Private Limited Company Compliance
Add a Director
It is possible to add or remove a director from the company at any time. While the articles of incorporation should have provisions allowing it, the Articles of Association and Companies Act provisions dictate how and who can be appointed as a new director.
- Identification proof (PAN card)
- Proof of residence (electricity bill, rental agreement, Aadhar Card, voter ID, passport, driving licence)
- Passport size photograph
- Digital signature certificate of the proposed director
- PAN card: mandatory for an Indian applicant
- Passport: mandatory for a foreign applicant.
Remove a Director
It is possible to add or remove a director from the company at any time. There are different reasons why a director is removed and there are three different procedures based on the reason.
Reasons to Remove a Director
A director can be removed for any of the following reasons:
- If they incur any of the disqualifications specified under the Companies Act
- If they absent themselves from board meetings over 12 months
- If they enter into contracts or arrangements against the provisions of Section 184 of the Companies Act
- If they are disqualified by an order of a court or tribunal
- If they are convicted by a court of any offence and sentenced to imprisonment for not less than six months
- If they have not abided by the terms and protocols mentioned in the Companies Act of 2013
- If they have resigned voluntarily from their position.
Ways to Remove a Director
There are 3 ways to remove a director from a company:
1. When the Directors Tender Their Resignation
The steps to be followed in this scenario are:
- Step 1: Holding a board meeting by giving seven days of clear notice
- Step 2: In the meeting, the board members will take note of the resignation
- Step 3: Then they have to pass a resolution in a particular format to that effect
- Step 4: After that, Form DIR-11 needs to be filed by the resigning director in his individual capacity
- Step 5: The company has to file Form DIR-12 with the registrar of companies (RoC) along with the registration letter and the board resolution
- Step 6: When all the forms are filled and the formalities for the removal of the director are done, the name of the director will be removed from the master data of the company on the Ministry of Corporate Affairs (MCA) website.
2. Director Remains Absent from the Board Meetings for 12 Months
- Step 1: If a director absents himself from all the meetings of the board of directors held over a period of twelve months, with or without seeking leave of absence from the board, they are considered to have vacated their office as per Section 167
- Step 2: A Form (DIR-12) must be filed
- Step 3: Upon completion of the formalities, the concerned director’s name will be removed from the database of the Ministry of Corporate Affairs (MCA).
3. Removal of Director by Shareholders
- Step 1: A notice is sent to all the shareholders for a board meeting required to be conducted within seven days from the date of the issue
- Step 2: A resolution is passed to have a general meeting and then for the removal of the director, subject to the approval of the shareholders on the day of the meeting
- Step 3: After providing a 21-day notice, the second meeting of shareholders is held to vote on the resolution passed earlier and the director who is being removed by the shareholders will be allowed to speak on their removal
- Step 4: The shareholders must file Form DIR-12, along with the attachments of the board resolution, and an ordinary resolution
- Step 5: Once all the formalities are over, the name of the concerned director is removed from the database of the Ministry of Corporate Affairs (MCA) and its website.
This is the simplified version of the whole process. The removal procedure has to be carried out carefully and should follow the procedure laid down in the Companies Act.
Our team at Vakilsearch will walk you through the entire process and will be there to help you at every step.
Consequences of Not Filing Form DIR-12:
DIR-12 has to be filed within 30 days from the date of resignation. If the company fails to do so, the following penalties will apply:
- After 30 days – within 60 days: twice the government fees
- After 60 days – within 90 days: 4 times the government fees
- If it exceeds 90 days: 10 times the government fees
- If it exceeds 180 days: 12 times the government fees and will be booked for the compounding offence as well
Increase Authorized Capital
A private company’s authorised capital specifies the maximum number of shares it may sell. There is no minimum capital required as per new Companies Act of 2013. To issue new shares or to raise the authorised capital, the capital clause of the Memorandum of Association is amended by passing an ordinary resolution by the board.
Checklist For Increasing Authorised Capital
- Check the provisions of the AoA to increase authorised share capital
- If the AoA does not permit an increase, then the AoA must be modified as per Section 14 of the Companies Act of 2013
- Issue a notice for calling a board meeting to modify the AoA in order to approve the increase in authorised share capital
- Issue a notice for calling an extraordinary general meeting to modify the AoA in order to approve the increase in authorised share capital
- Issue the notice at least 7 days before the board meeting and 21 days before the EGM.
The documents must be filed with the MCA within 30 days after obtaining consent from the shareholders for the share capital increase. The standard resolution for private firms is merely SH-7, and MGT-14 is not required.
- Digital signature certificate: A copy of a DSC from any authorised director of the company
- Memorandum of Association: A copy of the modified or latest version of the MoA
- Articles of Association: A copy of the modified or latest version of the AoA
- Certificate of incorporation: A copy of the company’s incorporation certificate
- PAN card: A copy of the company’s PAN card.
