Importance of Annual Compliances of One Person Company

Running a One-Person Company is not a simple task, as many individuals starting a company may not be aware of the mandatory compliances that need to be fulfilled. Failing to comply with these regulations can lead to hefty penalties and may result in the company and its directors facing scrutiny and further investigation.

It is worth noting that One-Person Companies are required to perform annual compliances from the time of their incorporation, and non-compliance can create various hindrances for the company in the Form of penalties and fines. Therefore, it is essential to be aware of and comply with the applicable regulations to avoid such situations. Additionally, One-Person Companies must provide accurate financial information to shareholders and investors.

Benefits of One-Person Company Compliances

One-Person Company (OPC) compliance has several benefits that include limited liability protection, increased opportunities to get funds from financial sponsors, and continuous existence.

Compliance with the Companies Act, Income tax, and GST helps to enhance investor confidence in the company

The following are some of the advantages of performing annual compliances for One-Person Companies:

• Easy to raise funds from financial investors – Proper annual compliances, including for OPCs, enhance the confidence of financial investors and makes it easy to raise funds from them.
• Maintains active status – Timely and proper Compliance helps maintain the company’s active status.
• Accurate data collection: Annual compliances ensure that the data collected for the compliances are accurate and true.
• Avoids hefty penalties – Non-compliance often results in hefty penalties and fines. Proper annual compliances help in avoiding these penalties.

Mandatory Annual Compliances of One-Person Company

The mandatory annual compliances of a One-Person Company (OPC) are as follows:

• Conducting Annual General Meeting (AGM): OPCs must conduct an AGM within six months from the end of the financial year. It is mandatory to hold an AGM even if only one director in the OPC exists.
• Filing Financial Statements: OPCs must prepare financial statements such as balance sheets, profit and loss, and cash flow statements and file them with the Registrar of Companies (ROC) within 30 days of the AGM
• Filing Income Tax Returns: OPCs must file income tax returns by July 31st of each year.
• Filing Annual Return: OPCs must file an annual return with the MCA within 60 days of the AGM.
• Statutory Audit: OPCs must conduct a statutory audit of their financial statements by a qualified Chartered Accountant
• Maintenance of Statutory Registers and Records: OPCs must maintain various statutory registers and records, such as the register of members, register of directors, and minutes of board meetings.

Failure to comply with these annual compliances may attract hefty penalties and fines and may even lead to the deregistration of the OPC. Therefore, OPCS must ensure they comply with these mandatory annual compliances yearly.

Conducting the Board Meeting

According to the Companies Act 2013, Section 173 mandates that a One-Person Company must conduct a minimum of one Board meeting annually. These meetings should be spaced out at least 90 days apart from each other and held every six months. It’s important to note that the provisions of Sections 173 and 174 regarding the quorum of meetings of the Board of Directors do not apply to a One-Person Company with only one director on its board.

Penalty for Non- Compliance:

In non-compliance, the company will be subject to a penalty of Rs. 25,000/-, while the officer in default will be charged with a penalty of Rs. 5,000/-

Appointment of Auditor

As per Section 139 of the Companies Act, a One Person or Company must appoint an Auditor. A Chartered Accountant firm shall audit the company’s accounts, and the Auditor will verify the books of accounts and issue an Audit report.

It’s important to note that the provision regarding the rotation of the Auditor does not apply to a One Person Company.

Filing of Annual Return

Every One Person Company must file their Annual Return within 180 days from the end of the Financial Year. The Annual Return should include details about the company’s shareholders or members and its directors.

The filing process requires the submission of Form MGT-7, the Annual Return form. OPCs need to ensure that this Form is filed within the specified timeline of 180 days from the end of the financial year.

Financial Statement

One Person Company must file Financial Statements, which reflect the company’s finances and include the Balance Sheet, Statement of Profit and Loss Account, and Director Report. 

The submission of Form AOC-4 for Financial Statements is mandatory, and it should be filed within 180 days from the end of the financial year.

Disclosure of Interest in Other Entities

In each financial year, the directors of the OPC must disclose any interest they have in other entities in the first meeting of the Board of Directors, using Form MBP-1.

Penalty: Any Director in default may be subject to imprisonment for a term of up to 1 year.

KYC of the Director of the company

To comply with regulations, individuals holding DIN as of March 31st of the financial year must submit Form DIR-3-KYC for the respective financial year by September 30th of the immediate next financial year.

Filing the Form DPT-3

The Form DPT-3 must be filed annually by every company, providing the Return of deposits and particulars that are not considered as deposits as of March 31st. The deadline for filing this Form is on or before June 30th.

Preparing the Statutory Register

According to Section 88 of the Companies Act 2013, One Person or Company must maintain statutory registers. Additionally, OPCs must comply with certain event-based requirements, including:

• Share Transfer
• Director Appointment or Resignation
• Change in Nominee or Bank Signatories
• Change in Auditor.

Under OPC Statutory Audit, CA Firm will give review report certification. OPC utilizes form AOC 4 to record their yearly fiscal summaries to ROC. A massive penalty of Rs 100 daily on delay in documenting Form AOC 4 is levied. Moreover, a sum of Rs. 1000 every day of default is charged from the organization, which can go the most extreme up to Rs. 10, 00,000.

Income Tax Filing

All private or public companies are obligated to make Income Tax Returns Filing. Each OPC enlisted in India needed to file ITR. ITR is an essential requirement for annual Compliance for OPC regardless of whether OPC has not.

An OPC (One Person Company) must file its income tax returns (ITR) every year by the due date, usually July 31st for individuals and September 30th for businesses. The ITR filing process involves reporting the company’s income, expenses, and deductions for the financial year to the Income Tax Department.

Amount of Rs. 10000/ as a fee will be imposed regarding non-filing of ITR.

The OPC must also obtain and maintain a valid Permanent Account Number (PAN), which is used to identify the company for tax purposes