Private Limited Company properties, benefits and compliance

A private limited company is a company that is closely held by a few individuals with limited liability for the losses the business might incur in the future. Unlike the public limited company, the shareholders or investors could be restricted to 100 persons. A private limited company in the eyes of law is a separate legal entity, which gives it an edge over partnerships and various other business setup options where a separate legal entity might not exist. The partners or investors in this type of arrangement can be selected and is an excellent choice for startups looking for limited investment without compromising ownership. A private limited company may hire a maximum of 50 employees only.

Initial private limited company compliances

During the initial year of doing business, private limited companies face some once for all compliances. These can be listed as follows-

·         Appointment of an auditor

All companies registered under the company’s act breaching a certain threshold require a statutory auditor to trust proof the books of account. This is a mandate even before obtaining a business commencement certificate and has to be done within 30 days of incorporation or registration. Failure to comply with the same leads to a Rs 300 per month or more penalty as well as denial for business commencement certificate.

·         Business commencement certificate

Apart from registering with the Registrar of Companies, the company has to obtain a business commencement certificate within 180 days of registration. This is mandatory to utilize any borrowing / transacting or executing any sort of other business transactions. Failure to comply with this could lead to a penalty of Rs 50,000, which is more than the average cost of yearly Pvt ltd company compliance package for a large private limited company.

Recurrent annual compliance for private limited company

The private limited company has some recurrent compliance requirements that have to be followed consistently throughout its life. These can be listed as follows-

·         Annual board meetings and Annual general meetings

The board meeting is amongst the board of directors and has to happen at least twice during a calendar year. If only two meetings are held in a year, the gap between the two meetings has to be more than 90 days or 3 months. Similarly, Annual general meetings which are a meeting that involves most of the parties interested in the company’s performance, directors, investors, creditors, etc., should be organized at least once a year. There should not be a gap of more than 15 months between the two annual general meetings.

·         Forms to be filed-

1.      After the annual general meeting is held, an e-form MGT-7 has to be filed within 60 days of conducting the AGM.

2.      Form AOC-4 is the financial statement of the private limited company that consists of a balance sheet, profit statement, loss accounts, and director’s report as attachments. This is the most important part of Pvt Ltd company compliance.

3.      MBP-1 is a disclosure form through which the directors of the company have to disclose their interest in other private limited companies after the first board of directors meeting in the financial year.

4.      DIR-8 is another disclosure form that directors need to file every year with the company disclosures of non-disqualification.

5.      Continuation of business form has to be filed with the Ministry of Corporate Affairs every year to retain its active status.

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