Post incorporation compliances for companies in India

To operate efficiently and achieve long-term growth, every business enterprise must observe regulatory mandates at all times. The term “post incorporation compliances” more precisely refers to the legal requirements which a business is supposed to meet after it has been incorporated or set up. Such obligations encompass a range of activities such as choosing directors, filing necessary documents, obtaining essential licenses and compliance with labor laws among others. These conditions need to be met because they ensure that the organization operates within the law, instills confidence amongst stakeholders, minimizes legal risks and establishes a foundation for continued success. This blog discusses post-incorporation compliance by examining its importance, elements and consequences in relation to business matters.

Mandatory Post Incorporation Compliances

Meeting post incorporation compliances are crucial for any company to establish a strong legal footing and operate within the framework of regulatory requirements, including the Companies Act. Let’s delve into the key post incorporation compliances, their corresponding due dates, and their underlying purposes in depth. By understanding these crucial aspects, you can proactively manage your company’s requirements and obligations with ease, thereby mitigating potential risks associated with non-compliance. Here the details of these: 

• Maintain the company’s registered office: In accordance with section 12(1), a company must establish a registered office that may accept and acknowledge any communications or notices that may be sent to it within 30 days of its incorporation and at all times after that.
• Letterhead preparation: In accordance with Section 12, the business obtains its name, registered office address, Corporate Identity Number, phone number, fax number, email address, and website address, if applicable, to be printed on all business correspondence, billheads, letter papers, notices, and other official publications; 
• Holding of First board Meeting: As per section 173(1) every company shall hold the first meeting of the Board of directors within 30 days of the date of its incorporation. 

Basically, the agenda of first board meeting is as follows: 

• Appointment of first auditor Ads by Ads by
• Opening of the Bank Account 
• Approval of draft share certificate 
• MBP-1 for the First Director 
• Fixing the financial year 
• Maintenance of statutory registers 
• Appointment of First Auditor of the Company under Section 139 – Within thirty days of the company’s registration date, the board of directors shall designate the first auditor.
• Share certificate issuance: In accordance with Section 56(4)(a), each company must provide a share certificate to the Memorandum subscriber within two months of the date of incorporation.
• Declaration of Commencement of Business: Within 180 days of the date of incorporation and the receipt of subscription money, forms to be filled by every company are form INC-20A to the ROC. The company is unable to launch its operations, obtain financing, or enter into any agreements as a result of not completing this form.
• Payment of stamp duty on share certificates: As per Indian stamp act the company shall pay the stamp duty within 30 days after issue of share certificate.

Post Incorporation Compliances Due Dates

The Post Incorporation Compliance under Companies Act, 2013 are mentioned below : 

Consequences of Non-Compliance Post Company Incorporation

When it comes to corporate governance, a business that fails to execute its post-incorporation compliance for private companies may suffer reputational damage, legal exposure and even inability to operate anymore. The company’s sustainability and growth chances are at stake not just because of the fines and legal liabilities but also failure to comply with these obligations. Let us now consider some possible serious consequences for enterprises in relation to non-compliance after incorporation.

• Fines and Penalties: Regulatory authorities can fine, penalize or charge interest for noncompliance with post-incorporation laws. These financial penances may strain the company’s resources with resultant unsound financial position.
• Difficulty with Business Operations: A firm will find it daunting if it does not follow the rules or fails to get necessary licenses, permits or permissions required for conducting business as planned. This may lead to delays, interruptions, and loss of income due to these reasons.
• The reputation of the brand may be compromised:  This could damage the confidence that its partners, investors and customers have in it. Bad press about non-compliance can hurt long-term growth since it erodes consumer trust and loyalty to a particular brand.
• Professionals in Charge: If those who are responsible for regulatory compliance such as directors, officers, fail to meet their compliance requirements, they can potentially be sued or forfeit their directorship positions. For some people this could lead to severe financial hardship as well as adversely affect career prospects.

These consequences highlight the need to prioritize post-formation compliance while also establishing strong systems and processes for ensuring that regulatory mandates are met. Through proactive management of compliance obligations, corporations can safeguard their legal position, preserve reputation and bring about a culture of honesty and responsibility within an organization.

Conclusion

After the registration process has been completed, post-incorporation compliances take on a significant role in corporate governance as they assist the company in staying on the right track to sustain integrity, legitimacy, and viability rather than merely complying with the law. By diligently following the regulatory framework and actively seeking additional measures, organizations can navigate legal complexities, mitigate risks, and foster transparency and accountability within their setup. Being mindful of these compliances’ benefits businesses in the long term, helping them succeed even more in today’s competitive environment by building stakeholder confidence and staying legally compliant.