Relaxation in regulatory compliance for companies registered in last quarter of a financial year

It is often heard in common parlance that if you incorporate a company in the latter half of the financial year, then you are at a disadvantage. Reason being that even before the business starts shooting, there is a large amount of cost that gets involved in the finalization of accounts and annual compliance. However, it is not necessarily so. You can get considerable flexibilities if you incorporate your company post January 2014.

There are four basic and prime compliance that are required to be undertaken by the Company are:

• Finalization of Accounts.
• Conducting Audit of Accounts.
• Filing of ROC compliance forms.
• Filing with the Income Tax Department.

Now, what we need to understand is that the ROC compliance take place after the accounts are approved by the shareholders in Annual General Meeting. For a newly incorporated company, the due date for the AGM is 18months from the date of incorporation or 9 months from the date of end of financial year, whichever is earlier. Further, a newly incorporated company can extend its financial year upto 15 months from its date of incorporation.

As per Companies Act, 1956, a newly incorporated Company is required to hold its First Annual General Meeting within a period of not more than eighteen months from the date of its incorporation; and if such general meeting is held within that period, it shall not be necessary for the company to hold any annual general meeting in the year of its incorporation or in the following year, subject to the condition that the Company must comply with the provisions of Section 210 of the Companies Act 1956. The Company is also required to comply with the provisions Section 210 of the Companies Act 1956, which has also a vital role in fixing the date of Annual General Meeting, which reads as below:

The Board of Directors of a Company shall lay before the members at the every Annual General meeting the followings financial statements –

(a) a balance sheet as at the end of the period specified in sub-section (3), and

(b) a profit and loss account for that period, which shall relate in the case of the first annual general meeting of the company, to the period beginning with the incorporation of the company and ending with a day which shall not precede the day of the meeting by more than nine months.

Let us take an example to understand this:

ABC Private Limited was incorporated on 01^st February, 2014. Now, we know that a newly incorporated company can extend its financial year upto 15 months from its date of incorporation (without any prior approval from the department). Hence, it is not necessary that ABC Private Limited closes its books of accounts on 31^st March, 2014. It can alternatively close its books of accounts on 31.03.2015. Hence, it can conduct its first AGM on August, 2015 or December, 2015, whichever is earlier. In this regard, it will be August 2015. Hence, the ROC Compliance can be done in September 2015 as against September 2014. A year of hassle saved!!!

However, for the purpose of Income Tax Filings, the year has to close 31^st March each year. For that purpose, you only need to file a simple format of Profit & Loss Account and Balance Sheet with the department.

Hence, we find that it is not at all necessary that registering a company post January means incurring unnecessary burden of filing expenses. One prudent move and the way of the start-up becomes hassle-free.

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