting from the fiscal year’s end and in the later stages, it should be held in 6 months starting from the fiscal year’s end. 15 months is the permissible gap between two-yearly general meetings.
Receipt of Form MBP-1
The Form MBP-1 should include each director’s interest in each of the incorporated entities. This is needed to be performed on an annual basis in the first meeting of the board. Apart from this annual disclosure, each director should also inform the meeting panel about any kind of modifications in his/her choices.
Receipt of Form DIR-2
The receipt of the DIR-2 should be secured as it is utilized to submit the non-disqualification disclosure by the firm directors.
Circulation and preparation of Financial Statements
Every firm is obligated to keep track of its finances and distribute them including the director’s and auditor’s reports and the announcement of its yearly general meeting.
Creating the Director’s Report
Section 134 of the Companies Act of 2013 requires every registered company’s board of directors to prepare a director’s report. This Director’s report will be included with the Form AOC-4 at the time of the annual filing. The director’s report will include information regarding the company’s finances, current conditions, any composition changes, dividends paid, debts, and so on.
The Auditor’s Employment
Every incorporated business must hire an auditor. He/she can be hired for a period of three to five years, and details on their employees must be filed with the company registrar in Form ADT-1. Previously, this position had to be confirmed at the yearly general meeting each year for the next five years. This condition, though, has been removed.
Filing of E-Form MGT-7
The e-Form MGT-7 should be filed to hand over the firm’s yearly returns. This is important compliance, as stated in the Companies Act, 2013. This form should be issued in 6 days starting from the schedule of its yearly general meeting. The annual return of a firm should be approved via a professional firm secretary if the firm’s annual turnover is 10 Cr or more.
Filing of E-Form AOC-4
The applicant will also have to hand over the firm’s financials and issue them with the company registrar in one month, starting from its yearly general meeting schedule. The official form to make this happen is AOC-4.
Keep the below-mentioned documents with you:
- Notice of AGM
- Copy of Profit and Loss A/c
- Auditors’ Report
- Director’s Report
- Copy of Balance sheet
Conclusion
For businesses operating in India, adherence to the Companies Act 2013 is essential. Organizations can assure legal and regulatory conformity, encourage good corporate governance, and increase stakeholder trust by being aware of and adhering to statutory obligations. Because these compliances are mandatory to follow and are a repetitive thing, we suggest you consider seeking assistance from us at OnDemand International.
We seek to offer our clients the best service, and an experience they wouldn’t regret. You can trust our skilled experts who will guide you on every step. So, relax and leave all your compliance-related doubts and questions for us to solve. Contact Ondemand International today!
FAQ’s
The 2013 Companies Act has only 29 chapters and 470 sections, compared to 658 sections and 7 schedules in the 1956 Companies Act.
In 1956, India’s first Companies Act was enforced, governing corporate structures in the nation.
Failure to comply with the annual filing obligations may result in sanctions, fines, and even legal action. Depending on the length of non-compliance and the size of the organization, the fines may change.
Yes, in addition to annual filings, businesses must also comply with ongoing requirements such as keeping registers and documentation, holding board meetings, following rules on agreements and organizing yearly general meetings. In accordance with the requirements of the Act, these compliances must be met all year long.
The due date for filing the annual return is 30 days from the date of the annual general meeting (AGM).
A penalty will be imposed if a corporation fails to file its annual return on time. The penalty amount will be determined by the number of days the company is late in filing its return.
