Secretarial compliance is a vast field, but every beginner of accounting field must have basic knowledge of Secretarial compliances. Companies Act, 2013 is applicable for all the companies registered in India. We can summarize basics of secretarial compliances to be followed by a private limited company in following points:-
- The Memorandum of Association (MOA) and Articles of Association (AOA)
- Shareholders
- Annual General Meeting of shareholders
- Extra ordinary General meeting of shareholder
- Board of Directors
- Appointment of Director
- Resident Director
- Annual KYC of Directors
- Annual declaration of Directors
- Board of Directors Meetings
- Significant Beneficiary Owner
- Appointment of statutory auditors
- CSR Committee
- CSR Committee Meetings
- Statutory Registers
- Audit Trail
- Half Yearly MSME return
- Annual Return DPT-3
- Annual Return AOC-04
- Annual Return MGT-7
- POSH Act Compliance
- Whole time Company Secretary
- The Memorandum of Association (MOA) and Articles of Association (AOA)
The memorandum of Association (MOA) is the public-facing document which includes prescribed information of interest to external parties, while the Articles of Association (AOA) govern the internal affairs of the Company. It is a mandatory document that must be filed with the ROC at the time of company registration. The drafting of AOA is mandatory. However, the filing of AOA with the ROC is optional at the time of company registration. MOA is a supreme legal document and subordinate to the Companies Act. The main purpose of the MOA is to limit the scope of activities and powers of the company. A company is authorized to do only the acts within the scope of the powers provided to it by the MOA. However, MOA can be amended if required and additional activities can be added by calling an Extra Ordinary Meeting of shareholders and filing revised MOA with ROC.
2. Shareholders
The minimum number of members needed to start a private limited company is 2 and the maximum number of members cannot exceed 200.
3. Annual General Meeting of shareholders
An annual general meeting (AGM) is the yearly gathering of a company’s interested shareholders. At an annual general meeting (AGM), directors of the company present the company’s financial performance and shareholders vote on the issues at hand. The AGM of a private limited company should be held in registered office or any place in India if all the members consent to it in advance, either in written form or through electronic mode.
All companies except One Person Company (OPC) should hold an AGM after the end of each financial year. A company must hold its AGM within a period of six months from the end of the financial year, i.e. within 30 September every year. Time gap between two annual general meetings should not exceed 15 months.
However, in the case of a first annual general meeting, the company can hold the AGM within nine months from the end of the first financial year.
The company must give a clear 21 days’ notice to its members for calling the AGM. The notice should mention the place, the date and day of the meeting, and the hour at which the meeting is scheduled. The notice should also mention the business to be conducted at the AGM. An AGM can be called at a notice period shorter than 21 days if at least 95% of the members entitled to vote in the meeting agree to the shorter notice. The consent may be given in writing or through electronic mode. A company should send the notice of the AGM to:
- All members of the company including their legal representative of a deceased member and assignee of an insolvent member.
- The statutory auditor(s) of the company
- All director(s) of the company
It is important to note that AGM of company registered in India cannot be held outside India, however board of directors’ meetings can be held outside India.
4. Extra ordinary General meeting of shareholder
An Extraordinary General Meeting (EGM) can be called by the members or shareholders of a company, but there are specific requirements outlined in the Companies Act, 2013: For Companies with Share Capital: Members holding at least one-tenth of the company’s paid-up capital carrying voting rights can call for an EGM.
5. Board of Directors
A person appointed as a director will perform all the duties and functions of a director as per the provisions of the Companies Act, 2013 (“Act”). A person is appointed as a director for the Board of a company. The Board or Board of Directors of a company means the collective body of directors of a company. The company operates through the Board of Directors. The Board of Directors is responsible for the management of the company. They make decisions regarding company affairs.
6. Appointment of Director
Any person above 21 years can become a director of a company. The AOA of a company should contain provisions for adding a director. The Companies Act, 2013 prescribes the procedure that a company must followto add a new director. A private company should have a minimum of two directors at all times. However, the company can have a maximum of only fifteen directors.
