Compliances Based on Threshold Limits under the Companies Act and SEBI Laws

What are the Compliances Based on Threshold Limits under the Companies Act?

Under the Companies Act, several compliance requirements are based on specific threshold limits concerning the company's size, turnover, and employee count. Here are some key compliances based on such thresholds:

Appointment of Auditors:
– Small Companies: Companies with a paid-up share capital of less than INR 10 crores and a turnover of less than INR 100 crores may not require a mandatory rotation of auditors.
– Other Companies: Companies exceeding these thresholds must rotate their auditors every ten years for an individual auditor and every twenty years for an audit firm.
Corporate Social Responsibility (CSR):
– Companies with a net worth of INR 500 crores or more, or turnover of INR 1000 crores or more, or a net profit of INR 5 crores or more during the immediately preceding financial year are required to form a CSR Committee. These companies must spend at least 2% of their average net profits of the last three financial years on CSR activities.
Statutory Audit:
– All companies, regardless of their size, are required to have their annual accounts audited. However, the requirement for the type of audit and the auditor's qualifications can vary based on the company’s size and turnover.
Secretarial Audit:
– Mandatory for every listed company and public companies with a paid-up share capital of INR 50 crores or more, or turnover of INR 250 crores or more.
Filing of Financial Statements:
– XBRL Filing: Companies listed in India and their Indian subsidiaries, or companies with a turnover of INR 100 crores or more, or with a paid-up capital of INR 5 crores or more are required to file their financial statements in XBRL format.
Internal Audit:
– Mandatory for every listed company, unlisted public companies with paid-up share capital of INR 50 crores or more during the preceding financial year, or turnover of INR 200 crores or more, or outstanding loans or borrowings from banks or public financial institutions exceeding INR 100 crores or more at any point of time during the previous financial year, and private companies with a turnover of INR 200 crores or more, or outstanding loans or borrowings from banks or public financial institutions exceeding INR 100 crores or more.
Appointment of Key Managerial Personnel (KMP):
– Every listed company and all public companies with a paid-up share capital of INR 10 crores or more are required to have whole-time key managerial personnel.
Managerial Remuneration:
– Companies with high profits are restricted in the amount of remuneration they can pay to their directors, which includes managing director or whole-time director, and managers without government approval.

These threshold-based compliances ensure that larger companies with greater resources and impacts adhere to stricter governance and transparency standards, ensuring better corporate governance and protection of shareholder interests.

By Taxmann’s Research and Advisory Team | Corporate Laws

Table of contents

1. Introduction
2. Compliances Based on Threshold Limits under the Companies Act, 2013
3. Meeting Requirements

1. Introduction

With the introduction of the Companies Act, 2013, in 2014, the compliance burden of every Company has increased substantially irrespective of its nature, be it a Private Limited Company, Public Limited Company, Listed Company, Small Company, Section-8 Company, or One-Person Company (OPC).

In order to increase transparency in reporting, the MCA and SEBI frequently come out with new amendments by way of circulars and notifications. Companies must adhere to all the applicable compliances within the specified due dates. Any non-compliance on the part of companies often results in heavy penalties. It is a good practice to track the relevant compliances as per the applicable provisions of the Companies Act, 2013/SEBI as the case may be.

Under the Companies Act 2013, various compliances must be done on a time-to-time basis. For a better understanding of the same, we have categorised the various Compliances on the following basis:

• Event-based Compliance: Compliance is to be done upon the occurrence or happening of a certain event, like filing E-form INC-22 upon shifting the company’s registered office.
• Time-based Compliance: Compliances are to be done on an annual, half-yearly, and quarterly basis, like the Filing of E-form AOC-4 and MGT-7.
• Specific Criteria-Based Compliance: Some compliances are based on paid-up share capital, turnover, or any other specific requirement, such as filing E-Form AOC-4 (XBRL) or appointing a Company Secretary.

In addition to the above-mentioned compliances, a listed company is also required to make various Quarterly, half-yearly, and event-based compliances and disclosures under the following regulations:

• SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015.
• Compliances under SEBI (Depositories and Participants) Regulations, 2018
• Compliances under SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011
• Compliances under SEBI (Prohibition of Insider Trading) Regulations, 2015

This write-up also discusses in detail the compliances w.r.t. to holding of Annual General Meeting (AGM), Minimum no. of Board Meetings/Committee Meetings as required under the Law.

2. Compliances Based on Threshold Limits under the Companies Act, 2013

3. Meeting Requirements

1. Sec 177 shall not apply – Exemption Notification to specified IFSC Public Companies, GSR 08 (E) dated 04.01.2017
2. Sec 178 shall not apply – Exemption Notification to specified IFSC Public Companies, GSR 08 (E) dated 04.01.2017
3. IFSC Public Companies shall hold the first meeting of the Board of Directors within sixty days of its incorporation and thereafter hold at least one meeting of the Board of Directors in each half of a calendar year.—Exemption Notification to specified IFSC Public Companies, GSR 08 (E) dated 04.01.2017
4. IFSC Private Companies shall hold the first meeting of the Board of Directors within sixty days of its incorporation and thereafter hold at least one meeting in each half of a calendar year—Exemption Notification to specified IFSC Private Companies, GSR 09 (E) dated 04.01.2017
5. The provisions of the Board meeting shall not apply to an OPC having only 1 Director—Proviso to Section 173 (5)
6. IFSC Public Companies shall hold the first meeting of the Board of Directors within sixty days of its incorporation and thereafter hold at least one meeting of the Board of Directors in each half of a calendar year.—Exemption Notification to specified IFSC Public Companies, GSR 08 (E) dated 04.01.2017
7. IFSC Private Companies shall hold the first meeting of the Board of Directors within sixty days of its incorporation and thereafter hold at least one meeting in each half of a calendar year—Exemption Notification to specified IFSC Private Companies, GSR 09 (E) dated 04.01.2017
8. Section 8 companies shall hold at least one meeting within every six calendar months— Notification no. G.S.R. 466(E) dated 5th June, 2015
9. A One Person Company, a small company, a dormant company, and a private company (if such private company is a start-up) shall be deemed to have complied with the provisions of this section if at least one meeting of the Board of Directors has been conducted in each half of a calendar year and the gap between the two meetings is not less than ninety days Section 173 (5)
10. The provisions of the Board meeting shall not apply to an OPC having only 1 Director—Proviso to Section 173 (5)
11. Applicable on Top 1000 listed entities, determined on the basis of market capitalization as at the end of the immediate preceding financial year; and a ‘high value debt listed entity

Dive Deeper
Compliance Calendar for Unlisted Public Companies
Compliance Calendar for Private Companies
Compliance Calendar for Section 8 Companies
Compliance Calendar for One Person Company & Small Company
Compliance Calendar for Listed Companies