Company Formation and its compliances

Incorporation of a Company

Private Limited Company

• Minimum two subscribers
• Maximum subscribers- 200
• Minimum two directors

Steps to register a Company

• Obtain DSC and DIN
• Name reservation- Name is reserved for 20 days
• Drafting of MoA and AoA
• Filing for Incorporation- SPICE form
• Details required :
  • Main Object
  • Registered address along with proof of address
  • Details of subscriber
  • Details of first Directors
  • Paid up Capital
• Obtain Certificate of incorporation

Contents of MoA

• Main Object
• Other Objects
• Liability Clause
• Place of registered Office
• Authorised Capital
• Subscribers details

Contents of AoA

• Contains bylaws for governance and internal management of the company
• Procedure of share transfer, conducting Board meetings, rights of members, duties and powers of Directors, procedure for appointment of directors etc.
• AoA can be altered from time to time- usually at the time of fresh investment, majors terms of investment are incorporated in the AoA.

Few registration requirements

• PAN (Permanent Account Number)
• TAN (Tax Payers Account Number)
• Bank Account
• Registration under Shop & Establishment Act
• GST (mandatory for turnover 20 lakhs and above)
• Provident Fund (if more than 20 employees)
• Professional tax
• Importer Exporter Code
• FSSAI License/registration
• BIS registration
• Environmental clearance

There can be many more depending on the activity undertaken.

Take help from a consultant to get these registrations.

Event based Compliances

• Receipt of share application money
• Allotment of shares
• Transfer of shares
• Appointment/Resignation of directors
• Appointment of Managing Director/ Whole Time Director
• Executing agreement with related parties
• Change in the Bank signatories
• Change in the statutory auditors

Cost of Non‐compliance :

• The Companies Act, 2013 provides for penalty/fine or imprisonment either of the officer in default and/or the company. Directors and KMPs are covered under the definition of “Officer in Default” as per the Companies Act 2013 which fixes their responsibility for any default done by the company”.
• For the procedural lapses such as late filing of forms, additional filing fees are required to be paid. In case of FEMA, the penalty for noncompliance can go up to thrice the amount involved.

Board of a Company and its Duties

The Board consists of Directors and Key Managerial Personnel like MD, CEO, COO, CFO, CS etc.,

• Duties :
  • Strategic oversight over business operations
  • Ensure compliance with the legal framework
  • Integrity of financial accounting and reporting systems
  • Credibility in the eyes of the stakeholders through proper and timely disclosures

Day to Day management of a company

• A Board Resolution is a way of documenting a decision made by a Company’s Board of Directors on behalf of the Company.
• A board resolution is passed at a board meeting or by way of circulation.
• Board resolutions are passed by way of majority vote.
• Interested Directors cannot vote or participate in the discussion.
• The fact must be recorded in the minutes.
• Shareholders’ Agreements and Charter Documents of the Company provide additional requirements.
• Before a company can make a decision on a matter, it needs to know whether the issue is something that needs to be considered by the board of directors or by the shareholders.

Calling of Board Meeting

• Standard Notice period- 7 days
• Quorum of Board Meeting- 1/3 rd of total strength or 2 (Two) Directors, whichever is higher.
• Participation of Directors in Board Meetings- Directors may, apart from attending the meeting physically, participate in the meeting by way of video conferencing & other audio visual means.

Post Meeting Compliance

• The minutes shall disclose date, time and place where the meeting was held, the particulars of the directors who attended the meeting through video conferencing, the decisions taken in the meeting.
• The draft minutes shall be circulated among all the directors within fifteen days of the meeting either in writing or in electronic means.
• Minutes to be signed within 30 days of the conclusion of the Board Meeting.
• Minutes kept in accordance with the provisions of the Act shall be evidence of the proceedings recorded therein.

Calling a Shareholders’ Meeting

• Annual general meeting (AGM)
  • Once in every year.
  • Within 6 months of close of Financial Year
• Extra ordinary General Meetings
  • As and when necessary
• 21 clear days notice to be given
• Quorum to be present
• Proxy are counted in Quorum
• Attendance in meeting by Authorised representatives
• Attendance sheet and minutes