Annual Compliance of One Person Company
In India, Person Companies (OPCs) are a distinct kind of business setup where an individual can function as a distinct legal entity. OPCs offer the advantages of restricted liability and official recognition to businessmen while keeping the compliance process simplified. This write-up concentrates on the yearly compliance specifications that OPCs must follow in India. OPCS needs to comprehend and satisfy these responsibilities to remain compliant, avoid penalties, and operate smoothly.
1. Annual General Meeting (AGM)
OPCs are not required to conduct AGMs, but they must fulfill their obligations for annual reporting by following specific criteria. These guidelines must be followed by OPCs:
OPCs are required to create financial statements annually, which must include a balance sheet, profit and loss account, and cash flow statement.
OPCs are required to assign a statutory auditor who will examine their financial statements. The auditor must provide an assessment of the accuracy of the financial statements and ensure that they adhere to the relevant accounting principles.
OPCs are required to submit an annual return to the Registrar of Companies (RoC) no later than 60 days from the end of the financial year. This annual report should include the company’s activities, registered office address, details of the sole member, and share capital information.
2. Maintenance of Books and Records
As a part of their yearly compliance duties, OPCs are required to keep various records and books such as:
2.1. Members Registry: OPCS must keep a record of their members, which should include the single member’s details like name and address, as well as the number of shares they have.
OPCs need to have a record of directors, which should include information such as their name, address, date when they were appointed, and any updates regarding changes in their role as directors.
OPCs are required to keep accurate financial records that encompass documentation of monetary dealings, bills, proof of payment, and vouchers.
OPCs are required to keep legal records, including but not limited to records of contracts, charges, and transactions involving related parties.
3. Board Meetings and Resolutions
Though OPCs are not required to conduct frequent board meetings, there are specific obligations of compliance that must be fulfilled regarding board resolutions. These obligations involve:
To file their financial statements with the Registrar of Companies, OPCs need to have a board resolution approving them. This resolution can be recorded either in the minutes of a meeting or through a resolution passed by circulation.
To appoint or reappoint a statutory auditor, OPCs must pass a board resolution that includes the auditor’s name, qualifications, and appointment duration.
OPCs are required to pass a resolution at their board meeting to authorize the filing of their annual return with the Registrar of Companies (RoC). This resolution ensures that all the details given in the annual return are correct and complete.
4. Tax Compliance
OPCs are obliged to follow different tax-related regulations. Primary areas of adherence comprise:
OPCs have to submit their income tax returns every year, revealing their incomes, expenses, and obligations for taxation.
To comply with regulations, OPCs are required to deduct a percentage of taxes from certain payments made to vendors, contractors, and employees, among others, known as Tax Deducted at Source (TDS). This amount must then be sent to the government within the designated deadlines.
OPCs that sell goods or provide services and earn income above the set limit are required to register for GST and regularly submit GST returns.
5. Consequences of Non-Compliance
Not fulfilling yearly responsibilities can lead to negative outcomes for OPCs. Some possible results may include:
Regulatory agencies have the authority to impose penalties, fines, and extra charges for failing to adhere to statutory and regulatory obligations. The extent of the penalties may differ depending on the type and gravity of the non-compliance.
5.2. Legal Responsibilities: Failure to comply with regulations can result in legal obligations for the OPC and its only member, which may lead to legal action, disagreements, and the possibility of personal responsibility for the sole member.
If an OPC continuously fails to follow regulations or commits serious violations, the regulatory authorities can begin a process to cancel the organization’s registration. This action is only taken in extreme situations.
Annual compliance is a crucial aspect of running a Person Company in India. OPCs must adhere to annual reporting obligations, maintain books and records, comply with tax laws, and fulfill other regulatory requirements. By understanding and fulfilling these obligations, OPCs can ensure legal and regulatory compliance, avoid penalties, and maintain their status as separate legal entities. OPCS needs to prioritize annual compliance to uphold good governance practices, protect the interests of the sole member, and foster trust among stakeholders. Proactive compliance measures and timely filing of necessary documents are vital for the long-term success and sustainability of Person Companies in India.