Are you a director of a private limited company?

• May 15, 2019
• By, CA.Vishranth.B.L

The following points to be taken care by a director of a private limited company;

I. On Appointment

• Obtain a Letter of Appointment
• Ensure that the Company has filed RoC E-Form DIR-12
• Obtain a copy of resolution passed by the company for your appointment
• Obtain copies of Certificate of Incorporation (COI), Memorandum of Association (MoA) and Articles of Association (AoA) and go through the same for understanding terms and conditions under which company was originally formed. Also, obtain the copies of amended MoA or amended AoA, if any.
• Obtain the copies of other statutory registration which the company has undergone. This may include;
  • Trade License
  • Shops & Establishment License
  • Professional Tax (PT)– Employer Registration
  • Professional Tax (PT) – Employee Registration
  • Provident Fund (PF) Registration
  • Employee State Insurance (ESI) Registration
  • Goods and Services Tax (GST) Registration
  • Import & Export Code (IEC) Registration
  • Permanent Account Number (PAN)
  • Tax Deduction and Collection Account Number (TAN)
  • MSME/Udyog Aadhaar Registration

  Do ensure that the company possess the valid statutory registration certificate which have been renewed on applicable manner.

• Obtain the status of all assessments, appeals and scrutiny proceedings which are in work in progress. Generally, assessments, appeals and scrutiny proceedings are available under following regulations;
  • Income Tax Act: Regular assessments of income tax returns, appeals filed against the orders, search & scrutiny matters
  • Value Added Tax: Regular assessments of VAT returns
  • Service Tax: Service Tax Audit matters
  • Foreign Exchange Management Act (FEMA): RBI compliance for Foreign Direct Investments (FDI), External Commercial Borrowings (ECB)
  • Software Technology Park of India (STPI): Filing of SOFTEX forms.
  • Labour Compliances: Any enquiries or notices received under Provident Fund, Employee State Insurance, Professional Tax, etc
  • Tax Deducted at Source (TDS) Compliances: Notices received for short/non deduction TDS through TRACES

II. On regular basis

• Ensure that Board Meetings are conducted and board resolutions are passed by Board of Directors (BoD) in applicable business transactions. Few of them to note are;
  • Capital expenditure
  • Raising capital
  • Taking out a loan
  • Entering into material contracts
  • Invest the funds of the Company
  • Appoint internal auditors and statutory auditors
  • Appointment of Company Secretary
  • Authorize buy-back of securities
  • Diversify the business activities


• Ensure that the Shareholders meeting are conducted and ordinary/special resolutions are passed by Share Holders in applicable business transactions. Few of them to note are;
  • Change of registered office
  • Altering the MoA
  • Change of objects of the Company
  • Alteration of AoA
  • Issue of Preferential Shares/Sweat Equity Shares
  • Increasing the subscribed capital
  • Reducing the share capital
  • Buy-back of shares


• Areas of focus during the day-to-day operations;
  • The statutory returns like GST returns, TDS returns, PF Returns, SI Returns, PT Returns, RBI filings, Registrar of Companies (ROC) filings, etc are done within the due date.
  • Check the transactions in cash to ensure that income tax compliances are in line.
  • Labour grievances are settled in time to ensure that there are no legal hurdles.
  • Any sum deducted on making payment to a party like TDS on salary, TDS on other, PF on salary, ESI on salary, PT on salary, etc are paid to the respective departments within the due dates
  • True and fair books of accounts are maintained regularly along with relevant supporting documents.


• Areas of focus during the year-end;
  • The Annual Audits like Statutory Audit under Companies Act, Income Tax Audit, GST Audit are carried out in time.
  • Annual Returns like Professional Tax Annual Return, GST Annual Return, etc are filed within the due date.
  • Income Tax returns are filed in time.
  • Annual RoC returns are filed within the due date.


• You will be personally liable in the following instances;
  • Income Tax: Any non-payment of income tax by the private company will make the director liable to discharge such liabilities
  • Fraudulent Business: A Director might be held liable personally, for debts or other liabilities of a company in case he was knowingly a party to the fraud(s) while carrying on the business.
  • Share Application Money Refund: Directors of a company are personally liable together with the company for repaying the share application money or the surplus share application money received if it is not repaid within the specified time period

Reference:

• http://www.mca.gov.in/