Post Incorporation Company Compliances

Introduction

Every private Limited company including OPC, Section 8 company must complete post incorporation compliances as per the Companies Act and any applicable law upon its formation. In this article, we will mention in detail about the compliances that are required immediately after the incorporation. These are basically the next steps after the company is incorporated. Post incorporation compliance if not done will lead to fines and late fees and may lead to closure of the company by MCA.

What are the post incorporation company compliance?

Post-incorporation compliances of a private limited company is a set of legal requirements. These requirements must be followed after it is formed or incorporated. Ensuring compliance is paramount for smooth functioning. It mainly includes setting up bank accounts, obtaining licenses and permits, holding the first board meetings, designating auditors, and submitting legal documents to the appropriate authorities. These compliance are generally to be done within 30 days or 60 days or before business commencement after incorporation date.

It is a rigorous law and must be followed to ensure the legal and operational probity of the company. It is the responsibility of the company management to make sure all these compliance are completed timely even if the company is in the starting phase and has no revenue or operations still these compliance are to be done. These compliance are reported in due diligence reports prepared by investors.

Table of Post-Incorporation Compliances

Below table mention details of various compliance along with due dates that are required after the company is incorporated:

Mandatory Compliances Within 30 days 

The compliances should be followed by the firm after incorporation. The compliances that should be done within 30 days are as follow:

• First board meeting: As Per Section 173 (1), organizing the first board meeting is important as it signifies the start of new business. Usually, the first board meeting must be held within 30 days of incorporation. Also it can be held within such a timeframe as specified by the company’s articles of association. The main motive of this meeting is to serve as a platform for directors to convene, establish corporate policies, approve initial transactions, and set the preparations for the company’s operations. Main agenda of the first board meeting is adoption of MOA and AOA, deciding authorized signatory of the company for filing purposes, adoption of bank accounts, appointment of auditors, approve preliminary expenses etc.

• First Auditor Appointment: According to section 139(1),the first auditor appointment ensures that the financial statements will be examined by a qualified auditor and an audit report is issued. After incorporation of a company, it is required to appoint within 30 days. The post of the auditor is crucial as it helps stakeholders believing that the company’s financial reporting confirms its integrity. First Auditor is appointed till the conclusion of first AGM. Any practicing chartered accountant meeting the criteria can be auditors in the company 

• File INC-22: Form INC-22 Is filed for the updation of registrar office address of the company. At times company registrar office rent agreement and proof of address is not available during incorporation. Hence while incorporation we just put the address in the form and later post incorporation of the company, within 30 days we file INC-22. In INC-22 we attach proof of register office address-rent agreements and electricity bill and NOC. It is mandatory compliance to be done. If INC-22 is not filed, the company won't be able to form any further Form with ROC.

• Opening a Bank Account: Opening a bank account is mandatory for the company to do business transactions. There is no fixed time to open a bank account. However, opening a bank account within 30 days is recommended. Before commencing any business transactions paid up capital has to be deposited in the bank account. Bank account is opened in the name of the company and presence of both the directors is generally required for opening a bank account. Bank account can be opened in any bank of your preference and every bank has its own process

• Interest Disclosure: According to section 184(1) of companies Act, every director shall disclose his interest in any company, firm, association of individual at the first board meeting. Incase of any change in disclosure, an announcement should be made to the board. A director in the first meeting, must declare that he had met the criteria.

Mandatory Compliances Within 60 days 

The compliances that should be done within 60 days are as follow:

• Share Certificate: An official document that has been legally signed on behalf of an organization and serves as proof of ownership of the designated number of shares is called a share certificate. The shareholders will receive this certificate within sixty days of the incorporation date.

• Subscribed Capital: Timely collection of the entire subscribed capital is essential to ensure that the business is adequately capitalized. Subscribed capital refers to the shares that shareholders have committed to purchasing. The company's capital needs to be obtained within sixty days of its incorporation. If this date is missed, there may be legal consequences, including breach of contract or requirements for corporate management violations.

