New Filing Requirements

DIR-3 KYC Form to Update DIN / KYC of Directors

Every Director who has been allotted DIN on or before the end of the financial year, and whose DIN status is ‘Approved’, would be mandatorily required to file form DIR-3 KYC before 30th April of the immediately next financial year.

The due date for FY 2018-19 is 30th April 2019 for all the persons whose DIN status is ‘Approved’ as on 31st March 2019.


  • The eForm should be certified by a practicing Chartered Accountant or Company Secretary or Cost and Management Accountant.
  • Subsequently, submission of KYC details through Form DIR-3 KYC would be annual process to be completed by the director within 30th April of immediately next Financial Year.

Documents Required:

  • Name (as per PAN database)
  • Father’s Name (as per PAN database)
  • PAN of the Director (mandatory for citizens of India)
  • Date of Birth (DoB)” (as per PAN database)
  • Personal Mobile number and Personal Email Address
  • Proof of Present Address such as Bank Statement or any Utility Bill in the name of the director with the correct address, not more than 2 months old.
  • Aadhaar is mandatory, if it is assigned. If not, then Voter ID or Passport or Driving Licence shall be attached.
  • Digital Signature of Director (Rs 800 will be requested if DSC is not available or DSC has expired)

Consequences of Non-filing

Deactivation of DIN: Non-filing of DIR-3 KYC within the prescribed timeline, would result in Deactivation of the DIN by the Ministry. The same will be re-activated only on payment of specified fee. The deactivated DIN’s can be reactivated after the Due Date on payment of a penalty of Rs 5000.

Other penal Action: Failure to file DIR-3 KYC form within the prescribed timelines might also lead to enforcement of penal action against Directors.
Please note that the Penal Action would be enforced irrespective of the fact that DIN is reactivated after payment of specified fee

 

Mandatory Compliances for a Private Limited Company in India

Although Private Limited Company is the most popular form of starting a business, there are various compliances which are required to be followed once your business is incorporated.

Managing the day to day operations of your business along with complying the corporate laws can be little taxing for any entrepreneur. Hence, it is essential to take help of a professional and also understand such legal requirements to ensure timely fulfilment of compliances, without any levy of interest or penalty.

We have elaborated below some of the common compliances which a private limited company has to mandatorily ensure:

Compliance Requirement Description and Timeline
Appointment of Auditor Auditor will be appointed for the 5 (Five) years and form ADT-1 will be filed for 5-year appointment. The first Auditor will be appointed within one month from the date of incorporation of the Company.
Statutory Audit of Accounts Every Company shall prepare its Accounts and get the same audited by a Chartered Accountant at the end of the Financial Year compulsorily. The Auditor shall provide an Audit Report and the Audited Financial Statements for the purpose of filing it with the Registrar.
Filing of Annual Return (Form MGT-7) Every Private Limited Company is required to file its Annual Return within 60 days of holding of Annual General Meeting. Annual Return will be for the period 1st April to 31st March.
Filing of Financial Statements (Form AOC-4) Every Private Limited Company is required to file its Balance Sheet along with statement of Profit and Loss Account and Director Report in this form within 30 days of holding of Annual General Meeting.
Holding Annual General Meeting It is mandatory for every Private Limited Company Company to hold an AGM in every Calendar Year. Companies are required to hold their AGM within a period of six months, from the date of closing of the Financial Year.
Preparation of Directors’ Report Directors’ Report will be prepared with a mention of all the information required under Section 134.

Statutory Audit

The purpose of a statutory audit is the same as the purpose of any other audit – to determine whether an organization is providing a fair and accurate representation of its financial position by examining information such as bank balances, bookkeeping records and financial transactions.

