Understanding Compliance

Compliance refers to adhering to rules, regulations, and laws set by the government. Businesses must comply with these requirements to maintain a good corporate image and avoid legal penalties. Companies must make diligent efforts to ensure they adhere to relevant laws, policies, and regulatory frameworks.

Consequences of Non-Compliance

Failure to comply with government-mandated rules and regulations can lead to penalties, including fines. Directors in default may also face legal action, including fines, imprisonment, or both, depending on the severity of the non-compliance.

Statutory Compliance Checklist for LLPs

A Limited Liability Partnership (LLP) is a hybrid of a partnership firm and a company, governed by the Limited Liability Partnership Act, 2008. LLPs must comply with statutory requirements annually. Below are the key compliance obligations:

• Books of Accounts: LLPs must maintain books of accounts on either a cash or accrual basis. LLPs with a turnover exceeding Rs. 40 lakhs or capital over Rs. 25 lakhs must undergo an audit by a Chartered Accountant.
• Annual Return Filing: LLPs must submit the following forms to the Ministry of Corporate Affairs:
  • Form 8: Filed within 30 days from the end of six months of the financial year, disclosing solvency and account statements.
  • Form 11: Contains details of partners and must be submitted by May 30th each year.
• Income Tax Return Filing: LLPs must file income tax returns annually, regardless of their profit or income.

Compliance Checklist for Nidhi Companies

Nidhi Companies must follow both generic and annual compliance requirements.

Generic Compliance:

• Minimum 200 members within one year of incorporation.
• Net owned funds of at least Rs. 10 lakhs.
• Deposits must be equal to or greater than 10% of outstanding deposits.
• The net owned fund to deposit ratio should not exceed 1:20.
• Maintenance of statutory books and registers.
• Convening statutory meetings.

Annual Compliance:

• Form NDH-1: Return of Statutory Compliance.
• Form NDH-2: Extension request for NDH-1 compliance.
• Form NDH-3: Half-yearly return.
• Annual filings: MGT-7 and AOC-4.
• Income Tax Return Filing: Mandatory annual submission.

Compliance Checklist for NBFCs

• NBS-8: Annual return for NBFCs with assets between Rs. 100-500 crores.
• NBS-9: Annual return for NBFCs with assets below Rs. 100 crores.
• Statutory Auditor Certificate: Confirms business engagement in non-banking financial services under Section 45-IA of the RBI Act.
• Credit Information Company (CIC) Membership: NBFCs must register with agencies like CIBIL, Equifax, Experian, or Highmark.
• FIU-IND Registration: Compliance with the Financial Intelligence Unit-India.
• CERSAI Registration: Central Registry of Securitisation Asset Reconstruction and Security Interest compliance.
• CKYC Compliance: Maintenance of company’s Know Your Customer (KYC) records.