Mandatory Compliances Within 180 days or before Business commencement.

File INC-20 A: As specified by the Companies Act of 2013, it is necessary to file Form INC-20A. This document certifies that the company has obtained the required subscribed capital and has started operations, serving as an official declaration that the business has started. Within 180 days of the date of formation, the form must be filed.

Failure to comply with this requirement can lead to serious consequences, including fines and potential legal action against the company and its officers. Additionally, not filing Form INC-20A may result in the company being marked as inactive, hindering its ability to conduct business, open bank accounts, or enter into contracts, and potentially leading to its closure by the Registrar of Companies (ROC).

Other Post Incorporation Registration

Apart from the compliances with due dates, there are certain optional relevant responsibilities that beyond from due date. These tasks can be performed anytime by the incorporated company. These compliances should be done so that they can plan to improve their operational efficiency, legal protection and growth prospects.

These compliances listed several specific licenses, IPR registration, GST registration, and MSME registration It promotes transparency, credibility, and competition in the marketplace. However, it is an optional registration and not a lawful requirement. 

• GST Registration: GST Registration is important for companies that provide goods or services. It guarantees compliance to the Goods and Services Tax (GST) system and also helps in smooth input tax credit, and builds supplier and consumer reputation. Businesses must register under GST if their yearly revenue exceeds the legal level of INR 40 lakhs (INR 20 lakhs for service providers).

• MSME Registration: MSME Registration helps small, medium sized businesses for multiple purposes. In order to increase access to government programs, subsidies, and finance, businesses required MSME Registration. It improves market visibility, competitiveness, and growth opportunities. 

• Industry Specific License: This license is required by some companies who engage in regulated industries including manufacturing, food processing e.g. FSSAI, IEC etc. Following industry regulations ensures compliance with legal requirements, consumer protection, and industry standards. To operate lawfully, businesses in sectors subject to certain standards, laws, or licensing requirements need to get licenses relevant to their sector. 

• IPR/Trademark Registration: Trademark registration and intellectual property rights (IPR) protect an organization's original concepts, innovations, and identity. They fortify brand reputation and market positioning, improve market exclusivity, and guard against infringement. An application for intellectual property rights (IPR) or trademark registration may be made by any person or business entity that currently possesses or plans to acquire intellectual property assets, such as designs, trademarks, copyrights, or inventions. 

• Professional Tax Registration: Another compliance includes professional tax registration. In India, companies that hire professionals or skilled laborers are required to get this registration completed. It is a state level tax on income received by people. It can be in the form of trades, occupations, and professions. Professional tax is paid by professionals through PT registration. Some penalties, fines and legal law may be levied by the state tax authorities for noncompliance with the provision. 

In case if the business does not obtain a professional tax registration, it can lead as a violation of tax laws, which could affect its legal operation. Also it draws more attention from regulatory bodies. 

Conclusion

An important factor of corporate governance is post-incorporation compliance. It protects the sustainability, accuracy, and quality of a business. It is also a legal necessity for the businesses. Companies may effectively handle regulatory complexity, reduce risks, and create a transparent and responsible environment by paying close attention to legal requirements and proactively exploring optional compliances. By promoting stakeholder confidence and ensuring legal compliance, adopting a comprehensive strategy to these compliances helps firms survive in the long term in today's competitive business climate.

Frequently Asked Question (FAQs)

1) What are post-incorporation compliances? 

Post-incorporation compliances include mandatory filings and processes a company must follow after registration. 

2) When should a company appoint its first auditor? 

A company's first auditor must be appointed within 30 days of incorporation.

3) Are there any tax-related compliances?

Yes, companies must register for tax deductions, Goods and Services Tax (GST), and file relevant tax returns.

4) Is it mandatory to hold board meetings?

Yes, the first board meeting must be held within 30 days of incorporation.