7. Resident Director
Section 149 (3) of the Act has provided for residence of a director in India as a compulsory i.e. every company shall have at least one director who has stayed in India for a total period of not less than 182 days in the previous calendar year.
8. Annual KYC of Directors
As per the provisions of Rule 12A of the Companies (Appointment and Qualification of Directors) Rules, 2014, every individual who is allotted DIN as on 31st March of a financial year must submit his KYC on or before 30th September of the immediately next financial year
DIR-3 KYC Form to be filed in MCA portal and OTP (One Time Password) will be sent to Director’s mobile number and e-mail id to verification. KYC of directors need to be done every year by 30th September.
9. Annual declaration of Directors
Form DIR-8 intimates Director’s qualification considering the Directorship in the last three years whereas Form MBP-1 gives the notice of Director’s interest as on current date.
10. Board of Directors Meetings
A Board Meeting is a formal meeting of the board of directors of a company to review performance, consider policy issues, address major problems and perform the legal business of the board. Pursuant to provision of section 173 and clause 2.1 of Secretarial Standards 1 of the Companies Act, 2013 every company is required to conduct four board meetings in a year and the time gap between two meetings should not exceed 120 days. Here “year” means calendar year (from January to December) and not financial year of the company.
As per provisions of Section 173(3) of the Companies Act, 2013, the board shall be called by giving not less than seven days’ notice in writing to every director at his address registered with the company and such notice shall be sent by hand delivery or by post or by electronic means. Board meeting can be held at shorter notice to transaction urgent business matters. For short notice meetings consent of all directors required.
The quorum for a meeting of the Board of Directors of a company hall be one-third of its total strength or two directors, whichever is higher, and the participation of the directors by video conferencing or by other audio-visual means shall also be counted for the purposes of quorum under this sub-section. If any director attending board meeting by video conferencing or by other audio-visual means, company must keep recording of such meeting in record.
Failure to attend Board Meetings for a continuous period of one year should be made a ground for vacation of office by the concerned director regardless of leave of absence being given by the Board for the meetings held during the year. However, such director can be reappointed by the company.
The draft minutes are circulated to all of the directors of the company on which their comments are requested. Such recorded notes shall be circulated to all of the directors within 15 days from the date of the conclusion of the meeting
The Company Secretary or director authorized by the board shall certify a copy of the signed minutes which further will be circulated to all the directors within the next 15 days of signing
11. Significant Beneficiary Owner
The significant beneficial owner is the natural person, who, whether acting alone or together with other natural persons, or through one or more other persons or trusts, holds not less than ten per cent.
Every individual, who subsequently becomes a significant beneficial owner/ or where his significant beneficial ownership undergoes any change shall file a declaration in Form No. BEN-1 to the reporting company, within thirty days of acquiring such significant beneficial ownership or any change therein.
12. Appointment of statutory auditors
Every Company shall, at the first annual general meeting (AGM), appoint an individual or a firm as an auditor who shall hold office from the conclusion of that meeting till the conclusion of its sixth annual general meeting
Form ADT-1 should be filed for an existing company within 15 days after the Annual General Meeting (AGM) in which the auditor was appointed or reappointed, as the case may be. For instance, if the company’s AGM was conducted on September 30, 2023, the company should file Form ADT-1 by October 14, 2023.
The Auditors shall first be appointed for a term of 5 years in compliance with the provision of Companies Act, 2013, and if reappointed shall be appointed for further maximum term of 5 years, thereafter the new Auditor shall be appointed.
13. CSR Committee
Corporate Social Responsibility (CSR) implies a concept, whereby companies decide voluntarily to contribute to a better society and a cleaner environment – a concept, whereby the companies integrate social and other useful concerns in their business operations for the betterment of their stakeholders and society in general in a voluntary way.
