As the regulatory environment in India continues to evolve towards greater transparency and digital governance, companies must stay vigilant about their compliance obligations. The Ministry of Corporate Affairs (MCA) has introduced several significant amendments to the Companies Act, 2013, that fundamentally alter how businesses maintain their records and report to authorities.
Key Recent Amendments
1. Audit Trail (Edit Log) Requirement
Effective from April 1, 2023, every company that uses accounting software for maintaining its books of account must use only such accounting software which has a feature of recording an audit trail of each and every transaction.
The software must create an edit log of each change made in books of account along with the date when such changes were made and ensuring that the audit trail cannot be disabled. This move is aimed at curbing financial manipulation and ensuring the integrity of financial statements.
2. Dematerialization of Securities for Private Companies
In a major push towards digitalization, the MCA has mandated that all private companies (excluding small companies) must dematerialize their securities. This means that such companies must facilitate the dematerialization of all their existing securities and ensure that any further issue of securities or transfer of securities is conducted only in dematerialized form.
3. Enhanced Disclosure on CSR
Corporate Social Responsibility (CSR) reporting has become more stringent. Companies are now required to provide detailed disclosures regarding their CSR committee, CSR policy, and the implementation of CSR projects in their board reports. Any unspent CSR amount must be handled as per the specific timelines and procedures prescribed under Section 135.
Annual Compliance Checklist
To ensure your company remains in good standing, here is a comprehensive checklist of the most critical annual compliance requirements:
Annual General Meeting (AGM)
Must be held within six months from the date of closing of the financial year (typically by September 30th). The maximum gap between two AGMs should not exceed 15 months.
Filing of Financial Statements (AOC-4)
The audited financial statements, including the Board's Report and Consolidated Financial Statements, must be filed with the ROC in Form AOC-4 within 30 days of the AGM.
Filing of Annual Return (MGT-7/7A)
Every company is required to file its Annual Return in Form MGT-7 (or MGT-7A for OPCs and Small Companies) within 60 days of holding the AGM.
Board Meetings
At least four Board Meetings must be held in every calendar year, with a maximum interval of 120 days between two consecutive meetings.
Director's KYC (DIR-3 KYC)
Every individual who holds a Director Identification Number (DIN) as of March 31st must submit their KYC details in Form DIR-3 KYC by September 30th of the following financial year.
Statutory Registers
Maintenance of statutory registers (Register of Members, Directors, Share Transfer, etc.) at the registered office of the company is mandatory and must be kept up to date.
Conclusion
The shift towards more rigorous compliance reflects the regulator's intent to build a more robust and transparent corporate ecosystem. While the list of requirements may seem daunting, timely execution and professional guidance can ensure that compliance becomes a seamless part of your business operations rather than a year-end hurdle.