Liquidation of Pvt Ltd Company
Simply put, liquidation is the process by which a company shuts down its activities. The company may decide to close down for a variety of reasons, including a refusal to continue operations, insolvency, and so on. The word ‘liquidation of a company’ refers to the process of selling a company’s assets. The company can sell its assets to meet obligations and repay liabilities.
If a company is liquidated due to bankruptcy, the liquidator can sell its assets to repay all pending liabilities. The remaining balance, if any, after repayment to the creditors, gets distributed among the shareholders of the company.
- Board meetings should be convened for the approval of winding up a company
- The appointment of an official liquidator or insolvency professional should be made
- Simultaneously, an NOC should be obtained from the Income Tax Department
- Before initiating a wind-up process, an intimation should be conveyed to the Insolvency and Bankruptcy Board of India (IBBI) within 7 days from the date of approval of the resolution
- An announcement should be made to the public within 14 days of passing the wind-up resolution in an official gazette, one english newspaper and one local newspaper, where the registered company has been based
- The whole winding up process should be completed within 12 months from the initiation of the liquidation
- PAN card of the company
- Certificate of closure of the company’s bank account
- An indemnity bond, which should be notarized by the directors
- Latest statement of company accounts
- Statement of accounts related to all assets and liabilities of the company, audited by a chartered accountant (CA)
- Proof of approval of the resolution by 3/4th of the board members
- Application for removing the name of the company
As your company grows and evolves, it is normal that you want to take your company in a direction that you didn’t anticipate before. When the objectives of your business change, it is necessary to make it official by amending the memorandum of association (MoA) and fulfilling other formalities for the same.
Why Change Business Objectives?
The business objectives stated in the MoA restrict the scope within which a business can act. So, changing objectives is necessary for the following situations:
Undertaking New Ventures: When your company is expanding vertically or horizontally into new areas resulting in new products or services or activities, the objectives need to be changed to accommodate it.
Company Takeover: When a company is taken over by another company, major changes take place. The branding of the original company may continue to remain the same, but more often than not, the direction and vision for the company are changed.
Eliminate Abandoned Activities: It might so happen that, over time, some of the activities of the company may prove to be unnecessary or pointless. In which case these activities will be slowly abandoned and the company will have to edit the objectives to reflect the same.
Banned or Prohibited Activities: Government policies keep changing. Sometimes an activity that was legal when the business started may be declared illegal or the government may restrict permissions. In such cases, your company should avoid that activity and amend the objectives to avoid legal consequences.
- Notice regarding EGM
- Attested true copy of the special resolution
- Minutes of the board meeting and EGM
- Altered MoA
- A certified true copy of the board resolution (optional)
- Id proof of all the directors of the company
- Address proof of all the directors of the company
- Attendance sheet or register of board meetings and general meetings
Section 12 of the Companies Act 0f 2013 mandates all companies or LLPs to have a registered office at the time of or within 30 days of incorporation. The registered office address of a company or LLP is the principal place of business and all official correspondence from the Ministry of Corporate Affairs (MCA) is sent to the mentioned address only. Therefore, any change of address to the registered office should be intimated to the RoC or MCA.
A company can have other offices such as an administrative office, a corporate office, a branch office, and so on. However, only the registered office address should be notified to the MCA. No intimation to the RoC or MCA is required regarding the establishment or change of address of other offices belonging to the company.
Documents Required for changing address of a Registered office to another state
- List of company directors.
- List of company shareholders.
- List of creditors duly certified by the auditors of the company.
- Copy of public notice published.
- Copy of certificate of incorporation, MoA, and AoA.
- Latest audited financial statements of the company.
- Rent agreement in the name of the company under the new address.
- Utility bill (not older than 2 months) as proof of premises and a NOC certificate from the owner of the premises.
Change Company Name
Sometimes, the name of your company just doesn’t feel right or is not working well for your business; or maybe you need to change your company’s name in order to distance yourself from some negative association. In such a situation, you can change the name of your company to something more suited to your future plans. While picking an alternative name might sound like an easy task, the legal process to change the name of your company is tiresome.
Documents required to change company name
Firstly, the Form MGT-14 need to filed with the RoC along with the following documents:
- Notice of the EGM
- Certified copy of the special resolution passed in the EGM
- The explanatory statement to EGM
- Copy of altered MoA and AoA with the new company name.
Once MGT-14 is approved, the INC-24 e-form should be filed within 30 days along with the following documents:
- A certified true copy of the minutes of the EGM
- Notice of the EGM
- Copy of any approval order received from the other authorities such as IRDA, SEBI, RBI, etc., if any
- Copy of resolution agreement mentioning the members voting for and against the resolution
- Copy of altered MoA and AoA with the new company name
- Other documents regarding any other information sought as optional attachments.