Annual Compliance Checklist for Startups-2024

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Why do we need an annual compliance checklist? There 1.66 million registered companies in India. And each one of them needs to keep their legal requirements in check. These requirements are often termed compliances. Businesses must stay updated and aware of their compliance fulfillment. A company with an incomplete set of compliances has to deal with severe consequences.  In this blog, we will know all about the annual compliance checklist for startups in 2024. Further, we will learn more about annual compliance and look into the checklists for compliance.

Meaning of Annual Compliance Checklist

• Compliance refers to meeting specific standards or regulations set by the higher authorities. This is done to resume the operations of a business legally. 
• Annual compliance provides a better way of meeting regulatory requirements by issuing deadlines for various compliances. This is carried out by an annual compliance checklist every year. 
• The most important purpose of an annual compliance checklist is to make businesses aware of their compliance-based risks before resulting in any costly fines or penalties. 
• Moreover, 62% of Indian organizations have opted for a Chief Compliance Officer (CCO) which is a bit less than 70% of the global organizations.

For companies or businesses, these sets of rules must be met anyhow to make sure that the business is operating within the boundaries of the law. 

These regulatory requirements are fulfilled by businesses with the help of an annual company compliance checklist. Most of the measures in this checklist fall under the india companies act 2013. These checklists depend upon the stature of a company and thus, are different for small companies and private limited companies.

Annual Compliance Checklist Benefits

Having an annual compliance checklist presents companies with numerous benefits. Some of them are-

1. Reduction in legal risks- Compliance checklists help ensure that a business is complying with all the legal procedures that need to be checked annually. Thereby, the risk of obtaining compensation through non-compliance becomes low. On the bright side, 92% of Indian companies have mentioned the code of conduct as an important feature of maintaining compliance. This is more than 70% among organizations globally.
2. Efficient operations- Non-compliance wastes a company’s time and resources. This can also lead to obstruction in the company’s workflow. Thus, creating an annual compliance checklist identifies all the loopholes in the business and helps maintain operational efficiency.
3. Reputation increases- Meeting the legal and regulatory compliances increases the genuine and makes the business more legitimate to its customers. Thereby, enhancing its reputation and strengthening the loyalty and trust of its customer base.
4. Improved decisions- A business must carry compliances with them. Without them, a business cannot operate legally. Thus, the best thing to do would be to understand those obligations and make strategic decisions accordingly. This will help the business and make it more trustworthy among the stakeholders.

Types of Compliance Checklist

Compliance checklists are of different types from regulatory-specific to industry-specific. Some of such company compliance checklist are -

1. Legal and Regulatory

These checklists contain all the legal requirements specific to businesses. From Central regulations to state regulations, these checklists must be met for smooth conduction of a business without violating the jurisdiction.

2. Specific to Industry

Some checklists are customized as per the specifics of certain industries such as healthcare, manufacturing, fintech companies, etc. These checklists present different annual compliance to different businesses depending upon their sectors.

3. Operation related compliance

These checklists require up-to-date operational processes of businesses. Various working components of companies such as training of employees, protection of data, and documents fall under this compliance type.

4. Safety-related compliance

Companies must keep in check the consequences of their activities on the environment and the general public. Safety-related compliances point out practices and steps businesses must take to adhere to public and environmental safety.

Statutory Compliance list for companies in India

Companies remain bound to a heavy workload in their daily operations. Amid all these, maintenance of legal annual compliances can be a sturdy affair. Thus, a list of statutory compliances for companies in India helps companies to stay one step ahead of non-compliance. A listed form for compliances results in a brief and to-the-point presentation of such statutory compliances. So, here is a list of statutory compliances for companies in india -

• ROC (Registrar of Companies) form filling.
• Conducting Annual General Meetings (AGM) every year.
• Issuing a share certificate.
• Maintenance of registers such as Director’s register.
• Proper audit and management of accounts book.
• Conduction of board meetings as specified.
• Recording those meetings from time to time.
• Presenting the financial status to all stakeholders and board members.

Moreover, a PAN card is compulsory to be issued prior to the commencement of operations of a company. The Tax Department uses it to track a company’s tax details. Another such must-have in particular is a Tax Deduction and Collection Account Number (TAN). This is used to deduct TDS (tax deduction at source) from employers who have salaried workers under them.
 

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Contents in a statutory compliance

The list of statutory compliances for companies in india consists of four categories-

• Industry
• Social protection
• Labour wage
• Women welfare
   

Among all the company compliance checklists, compliances related to labor law are essential and beneficial. There exists a total of 43 labor laws in India under Annexure-A. Human resources are crucial for any business. However, it is not just necessary but also morally right to comply with the basic rights and compliances for workers under the labor laws in India, as it ensures a fair and harmonious work environment. 

Some of the significant labor laws in India that companies need to adhere to are - The Employees State Insurance Act, 1948, the Minimum Wages Act, 1948, The Labor Welfare Fund Act,1948, The Payment of Wages Act, 1936, and so on.

Compliance with labor laws in India requires following various regulations that involve the employer-employee relationship. Such compliances encompass key aspects such as wages, bonuses, working environment, right to privacy, and solutions to disputes. Non-compliance of labor laws in India can result in fines and penalties for companies. The highest-ever non-compliance compensation globally was a sum of 1.2 Billion Euros.

