Starting a small business in India is an exciting venture, but it comes with a set of legal responsibilities. Understanding and adhering to the compliance requirements of the Companies Act, 2013, is crucial for a smooth and penalty-free operation. For a comprehensive guide to business registration and compliance, you can always rely on expert services like RegisterKaro. This off-page content provides a clear and concise breakdown of the key compliance obligations specifically tailored for small companies.
What is a ‘Small Company’ under the Act?
First, let’s clarify the definition. A “small company” is a private company that meets specific criteria for its paid-up share capital and turnover. As per the latest amendments to Section 2(85) of The Companies Act, 2013, a company is classified as a small company if:
- Paid-up share capital does not exceed INR 4 crore (as may be prescribed, not exceeding INR 10 crore).
- Turnover does not exceed INR 40 crore (as may be prescribed, not exceeding INR 100 crore).
This classification brings significant benefits, including exemptions and relaxed compliance norms, which reduce the administrative burden on small businesses.
Essential Annual Compliance Checklist
Even with the relaxations, small companies must adhere to a set of mandatory annual compliances. Failing to do so can lead to hefty penalties and legal issues. Here is a checklist of the key requirements:
- Board Meetings: While large companies need to hold four board meetings annually, a small company is required to hold at least two board meetings in a financial year, with a gap of at least 90 days between them.
- Appointment of Auditor: A statutory auditor must be appointed within 30 days of incorporation, and Form ADT-1 needs to be filed with the Registrar of Companies (ROC) within 15 days of the AGM.
- Annual General Meeting (AGM): A small company must hold an AGM every year within six months from the end of the financial year. The gap between two AGMs should not exceed 15 months. The first AGM must be held within nine months of the closure of the first financial year.
- Annual ROC Filings: This is one of the most critical compliances. Every company, irrespective of its turnover, has to file annual returns with the ROC. The two main forms are:
- Form AOC-4 (Financial Statements): To be filed within 30 days of the AGM, this form includes the company’s financial statements, such as the balance sheet and profit & loss account.
- Form MGT-7A (Annual Return): A simplified annual return form specifically for small companies, which needs to be filed within 60 days of the AGM.
- Director KYC: All directors holding a Director Identification Number (DIN) must file Form DIR-3 KYC annually by September 30th to update their information.
- Statutory Registers: Small companies must maintain various statutory registers at their registered office, including the Register of Members, Register of Directors, and Register of Charges.
- Income Tax Return (ITR): All companies are required to file their income tax returns, irrespective of turnover or profit.
Other Important Filings and Exemptions
Beyond the annual checklist, some filings are event-based, meaning they are triggered by specific actions. These include:
- Form ADT-1: For the appointment of an auditor.
- Form DPT-3: For reporting details of deposits or loan receipts.
- Form MSME-1: If there are outstanding dues to MSME vendors for more than 45 days.
- Form DIR-12: For any change in directorship (appointment, resignation, or removal).
The Companies Act, 2013 also provides significant relaxations for small companies, such as exemptions from the mandatory requirement to prepare a cash flow statement, lesser penalties for non-compliance, and no obligation for Corporate Social Responsibility (CSR) or Secretarial Audit Report.
By staying on top of these key requirements, small businesses can focus on their growth while ensuring legal security.
