Incorporating your company is just the beginning. Once your business is legally established, several post-incorporation compliance requirements must be fulfilled to ensure your company remains in good standing.
These compliance tasks vary based on the nature of your business and the regulatory environment you operate in, much like adding the final touches to a newly constructed house. Understanding and addressing these requirements will keep your business running smoothly and efficiently.
Here’s a comprehensive overview of the essential post-incorporation compliance tasks you need to complete:
01.
Internal Compliances - Companies Act, 2013
Once your company is officially registered, several legal requirements must be fulfilled to ensure proper governance and operational readiness.
Board Meeting
The first task is to convene a board meeting within 30 days of incorporation. This meeting must be announced with a notice and agenda sent to all Directors at least 7 days in advance.
Certificate of Commencement
To begin business operations, you must obtain a Certificate of Commencement of Business. This involves two key declarations:
- Form INC 20A: Confirm that all subscribers to the Memorandum of Association have paid for their shares. File this within 180 days from incorporation.
- Form INC 22A: Verify your registered office address if not done during registration. Submit this form within 30 days of receiving the registration.
Appointment of Statutory Auditor
You must appoint a Statutory Auditor within 30 days of incorporation. If you miss this deadline, the appointment must occur within 90 days of an Extraordinary General Meeting. Ensure the chosen auditor provides written consent and meets legal qualifications.
Issue of Share Certificate
Share certificates must be issued to the subscribers within 60 days of incorporation. Additionally, pay the applicable stamp duty within 30 days from the date of issuance. For states allowing e-stamping, this can be done online.
Disclosure of Interest by Director
File Form MBP-1 to disclose any directorships or interests in other companies or entities that the first Directors hold.
Books of Accounts
Maintain detailed financial records in line with Indian Accounting Standards at your registered office.
Registers
Keep updated registers for Shareholders, Debenture Holders, and other Security Holders. For dematerialized shares, use the depository’s register.
02.
Employee-Related Compliances
As you start building your team, several important regulations must be followed to ensure fair and legal employment practices.
Labour Laws
To ensure compliance with statutory labour laws, you need to adhere to regulations on wages, working hours, provident funds, and more. The Startup India scheme allows for self-certification under six key labour laws, offering a streamlined process for new companies:
- Employees State Insurance Act, 1948
- Employee Provident Fund and Miscellaneous Provisions Act, 1952
- The Payment of Gratuity Act, 1972
- The Building and Other Construction Workers’ (Regulation of Employment and Conditions of Service Act, 1996)
- The Contract Labour (Regulation and Abolition) Act, 1970
- The Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Act, 1979
Employment Contracts/Agreements
While inspections are waived for the first year under this scheme, subsequent compliance returns must be filed as required.
Drafting clear contracts is essential for managing relationships with employees, vendors, and other stakeholders. Key agreements include:
- Offer Letter: Details the terms of employment and is executed on stamp paper, with state-specific stamp duty.
- Intellectual Property (IP) Agreement: Ensures ownership of IP created by employees during their tenure.
- Non-Disclosure Agreement (NDA): Protects confidential information, available in Mutual or One-Sided forms, with a standard stamp duty of Rs. 100 in most states.
Employee Stock Option Plan Employee Stock Option Plan
Establish an ESOP to motivate and retain employees. Ensure your Articles of Association allow for ESOPs, get shareholder approval, and possibly form a compensation committee to design the plan. Typical ESOP pools range from 5% to 15% of the company’s equity.
03.
Other Compliances
As your business grows, additional legal requirements may come into play.
Import Export Code (IEC)
Apply for an IEC to engage in international trade. You can submit your application online at DGFT or offline using Form ANF-2A. Required documents include:
- Bank account details and banker’s certificate
- Applicant’s photograph
- Company’s incorporation documents, PAN copy, and board resolution extract
- Form 18 for changes to registered office, if applicable
Environmental Laws
Ensure compliance with environmental regulations to manage emissions, waste, and resource use. Startups can use a self-certified declaration under three environmental laws for simpler compliance.
Intellectual Property
Protect your business ideas and innovations through trademarks, patents, and copyrights. For registered startups, the application process for IP protections is simplified, with the government covering certain registration costs.
Navigating the post-incorporation phase may seem complex, but addressing these requirements early sets a strong foundation for your company’s future success. By staying on top of these legal obligations, you can focus on growing your business and achieving your long-term goals.