However, Section 135 of the Companies Act, 2013 (“Act”) provides that certain companies must mandatorily contribute a certain amount towards CSR activities. As per the Companies Act, 2013, ‘Corporate Social Responsibility’ means and includes but is not limited to :
- Projects or programs relating to activities specified in Schedule VII to the Act
- Projects or programs relating to those activities which are undertaken by the Board or Directors of a company in ensuring the recommendation of the CSR Committee of the Board as per declared CSR Policy along with the conditions that such policy cover subjects specified in Schedule VII of the Act
- The provisions of Corporate Social Responsibility (CSR) applies to every company fulfilling any of the following conditions in the preceding financial year;
- Net worth of more than Rs 500 Crore
- Turnover of more than Rs 1000 Core
- Net Profit of more than Rs. 5 Core
The Board of Directors of every company for which the CSR provisions apply must ensure that the company spends in every financial year at least 2% of its average net profits made during the immediately preceding three financial years as per its CSR policy.
The CSR Committee should consist of three or more directors, out of which at least one director must be an independent director. An unlisted public company or a private company shall have its CSR Committee without any independent director if an independent director is not required.
CSR committee shall formulate CSR policy and recommend activities to be undertaken by the company, amount to be spent in such policy and also monitor the CSR policy of the company.
Certification by CFO or Finance head: The Board of a company shall satisfy itself that the funds of CSR have been utilized for the purposes and in the manner as approved by it and the Chief Financial Officer or the person responsible for financial management shall certify to the effect.
The Board of Directors of the Company shall mandatorily disclose the composition of the CSR Committee, and CSR Policy and Projects approved by the Board on their website, if any, for public access.
14. CSR Committee Meetings
The Committee members shall be served a notice of not less than 7 days for every meeting of the Committee. The CSR committee shall meet as and when deemed necessary in pursuance of its activities and responsibilities. There must be at least 2 meetings of CSR Committee in a year.
Within fifteen days from the date of the conclusion of the Meeting of the Committee, the draft Minutes thereof shall be circulated by hand or by speed post or by registered post or by courier or by e-mail or by any other recognized electronic means to all the members of the Committee.
15. Statutory Registers
The statutory registers to be maintained include the Register of Members, Register Relating To Directors and KMP, Register of Charges, Registers Relating To Renewed and Duplicate Share Certificates, Register Relating To the Employee Stock Options, and Register Relating To Shares/Other Securities Buyback.
16. Mandatory Accounting Audit Trail
With effect from 1 April 2023, the Ministry of Corporate Affairs (MCA) has made it mandatory for companies to maintain an audit trail throughout the year for transactions impacting books of accounts.
A new audit trail (edit Log) feature is required to keep track of all activities in books of accounts such as the creation, alteration, and deletion of all transactions recorded in accounting software.
Such a feature is required not only for accounting transactions but also for all the masters, such as ledgers, stock items, and groups, including the details edited in company masters.
Therefore, through the edit log, the auditor and company can easily identify:
- Who created the transaction and when,
- whether any further modification was made and who made the such modification,
- What modifications are made in accounting transaction
17. Half Yearly MSME Return
Section 15 of the MSMED Act provides that in no case the period agreed upon between the supplier and the buyer for payment of invoice in writing shall exceed forty-five days from the day of acceptance or the day of deemed acceptance.
Specified companies should file Form MSME-1 when payments are due to MSME for more than 45 days from the date of acceptance of the services or goods, along with the reason for its delay. Specified companies are companies-
- That have obtained goods or services from the MSME.
- Whose payments to the MSMEs exceed 45 days from the date of acceptance or deemed acceptance of the goods or services.
Every company is required to file the MSME Form I as half yearly return by 31st October, effective for the period from April to September and once again by 30th April for the period October to March every year, relating to the outstanding payments to MSMEs.
18. Annual Return DPT-3
DPT-3 is a return of deposits that companies must file to furnish information about deposits and/or outstanding receipt of loan or money other than deposits.
