A company becomes eligible and subject to different forms of regulatory and procedural yearly compliances right from inception and incorporation. While starting one's own company is a dream come true for many people, not everyone is aware of the critical terms and compliances required by law. Failure to adhere to these regulations can expose you to hundreds, if not thousands, in penalties. Moreover, as the business owner, you may also be legally prosecuted and subjected to even more investigations. Filing your annual returns and complying with the Registrars of Company (ROC) is one of the ways a business owner sets his private company for success as it facilitates effective and efficient operation.
What is Compliance for a private limited company?
For private companies, Compliance entails conforming to the set rules and regulations. In the corporate arena, every company is expected to adhere to the set policies, standards, rules, and regulations to maintain its propriety or morality as an entity.
Importance of Compliance for a company
Compliance is instrumental to the company's success. The presence of all the necessary legal certificates is a measure of a company's transparency. Among the reasons why Compliance is important to include:
Inspires the confidence of your target market.
Enhances the trust and loyalty of customers
Compliance is an enabler for the reputation of the company.
Booster for employee loyalty for when Compliance regards Minimum Wage Act, Prevention of Sexual Harassment at Workplace Act, and Employee Compensation Act, among others.
It is a measure of business transparency.
Present-day financial processes must be swift and well refined to enable organizations to continually support high performance for business growth. Many Compliance and accounting consulting service providers in India and even more accounting and compliance outsourcing services. KGMC India stands at the top of this list, focusing its services on helping companies reconcile their accounts regardless of whether they use a centralized or decentralized mode of operation.
What KGMC India can do for you
Based in Gurugram, Delhi NCR, India, KGMC India is an India-based organization popular for providing excellent accounting and compliance services to globally renowned brands as far as regulations compliance is concerned. The financial services company has made a name for itself, offering tech-based finance and accounting outsourcing services.
Featuring a team of skilled, experienced, and passionate industry professionals, KGMC India researches have many years of experience in the financial process of outsourcing domain to promote companies through solutions tailored to their individual needs.
KGMC India's accounting and compliance services help companies conveniently manage every compliance measure established by the government, sparing them from the hassle related to the process' complexity and technicality. KGMC India is served with compliance specialities, all knowledgeable and experienced on matters policy and standard for individual company sectors.
Outsourcing your financial processes for the purpose of Filing Annual ROC Compliance
It may be necessary for all your accounting and compliance services to outsource your financial processes, probably because the regulations are progressively changing. The financials of companies are increasingly being scrutinized. Many complex and non-recurring business transactions may be too much for you. The high cost of hiring experienced professionals and the limited supply of qualified finance and accounting experts make it all the more challenging.
Types of compliance private limited companies have to do
A private limited company incorporated in India is expected to meet all the compliances governing the Companies Act 2013, which regulates their operations. Among the regulations include the appointment, qualification, remuneration, and retirement of the Company's Directors. The compliance requirements for private limited companies in India have changed radically until now in 2021. These include:
Managing everyday business operations and remaining abreast with all Compliance with the technical corporate laws is a daunting task for any entrepreneur. For this reason, it is important to seek the services of professionals who understand the legal elements required for effective Compliance to spare you from the penalties and consequences involved.
Benefits of outsourcing compliance
Outsourcing compliance from a specialist helps you save money and time because the specialist company will control the compliance requirements at a lower cost than when you do it yourself. The lowered price follows the fact that these companies normally take advantage of economies of scale by managing the compliance requirements of multiple companies at a reasonable charge for each. Outsourcing also exposes you to faster access to more sophisticated systems, including compliance analytics, which you would otherwise have to pay for or develop within the company.
Another advantage is that compliance specialists normally stay on top of changing regulations, which allows you to focus on other things instead of doing the research yourself. By outscoring Compliance, the risk is shifted from your company or from you as a director to the compliance specialist company, even if the problem originates from your company.
Factors that influence the level of Compliance
Several factors influence the level of Compliance a company has to maintain. Some of these factors include the location of the company, the number of employees working in the company, and the amount of revenue generation they achieve. Different companies have different compliance regulations, hence outsourcing a compliance specialist based in the country where your company is registered. Depending on the amount of revenue your company generates, the annual returns filed will adjust proportionally to how your financial year ends in terms of revenue.
Consequences of failure in filing annual returns and ROC compliance of private limited company
A company's financial statements and annual returns must always be filed on time every year. The Companies Act of 2013 stipulates that failure to file your yearly returns is an offence punishable by law. Among the consequences for failing to file your company's annual returns and ROC compliance include:
Penalty:
Failure to file your returns attracts a penalty increase of Rs. 200 per day. For instance, if your company files return 9 months past the expected date, you would be required to pay Rs. 54,000 different from the Rs. 4800 that is applicable at this time.
Therefore, every stakeholder in a company needs to appreciate this critical regulation and ensure that if their companies have any overdue compliance, they file it in good time. Failure to do this will be subject to the higher penalty of Rs. 200 for every day delayed past the due date.
Fine and imprisonment
A company director that defaults in filing their company's annual return are eligible for a penalty surmounting to an imprisonment term of up to six months or a fine of between Rs. 50,000 and Rs. 5 lakh. Also, supposing any information filed by a company director is by any nature false or inaccurate, then that person can be punished for a term not less than 6 months. The punishment term can also be extended to 10 years and would also have to pay a fine not less than the amount subject to the involved fraud or three times the sum.
Disqualification of director
The director may also be disqualified if they have not filed returns for their company for a period exceeding 3 straight financial years. Disqualification means that their DIN is rendered inactive and would not be eligible for serving as director in any company for a minimum of 5 years. More than two lakh directors of companies who failed to file their MCA annual return were recently disqualified by the Ministry of Corporate Affairs. The decision left many companies absent a board of directors. There are certain directors in many companies who have fallen victim to this charge. There have also been cases where directors holding directorship positions in multiple companies have been disqualified simply because one of the companies they serve failed to file their annual returns.
Strike-off
It is also possible that such a company becomes a victim of a strike-off, meaning that they are rendered inactive. A strike-off happens when a company fails to file its annual returns for the last two consecutive financial years. In a strike-off state, the company's bank account is frozen.
So far, there have been almost 2.24 lakh companies across India, which have already been struck off by the Registrar of Companies for not filing annual returns, among other compliance issues. Restrictions have also been imposed upon the operations of their bank accounts as stipulated by law. Worse, restrictions on the sale and transfer of both movable and immovable properties have been affected for companies struck off. The restrictions are only lifted after they are cleared.
While managing all corporate compliances in India is necessary, the processes can be very challenging. Outsourcing the services of a professional Compliance Management Service Provider would go a long way in protecting your company from detrimental legal situations.
KGMC India has been providing compliance services for companies in India, just like yours, for over a decade since its launch in 2010. It has helped number organisations achieve skyrocket growth. The financial services' compliance services in India cover all the laws of the republic, executing required methods to comply with the law.
I know you are probably thinking: "Compliance is only for the big companies or for the rich who can afford it. It is not for regular businesses like mine!" But you could not be more wrong! Reach out to KGMC India today, and have the best compliance specialists do the work for you!
