A company is generally understood as a business entity shaped by a group of individuals. Companies operating in India must obey numerous legal requirements, which constitute the definition of 'statutory compliance'. Companies need to fulfil various reporting requirements specified in the Companies Act, 2013, as well as Income Tax Act regulations and labour laws. Every Indian business type, regardless of being a private limited company or LLP or manufacturing, must maintain compliance obligations to prevent penalties and maintain operational efficiency.
Since it comes into existence as per law, there is a list of statutory compliance checklists for private limited companies and for otherwise as well, which have been explained hereby.
Statutory Compliance Checklist For Companies In India
A startup business may be given a try casually and may be dropped if things do not go well. However, if such a startup has been incorporated as per The Companies Act, 2013, it is not a casual affair. There is a list of statutory compliances for companies in India that have to be religiously satisfied. It may vary for industries as well, for example, a statutory compliance checklist for manufacturing companies that require adherence to FSSAI or ISI, etc. Any defect or ignorance in the list of statutory compliance for private limited companies or otherwise may be an invitation to a lot of legal trouble.
What are the statutory compliances in India?
To get into the technicalities of statutory compliance checklists for companies in India, one should understand the concept first. The term ‘statutory’ means rules and regulations, and ‘compliance’ means adherence to or obeying/ complying with. The government sets certain regulations or regulatory compliance to be followed by a company for the welfare of the employees. One should know monthly compliance for private limited companies as well as other setups to evade any regulatory compliance trouble.
Statutory Compliance List Under Companies Act, 2013
Since its incorporation, the company has been governed as per company laws and regulatory compliance, respecting the Memorandum and Articles of Association (MOA and AOA). A private limited company must perform four fundamental obligations, which include annual filing to the Registrar of Companies (ROC), keeping official business records active, conducting yearly general meetings and creating necessary financial records documents. In India, LLPS must annually file Form 8 and Form 11, together with the obligation to maintain books of accounts and audit requirements based on specified turnover and capital contribution thresholds.
Manufacturing companies must fulfil multiple requirements under statutory law. Besides standard company law reporting requirements the organization must follow regulations regarding employee conduct and environmental permits and workplace safety standards under the Factories Act. The statutory compliance checklist for manufacturing companies also involves adherence to rules under the Provident Fund, ESI, and Minimum Wages Act, among others.
A company should comply with the following:
- Form filing with the Registrar of Companies (ROC)
- Board meetings to be held as per the rules
- Appointment of an auditor within a given period
- General meetings on an annual basis
- Share certificate issuance
- Minutes of meetings to be duly recorded
- Book of accounts to be duly maintained and audited
- Circulation of financial reports
- Maintenance of statutory registers
Along with the above list, the issuance of a Permanent Account Number (PAN) by the Income Tax Department in the name of the company is a must. The purpose of PAN is to track company transactions and maintain records of Income Tax payments and returns. There is another requirement of Tax Dedication and Collection Account Number (TAN) for tax deposit at source. The concept behind Tax Dedication at Source (TDS) is that employers who pay salaries to their workers are required to deduct TDS under Section 192 of the Income Tax Act, 1961. The amount deducted is credited to the government before the 7th day of the month that follows.
What is included in statutory compliance?
The statutory compliance checklist for companies in India is broadly divided into four heads:
- Industrial relation
- Social security
- Fair wage
- Benefits for women
What are the compliance requirements for a company?
There are several legislations brought by the Ministry of Corporate Affairs or otherwise that require healthy operations by the corporations. Some of those important laws have been briefly explained below:
- Factories Act, 1948: An Act dedicated to the occupational safety, health and welfare of workmen employed at factories or manufacturing units.
- Employees Provident Fund (EPF) Act, 1952: Provisions dedicated to the security of an employee after retirement from service.
- Employees’ State Insurance (ESI) Act, 1948: An Act containing health and safety provisions to grant security to employees against risks during employment.
- Professional Tax Act (State Laws): Some states in India, like Telangana and Maharashtra, have imposed taxes on certain professions, including trades and employment.
- Labour Welfare Fund Acts (State Laws): States like Haryana, Punjab, Maharashtra etc. have this legislation to finance certain activities dedicated to the welfare of the labour.
- Maternity Benefit Act, 1961: The legislation protects the employment of a woman during her maternity period through certain benefits.
- Contract Labour (Regulation and Abolition) Act, 1970: An Act to protect contract labour and to ensure safe work conditions for them.
- Sexual Harassment of Women at Workplace (Prevention, Prohibition, and Redressal) Act, 2013: A legislation to protect women against any sexually coloured acts or remarks at the workplace and ensure a safe work environment.
- Minimum Wages Act, 1948: An Act dedicated to the fixation of minimum wage rates in certain occupations.
- Payment of Wages Act, 1936: Provisions for the regulation of the period of wages and to provide a remedy against unexplained or unauthorised deductions.
- Payment of Gratuity Act, 1972: An Act that requires certain industries or employers to pay their retiring employees a one-time gratuity amount.
- Payment of Bonus Act, 1965: Based on the profits of a company, the Act obliges employers to designate the minimum and maximum bonus percentage.