- The purpose of Form DPT-3 is to report any deposit-related activities or transactions that do not meet the criteria for being classified as deposits. Companies promote transparency, comply with regulatory standards, and uphold financial accountability by fulfilling this requirement.
A deposit, according to Section 73 of the Companies Act of 2013 (Act), is any money received by a company as a deposit, loan, or in any other form, but excludes certain specific types of transactions/amounts.
It is evident that the advance received by the company has to be allocated or appropriated against identified or specified goods or services within 365 days of acceptance. It is not necessary for the company to actually deliver the goods or services within 365 days.
[Punishment for contravention of section 73 or section 76]
Where a company accepts or invites or allows or causes any other person to accept or invite on its behalf any deposit in contravention of the manner or the conditions prescribed under section 73 or section 76 or rules made thereunder or if a company fails to repay the deposit or part thereof or any interest due thereon within the time specified under section 73 or section 76 or rules made thereunder or such further time as may be allowed by the Tribunal under section 73,—
| (a) | the company shall, in addition to the payment of the amount of deposit or part thereof and the interest due, be punishable with fine which shall not be less than [one crore rupees or twice the amount of deposit accepted by the company, whichever is lower] but which may extend to ten crore rupees; and | |
| (b) | every officer of the company who is in default shall be punishable with imprisonment which may extend to [seven years and with fine] which shall not be less than twenty-five lakh rupees but which may extend to two crore rupees: |
Provided that if it is proved that the officer of the company who is in default, has contravened such provisions knowingly or willfully with the intention to deceive the company or its shareholders or depositors or creditors or tax authorities, he shall be liable for action under section 447.]
19. Annual Return AOC-04
It is to be noted that the AOC 4 e-form is to be filed within 30 days from the conclusion of the AGM (In the case of OPC within 180 days from the end of the financial year).
20. Annual Return MGT-7
Form MGT-7 must be filed within 60 days after the company’s Annual General Meeting. The deadline for convening the annual general meeting falls on or before the 30th day of September following the conclusion of each financial year. Hence, the typical due date for filing form MGT-7 is November 29th annually.
Company need to place the copy of the company’s annual return on its website; and Disclose the web-link of the annual return in the Board’s report.
21. POSH Act Compliance
The Prevention of Sexual Harassment (POSH) Act, officially known as the “Sexual Harassment of Women at Workplace (Prevention, Prohibition, and Redressal) Act, 2013”, is a law in India designed to protect women and all employees from sexual harassment at the workplace.
POSH Act was passed by the Indian Parliament in September 2013 and was a significant step towards creating a safe workplace environment for women in India.
As per the POSH Act, an employer has 10 workers or more is required to set up an Internal Complaints Committee for the redressal of ‘sexual harassment complaints at such entity and to regulate and administer complaints on sexual harassment.
The POSH Policy covers all forms of sexual harassment, including physical, verbal, and non-verbal harassment. It also covers sexual harassment that takes place outside of the workplace, as long as it is related to the employee’s work. The POSH Policy requires all organisations to have a written POSH policy in place.
Verification Exercise: There may be surprise inspections from representatives of the Central and State Governments. Company need to keep relevant documents and paperwork complete and handy. Below is the list of documents needed.
- PoSH Policy as per the guidelines.
- Pictures of Posters put up in your office location and/or on your website.
- List of all IC members with their contact details.
- Trainings conducted for your IC members and agenda covered.
- Details of Employee awareness sessions conducted and topics covered.
- Details of women sessions conducted.
- Annual report of at least last 3 years.
22.Whole time company secretary
As per Section 203 of the Companies Act, 2013 read with Rule 8 and Rule 8A of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, every listed company and every other public company or private company having a paid-up share capital of ten crore rupees or more shall have Whole-time Company Secretary as Key Managerial Personnel (KMP). Company Secretary (C.S.) who is appointed as key Managerial Personnel shall not hold office in more than one company except in its subsidiary company at the same time.
Pushkar Mer 