Annual Mandatory Compliance for Start-ups in India

Startups in India have to follow a number of compliances placed by various statues. These include the periodic filing of tax and other returns, holding the board and other meetings, maintaining statutory books and accounts etc.

Running a Startup business in India is not an easy task. It involves a constant investment of both time and effort as well as the technical capabilities of knowing the various statutory compliance and regulations.

Below is statutory compliance checklist for startups –

1. Appointment of Auditor- Before explaining this provision, we have to understand the term and purpose of a statutory audit. There is no difference between a statutory audit and any other audit. The basic purpose of this audit is to determine whether a company is providing a true financial condition by providing bank balance, financial transactions, etc. For this purpose, an auditor is appointed by the company. He will be appointed for a term of 5 years and if it is a new business, the auditor has to be appointed within one month of the inauguration of the enterprise.
2. Annual ROC filing- It is mandatory for every private company to file details of annual accounts and returns of shareholders, directors, etc. to the registrar of companies. It has to be done once in a year in the given way:

• Annual returns- It is compulsory for every private company to disclose its annual returns within 60 days from the last annual meeting held. The annual returns are to be calculated from the 1st April to 31st March of next year.
• Financial statements- Every private company is required to disclose its financial statement of profit and balance sheet within 30 days from the last annual meeting held.
  Annual Returns and Financial Statements like Balance Sheet & Profit and loss account finalization are most important on the list of compliances for startup, this compliance helps startups to know about their financial growth.

3. Annual general meeting (AGM)- An annual general meeting of the shareholders of a private company is mandatory to be held within a period of 1 year. There is a condition that it should be held in the last six months of the financial year. In AGM there is a discussion on certain essential topics like approval of financial statement, appointments of auditors, salary or remuneration for directors, dividend declaration, etc.
4. Board Meetings- The first board meeting should be held within a period of 30 days from the incorporation of the company. There should be at least four board meetings in a year, and the respective interval between two board meetings should not exceed a period of 120 days. There is an exception in case of small Companies which are allowed to conduct at least two board meetings instead of four, which means it is an exception for start-ups as all startups are considered as small companies. Two directors must be present at the board meeting, or if there are more than two directors, 1/3rd of the total directors should attend the board meetings. At least priors 7 days notice has to be given to the directors as to the date of the board meeting. A detailed discussion of the meeting should be recorded on a file, and that file should be kept at the registered office of the company.
   So, in the Annual General Meeting, the shareholders come together to discuss the Financial Growth of the startup and Board Meeting between the Directors is to discuss the operational growth of the startup
5. Reports of directors- As mentioned under the Companies Act, 2013, every director has to submit reports containing details about the directorship in other companies every year. This shall be in writing, and a special formal report has been given.
6. Income tax- The compliance requirements related to income tax include the following:

• Income Tax Returns Filing,
• Tax Audit Report Filing,
• Periodic Returns Filing (Monthly, Quarterly, Annual Returns of GST, TDS, etc.),
• Monthly/Quarterly GST Returns,
• Quarterly TDS Returns,
• Assessment of advance tax liability and the periodic payment of advance tax,
• Payment of periodic dues such as GST Liability, TDS & TCS payment,
• Regulatory Assessment of business under different laws (For example – Environment and Protection Act, the Money Laundering Act, Competition Act, Factory Act etc.).

7. Maintenance of records- It is compulsory for every private company to maintain proper records and register of directors, members, shares, etc. And such documentation should be kept at the registered office of the company.
8. Other compliances- There are some event-based compliances too, which are as follows-

• Giving loans to other companies;
• Providing loans to directors;
• Change in paid-up capitals of the company;
• Opening or closing up bank accounts;
• Appointment or change in auditor of the company.

Apart from above-stated compliances, there is a range of compliances which need to be kept in mind. These are compliances such as trademark registration, the procedure for maintaining the books of accounts, the procedure to be followed in an annual general meeting, etc. the above-stated compliances have to be duly met.

NON-COMPLIANCE

The penalty imposed for non-compliance is usually 12 times the cost of filing these statements. However, an additional filing can range anywhere from Rs. 50,000 to Rs. 5,00,000. In addition to this, a director in fault can be independently liable for imprisonment of 6 months or with a fine ranging from Rs. 50,000 to Rs. 5,00,000 or both.  In case of a missed deadline, there can be penalties, additional fees or a compounding of offense, etc.