- Equal Remuneration Act, 1976: A legislation to prevent any discrimination at the workplace based on gender.
What is the need for statutory compliance?
India has a history of bonded labour, exploitation, etc. To curb such wrongful acts, the government has time and again brought a list of statutory compliances for companies in India. The goal on the part of the company is to keep up with all labour regulation compliance in India for employee welfare. A statutory compliance list is also important for the business operations in which the company is involved and the welfare of its customers. Non-compliance with the list of statutory compliances for companies in India may result in a lot of unnecessary penalties and financial losses. It also affects customer fidelity and business integrity.
Benefits of Regulatory Compliance of a Company
If so much trouble is being taken up in the name of regulatory compliance, there has to be some fruit as well, which has been depicted below:
- Fair treatment of employees
- Fair payment for the work done, and accordingly fair wages
- Humanely and fairly work hours and conditions for employees
- Helps the company avoid penalties due to timely payments
- Protect from unreasonable benefit demands from Trade Unions
- Avoid legal troubles for the company due to regulatory compliance in time
- Reduce risks through a month-wise statutory compliance checklist
Conclusion
Statutory compliance checklist for companies in India is a regulatory task that can not be overlooked. It is advisable for the concerned personnel of a company to prepare a month-wise statutory compliance checklist. For that matter, a corporate lawyer will be of great help. It is the law that binds all the above-mentioned list of statutory compliances for companies in India. With this, it has to be contemplated that ignorantia facti excusat ignorantiam juris non excusat, which means ignorance of fact may be ignored, but ignorance of the law is not.
Having a clear understanding of the statutory requirements for a company is crucial for business continuity. Companies that fail to follow legal requirements expose themselves to financial sanctions along with legal consequences. A company's compliance status remains steady through regular maintenance and audit activities regardless of operating in services, trading or manufacturing industries.
FAQs
What are statutory compliances for a company?
The provisions of the Companies Act, 2013, read with the associated Rules, govern a Public Limited Company. However, alongside the compliances required by the Companies Act of 2013, such businesses additionally have to comply with taxation and labour legislation.
- Compliances under the Companies Act, 2013, read with allied Rules
- Compliances under FEMA Regulations
- Compliances under the Goods and Services Tax (GST) Act, 2017
- Compliances under the Income Tax Act, 1961
- Compliances under Labour Law
What is statutory compliance in India 2024?
Statutory compliance is a legal structure within which the Company must carry out all of its responsibilities. Every organisation must treat its employees in accordance with all federal and state labour regulations.
What are the statutory registration compliances applicable to an Indian company?
- Incorporation under the Companies Act, 2013:
- Filing of the Memorandum of Association (MOA) and Articles of Association (AOA) with the Registrar of Companies (ROC).
- Obtaining the Certificate of Incorporation from the ROC.
- Obtaining a PAN from the Income Tax Department for the company. This is essential for various financial transactions and tax-related purposes.
- Obtaining a TAN for the company, especially if it is liable to deduct tax at source (TDS) on payments made.
- If the company's turnover exceeds the prescribed limit, it needs to register for GST. Depending on the nature of the business, it is applicable when the annual turnover exceeds the threshold limit of Rs.40 lakh or Rs.20 lakh or Rs.10 lakh.
- Register under the Shops and Commercial Establishments Act of the respective state. This registration is related to the regulation of working conditions in commercial establishments.
- Obtain a trade license from the local municipal authority, as required under municipal laws. This is essential for companies dealing with substances that may be hazardous such as liquor and firecrackers.
- Register the company under the MSME Act if it qualifies as a micro, small, or medium enterprise.
- Obtain any required environmental clearances or approvals depending on the nature of the company's activities. This can be obtained from the State or City Pollution Board. For instance, food companies require this as their operations can impact the environment.
- Register for EPF if the company employs 20 or more employees. EPF provides social security benefits to employees.
- ESI registration applies to all factories or entities that employ 10 or more persons who have a maximum wage of Rs. 21,000. However, in some states, it is 20 employees. ESI provides health and medical benefits to employees.
What are the statutory requirements for a company?
The statutory requirements for a company are as follows-
- Shops And Commercial Establishments Act
- The Employees Provident Funds and Miscellaneous Provision Act, 1952
- The Employees State Insurance Corporation Act, 1948
- The Professional Tax Act, 1975
- The Labour Welfare Fund Act, 1965
- The Contract Labour (Regulation & Abolition) Act, 1970
- The Child Labour (Prohibition & Regulation Act), 1986
- The Minimum Wages Act, 1948
- The Payment of Wages Act, 1936
- The Payment of Bonus Act, 1965
- The Maternity Benefit Act, 1961
- The Payment of Gratuity Act, 1972
- The Equal Remuneration Act, 1976
- The Employment Exchange (Compulsory Notification of Vacancies) Act, 1959
- Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013
- The Employees' Compensation Act, 1923
- The Industrial Employment (Standing Orders) Act, 1946
- The Industrial Disputes Act, 1947
- The Apprentice Act, 1961
- The Interstate Migrant Workmen (Regulation of Employment and Conditions of Services) Act, 1979
- The Factories Act, 1948
- The Trade Unions Act, 1926
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