In order to compare the stand of Indian companies for their employing population, here is a survey representation of “Workplace privacy of workers as a compliance” taken from companies of different countries-

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Categorization of company compliance checklists

Private Limited companies in India need to follow strong company compliance checklists in order to resume their business operations legally. These checklists mostly include tax filings, along with proper punctual tax returns. However, over the years compliance checklists for private limited companies have had many changes. Below, a detailed explanation of company compliance checklists for private limited companies are specified-

Company compliance checklists are divided into two categories - Registrar and Non-registrar Compliances.

Let us dive deeper into both of these compliances one by one.

Compliances with Registrar Companies 

Here are various registrar-related compliances that must be followed -

1. Auditor Appointment - New companies or startups need to appoint an Auditor within a span of one month. Following this, all the shareholders of the company are required to pass this enforcement in the following Annual General Meeting. Finally, the auditor appointment process ends by filling the E-form ADT-1. Another important point is that the filing date should not be after 15 days of the Annual General Meeting.
2. Conducting AGM - After concluding the first financial year, a company must hold the Annual General Meeting within the first 9 months. The following every year, the business must conduct its AGM in the first half of the financial year. A gap of more than 15 months is strictly prohibited by the MCA.
3. Conducting Board Meetings - A board meeting is an important necessity which must be held within the first month of the company’s existence. The next board meeting can only be held after a period of 120 days.

Here is a representation of Board Meeting Participants in India -
 

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Below given are the E-forms that need to be filed-

1. Business initiation declaration (INC-20A) - From the day of incorporation, an enterprise must fill the INC-20A e-form within 180 days.
2. Financial Statement Form (AOC-4): P&L statements along with a report form the director and balance sheet must be presented. After conducting an AGM, these statements must be presented before 30 days.
3. Director appointment or discontinuation (DIR-12): Any incident leading to the appointment or resignation of the company’s director must be reported by filling out the DIR-12 form within 30 days of the incident.
4. Annual return for small company (MGT-7A): Must be filled and submitted within 30 days of conducting AGM.
5. MCA resolution (MGT-14): The specifics of the past general board meetings must be filed before successfully passing a boarding resolution by the Ministry of Corporate Affairs. Required to be completed within 1 month since the previous meeting.
6. KYC (DIR- 3KYC): Filing of KYC and DIN must be done by the director of a company before 31 March every year. Moreover, this task must not be left undone after 30 September.
7. Report from Director: The india companies act 2013 strongly states about the necessary submission of a report from the director of a company containing all the important information about the company. 
8. Deposit return (DPT-3): Every company must file this return before 30th of June every year. This particular annual compliance presents data on any loan or deposits of a company.
9. Account keeping and Statutory compliance: Statutory compliance is necessary for future implications as it involves all the contracts, loans, register of directors, Board assembly particulars, financial records and so on.
10. P&L account distribution: This distribution is to be made within the company members. Financial records, reports of the director and auditor must be forwarded to all stakeholders. This must happen 3 weeks prior to the Annual General Meeting.

Compliances with Non-Registrar companies

Below are the annual compliances necessary for non-registrar companies-

1. Providing payouts periodically (Taxation policies like GST, TDS, TCS, Advance Tax)
2. This annual compliance returns include- 

• GST (annual/Quarter/Month)
• Tax Deducted at Source (quarterly)
• Advance tax evaluation  
• Return Filing of professional tax and PF
• Half-yearly ESIC Returns filing
• IT returns filing
• Reporting and assessment of regulatory norms and acts such as competition act, Environment protection act, etc.

Compliance checklist for listed entities annually

A listed company refers to a public limited entity that has its shares or stocks available for trading on the stock exchange. Listed company compliance checklist are usually more than that of private companies. Here is a listed company compliance checklist in a tabular format-

This is the annual listed company compliance checklist that publicly listed companies must adhere to in order to operate smoothly and legally. 

How to check and review your annual compliance checklist?

Creating an annual compliance checklist is not the end of the road. It is important to keep on re-checking and reviewing your compliance checklist to keep record of any mistakes or delay in compliance. This can be achieved by following these points-

1. Assessments from time to time: Non-compliance will never come and inform you about it. Businesses must spot any non-compliance by continuously self-assessing their checklists from time to time.

Here is a representation of how much time companies spent on compliance each year (from a survey)-
 

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2. Maintaining Audits: Auditors can be useful in maintaining compliances. They assess the business adherence to regulatory compliances and work on any areas that require improvement.

3. Handling Non-compliance: Corrections of non-compliance must be fast with the aim of keeping the damage to the minimum. Business should make sure that such non-compliances must not be repeated again.

4. Striving to improve: With time, laws and regulations of Government may change. Thus, improvement in compliance checklists is meant to keep the lists updated with any such concerning change in regulatory measures.

Bottomline

Companies often grapple with compliance requirements in India, especially startups who must invest significant time in annual compliance. While this may seem burdensome, it is crucial for operational allowances. Collaboration with the government is essential, achieved through meeting these compliance obligations annually. This ensures tax adherence, rights protection, and business order. This blog has outlined regulatory requirements and their deadlines, emphasizing their importance.

To streamline compliance, companies should seek assistance from Filing Buddy.  The experts at Filing Buddy handle registrations and fulfills compliance needs for businesses efficiently. Entrust your compliance to us and let us support your business growth.