  • Appointment of the Statutory Auditors of the Company.
  • Finalise Annual Accounts with the Auditors of the Company

Annual RoC Filings

  • Private Limited Companies are required to file its Annual Accounts and Returns disclosing details of its shareholders, directors etc to the Registrar of Companies. Such compliances are required to be made once in a year.
  • As a part of Annual Filing, the following forms are to be filed with the ROC:
    • Form MGT-7 (Annual Return) : Every Private Limited Company is required to file its Annual Return within 60 days of holding of Annual General Meeting. Annual Return will be for the period 1st April to 31st March.
    • Form AOC-4 (Financial Statements) : Every Private Limited Company is required to file its Balance Sheet along with statement of Profit and Loss Account and Director Report in this form within 30 days of holding of Annual General Meeting.

Annual General Meeting

  • Every Private Limited Company is required to hold a meeting of its shareholders once in every year within a period of six months from the date of closing of the financial year.
  • The primary agenda of an AGM includes approval of financial statements, declaration of dividends, appointment or re-appointment of auditors, appointment and remuneration of directors etc.
  • The Annual General Meeting shall be held during business hours on a day which is not a public holiday and shall take place at the registered office of the company or at some other place within the city, town or village in which the registered office of the company is situated.

Board Meetings

  • The First meeting of the Board of Directors of a Private Limited Company shall be conducted within 30 days from the date of Incorporation of company.
  • Further, minimum Four Board Meetings shall be held in a calendar year (one meeting in every 3 months). In case of a Private Limited Company which is classified as a “Small Company”, atleast two Board Meetings shall be held in a calendar year (one meeting in every half year)
  • Most of the startups fall within the category of “Small Company”.
  • Minimum 2 directors or 1/3rd of the total number of directors, whichever is greater, are required to be present in meeting of the Board of Directors. The discussions of the meeting need to be drafted and recorded in the form of “Minutes of the Meeting” and maintained at the Registered Office of the Company.
  • Directors should be intimated about the date and purpose of the meeting by giving a notice atleast 7 days in advance from the date of the meeting.

Directors’ Report

Every director has to disclose about his directorship in other companies every year. This shall be done by giving a declaration in writing to the company every year in a specified Directors’ Report format.

Income Tax Compliances

  • Calculation and Quarterly Payment of Advance Tax
  • Filing of Income Tax Returns (Tax will be payable at a flat rate of 30% plus Education Cess)
  • Tax Audit – Mandatory in case sales, turnover or gross receipts of a business exceed Rs. One Crore in the previous year relevant to the assessment year.
  • Filing of Tax Audit Report

Maintenance of Statutory Registers and Records

A Private Limited Company has to maintain various statutory registers and records as required by the Company law such as Register of shares, Register of Members, Register of Directors etc. Besides, Incorporation documents of the company, Resolutions of the meetings of the Board of Directors, Minutes of the Board Meetings and Annual General Meeting etc are also required to be preserved by the Company.

Such records are to be kept at the registered office of the company and shall be open for inspection to its members during business hours. Also, the books of account of every company relating to a period of atleast eight financial years should be preserved and kept in good order.

Other Event Based Filings

Besides Annual Filings, there are various other compliances which need to be done as and when any event takes place in the Company. Instances of such events are:

  • Change in Authorised or Paid up Capital of the Company.
  • Allotment of new shares or transfer of shares
  • Giving Loans to other Companies.
  • Giving Loans to Directors
  • Appointment of Managing or whole time Director and payment of remuneration.
  • Loans to Directors
  • Opening or closing of bank accounts or change in signatories of Bank account.
  • Appointment or change of the Statutory Auditors of the Company.

Different forms are required to be filed with the Registrar for all such events within specified time periods. In case, the same is not done, additional fees or penalty might be levied. Hence, it is necessary that such compliances are met on time.

Non-Compliance

If a Company fails to comply with the rules and regulations of the Companies Act, then the Company and every officer who is in default shall be punishable with fine for the period for which default continues.

If there is delay in any filing, then additional fees is required to be paid, which keeps on increasing as the time period of non-compliance increases. It should be noted that some of the Annual Filing Forms can also be revised but the fees for subsequent revised filing shall be charged, assuming it as a new filing.

