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StartUps may face Hefty fines & Jail term, if they fails to hold AGM

StartUps may face imprisonment for Non-filing of Annual returns

 

Yes, you read it right, StartUps may face Hefty fine & Jail term, if they fails to hold Annual general meeting (AGM) or fails to file their annual returns. With this article, we kick-start our discussion on the penal provisions for Non-Compliances of Companies Act by StartUps. Without any doubt new Companies Act lays down a host of strictures to improve corporate governance standards in India.Hefty fines and the threat of jail terms have also been laid down in specific instances.Founders are so busy with the business, they end up ignoring compliance and governance. There are some provisions which were mandatory earlier as well, but then the fines and penalties was very less, sometimes Re 1 as well., entrepreneurs often paid the fee and repeated the offense. But now, the fines have been increased and the rules made tough so as to monitor each and every activity of the company and make the system more transparent.

After your Company or LLP is incorporated, some of the compulsory mandates which you are required to take care of are listed below.:-

  • Obtaining Permanent Account Number (PAN)
  • Obtaining Tax Deduction Account (TAN)
  • Obtaining Import Export Code (IEC) – for exports of services and goods
  • Obtaining Value Added Tax (VAT) – for engaged in trading business
  • Obtaining Service Tax Registrations – for rendering of services
  • Accounting and Book Keeping
  • Statutory Audit under Companies Act, 1956
  • Tax Audit
  • Annual ROC filings
  • Annual Income Tax Return filing
  • Quarterly filing of TDS returns
  • Monthly e-filing of VAT returns
  • Half yearly filing of Service Tax Returns
  • Maintaining of Statutory Registers, minutes books, holding Board Meetings, Annual   General Meetings

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For Instance, every company registered in India has to file its annual returns in prescribed form. Earlier, the fine for non-compliance with this rule was Rs 500, which has been increased upto Rs 5,00,000 or imprisonment upto 6 months (Section 92 (5)). Here is a brief of some of the penal provisions mentioned in the New companies Act,2013 :-

Companies compliances

Non- Compliance of companies act may lead to Jail

 This isn’t the complete list, but for sure to make us aware of the stringent provisions of Companies Act, 2013.

As a company grows, there are more laws to comply with. Instead of waiting for your business to grow & then create a compliance function, isn’t it better to be well-prepared from the very beginning? Perhaps many entrepreneurs find this unnecessary since they feel they can themselves stay on top of what is required. There are 2 obvious issues here:

  1. Laws are every-changing. How will one keep track of everything after a certain point? The company will grow which will only mean more laws to comply with.
  2. Compliance is not restricted to the financial and legal space – the natural, but less mentioned, extension into the organization’s HR, Payroll and IT areas is just as important.

The details being said and explained, it is of utmost importance, as well as evident from the mandatory requirements after incorporation of the company or the LLP, to consult with the consultant immediately after incorporation, what needs to be done next. It is also expressly suggested to always opt for a service provider who is providing end to end solutions, starting from startup counseling to entity registration to the annual compliances under one shelter.

 

In case of any query, feel free to ask them.⇓

 

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