VenturEasy will be pleased to help you with mandatory compliances and annual filing for your Private Limited Company. Get in touch with us at [email protected] or sign up at ventureasy.com/Company-Annual-Filing

Mandatory Compliances for an LLP (Limited Liability Partnership)

All LLPs registered with the Ministry of Corporate Affairs need to file Annual Returns and Statement of Accounts for every Financial Year. It is mandatory for a LLP to file a return irrespective of whether it has done any business. There are three mandatory compliance requirements to be followed by LLPs.

  • Filing of Annual Return
  • Filing of Statement of the Accounts or Financial Statements
  • Filing of Income Tax Returns

Filing LLP Annual Return

Annual Return or Form 11 is a summary of an LLP’s Partners. It is also an indication of whether there is any change in the management. Every LLP is required to file Annual Return in Form 11 to the Registrar within 60 days from the closure of a financial year. That is, the Annual Return has to be filed on or before 30th May every year.

Form 11 or Annual Return is applicable to those LLP’s which were registered till 30th September 2017. For LLPs registered after 1st October 2017, the return can be filed in the year 2019.

Filing Annual Accounts or Statement of Accounts or P&L and Balance Sheet

All LLPs are required to maintain their Books of Accounts in Double Entry System. They also need to prepare a Statement of Solvency (Accounts) every year ending on 31st March. For this purpose, LLP Form 8 should be filed with the Registrar of Companies on or before 30th October every year.

Form 8 or Annual Statements is applicable to the LLPs registered till 30th September 2017. For LLPs registered after 1st October 2017, the Annual Statements can be filed in 2019.

It should be noted that LLPs whose annual turnover exceeds Rs. 40 lakh or whose contribution exceeds Rs. 25 lakh are required to get their accounts audited by a qualified Chartered Accountant mandatorily.

*An Audit of accounts is mandatory under the Income Tax Act when the annual turnover of LLP is more than one hundred lakh rupees.

Forms to be filed Last date for filing
Annual Return (Form 11) 30-05-2018
Accounts (Form 8) 30-10-2018
INCOME TAX RETURN Last date for filing
In case Audit is not required 31-07-2018
In Case Audit is required 30-09-2018

Running a business, be it in the form of a One Person company, LLP or as a Private Limited Company, is no easy task. It is an investment of time, money, and effort and also requires the know how of many formalities, regulatory or financial. Filing of all the forms and returns on time is very essential. Heavy penalties are imposed if the Forms are are not filed on time with the Registrar.

VenturEasy can help you with all mandatory compliances for an LLP. Get in touch with us at [email protected] or drop your queries here

Modes of Funding/Capital Infusion for Startups

A successful business requires investment of time, effort and MONEY for its long term growth and prosperity.  Infusion of funds is an essential pre-requirement, especially for Startups if they want to scale up and make their brand popular and visible.

Innovative and promising Startups or businesses always attract enterprising investors who are ready to stake their money and a get a good return out of the same. The difficult part arrives when the decision on the mode of funding has to be evaluated.

There are a lot of factors which determine the mode of funds infusion. Whether the funds are to be given in exchange of Shares or to be treated as Debt or Convertible instrument depends upon the expectation of return and repayment by the investor and relationship with the Company.

This article will give you a brief about different modes of funds infusion and their applicability:

SHARE CAPITAL

One of the most common methods of raising funds is by issue of shares of the Company.

Share capital is a long-term source of finance. In return for their investment, shareholders gain a share of ownership in the company, access to voting rights and right to participate in the management.  Shareholders are not entitled to any interest on their investment. They can be paid dividend on their investment depending on the profits of the company which is subject to the provisions of The Companies Act 2013.

The purpose of investing in Share Capital is to reap the benefit or gain through increase in value of shares. For example – Angel Investors who invest at early stages intend to exit by disposing off their shares in next bigger round of investment at a higher valuation.

Share capital is generally of two types: Preference Share Capital and Equity Share Capital.

The major difference between Preference and Equity Shares is that the former does not enjoy voting rights and have a preferred right to dividend as well as return of capital at the time of liquidation.

 

Most of the investors prefer to invest in Preference Shares to avoid the risk of loss of initial investment in case of liquidation or bankruptcy of the Company. This goes well with the Company also, as Preference Shareholders do not have management and voting rights and hence, there is no interference in the working of the business.

DEBENTURES/BONDS

Bonds and Debentures are debt securities. They have an implicit level of safety simply because they ensure that the principal investment is returned to the lender at the maturity date with interest or upon the sale of the security.

Generally, a legal agreement is executed between the Company and the Investor at the time of issue of debentures specifying in detail, the term and conditions of repayment and interest.

Also, the Debenture-holders are creditors of the Company who get preference in repayment of liability over the shareholders, at the time of liquidation.

Debentures are further classified as Convertible or Non-convertible.

Convertible debentures can be converted into equity after a specific period of time. You can read about these under the section “Convertibles”.

Non-convertible debentures do not have the option of equity conversion but are generally coupled with a higher interest rate.

CONVERTIBLES

The most commonly used instrument for raising Capital by Early Stage Startups is Convertibles.

Preference Shares, Debentures and Loans – all can come with a convertible option. These instruments provide the benefit of deferring the valuation of the Company to a later stage when the conversion to equity actually takes place.

Convertibles are particularly attractive to those investors who want to participate in the rise of hot growth companies while being insulated from a drop in price should the stocks not live up to expectations.

Convertible Preference Shares or Debentures have the advantage of being fixed-income securities that the investor can choose to turn into a certain number of shares of the company’s common stock after a predetermined time span or on a specific date. The fixed-income component offers a steady income stream and some protection of the investors’ capital. However, the option to convert these securities into stock gives the investor the opportunity to gain from a rise in the share price.

The conversion into Equity Stock takes place through a pre-determined conversion price or conversion ratio which represents the number of equity shares, investors may receive for every convertible preferred share or debenture.

UNSECURED LOAN

A loan is when you receive money from any person, bank or financial institution in exchange for future repayment of the principal, plus interest. Loans can be either secured or unsecured.

A secured loan involves pledging an asset (such as a car, house) as collateral for the loan. If the borrower defaults, or doesn’t pay back the loan, the lender takes possession of the asset. These loans enjoy a level of safety because of the collateral attached to them.

An unsecured loan is the one which doesn’t have any security attached to it and supported only by the borrower’s creditworthiness. Though there is a risk of non-repayment of money attached to it, but it is easy and less time taking for a company to raise an unsecured loan. The process does not generally require too much paper works and is easy to execute.

A Private Company can take unsecured loan from its Directors or his relatives ONLY. “Relatives” include the ascendants and descendants of the director and their spouses.

CONVERTIBLE NOTES

The concept of Convertible Notes was recently introduced by the Companies Act making this option exclusively available to Startup Companies.

Convertible notes can be defined as a type of loan or debt security issued in the form of some document or certificate to the investor in return of the money lent to the Company. The amount raised in exchange of Convertible Notes has to be repaid or be converted into equity shares of such startup company at the option of the holder. It should be repaid or converted within a period not exceeding 5 years from the date of issue of the Note. It can also be repaid or converted on occurrence of specified events as per the terms and conditions agreed upon between the parties.

These notes can also be issued to NRIs subject to conditions mandated by RBI in this regard. The minimum amount that has to be raised against issue of Convertible Notes is Rs. 25 lakhs or more in one tranche.

A company can enter into a legal agreement with the Investor at the time of issue of these notes specifying the details of the issue and the terms and conditions of repayment.

Choosing an appropriate mode of funding:

Before choosing an appropriate mode of funding, the pros and cons of each of the methods have to be carefully evaluated. Following points can be kept in mind while choosing the appropriate mode-

  • Whether the company wants to dilute the ownership of the promoters in the Company.
  • Whether the company can afford to include the investors in the management of the entity.
  • Whether the company can afford to pay a fixed sum as interest on debt or loan.
  • Conditions relating to compliances required under different Laws and the cost for the same.
  • Tax benefits available- Interest paid on debt financing is allowed as deduction from profit whereas dividends are paid out of the profits earned and dividend distribution tax is to be paid.