What are the legal compliances required for a Start-up?

LegalKart Editor
LegalKart Editor 04 min read 2910 Views
Last Updated: Dec 01, 2023
Legal Compliances for Startups in India

Startups & Law

Entities incorporated under the Companies Act, 2013 as a private limited company or registered as a partnership firm under section 59 of the Partnership Act, 1932 or a limited liability partnership under the Limited Liability Partnership Act, 2008 in India are regarded as start-ups ten years from their incorporation.

Also read How to Register Your Startup in India: 5 Simple Steps for Registration

These start-ups are expected to follow certain legal requirements. Various legal, regulatory, and annual compliance deadlines, laid down by the Acts which govern start-ups, must be complied to. Non-compliance may lead to start-ups facing penalties, closer inspections and may even lead to disciplinary actions against its directors. Additional fees may be imposed if there is a delay in any submissions; these costs keep going up as long as they are delayed. To avoid these complications all compliances must be adhered to.

Annual Compliances required by a start-up:

One of the foremost legal requirements for startups are Annual Compliances that each startup is required to comply with.

  • Annual General Meeting: Every start-up is required to have a general meeting once a year. The annual compliance deadline for the same should be no later than September 30th, six months after the conclusion of the fiscal year. The approval of financial statements, the announcement of income, the registration or nomination of auditors, the appointment and compensation of directors, and the appointment and compensation of officers all take place during this annual general meeting.
  • Director’s Report: Having a director’s report is another crucial annual compliance. The Director's Report ought to be publicly disclosed each year. The report should be signed by the company's chairperson who has been given permission by the board. The directors are required to submit an annual written statement to the corporation in the format required for the directors' report.
  • Annual Filing of Returns and Financial Statements: E-form MGT-7 is the electronic form allocated by the Ministry of Corporate Affairs (MCA) for companies and start-ups to file their annual returns and financial statements to the Registrar of Companies (“ROC”). All businesses are given access to this computerised form to submit the specifics of their annual return. The annual compliance deadline for every corporation to submit its annual return is within 60 days of the annual general meeting. For new start-ups, these returns should be filed with the new Company registration.
  • Income Tax Filing: Income tax is to be filed by all individuals, start-ups and other companies annually. Even if a start-up company does not produce any money during the fiscal year, filing an income tax return is required. It is mandatory to make financial statements, prepare income tax returns, and file income tax returns.
  • GST Return Filing: Even if they no sales are made during the month or year, all companies, start-ups and individuals selling goods and services in India are required to register for GST and file GST returns. GST registration is are a necessary annual compliance for start-ups selling goods and services in India.  
  • Statutory Audit Compliances: At the conclusion of the fiscal year, every firm is expected to prepare its accounts and have them audited by a Chartered Accountant. In order to determine if an organisation is giving a clear and accurate picture of its financial condition, the statutory audit looks at data such as account balances, bookkeeping records, and banking transactions. Therefore, start-ups must also appoint an in-house auditor to ensure that there are no discrepancies in records.

You may also read Tax Exemptions: Know About Incentives For Start-Ups

Legal Requirements for a Start-up:

  • The First Board Meeting- The first meeting of the board of directors is a regulatory compliance that is mandatory for newly incorporated companies and should take place within 30 days of the incorporation of your company. After that, there should be a total of four Board meetings throughout the year. At least two board meetings should be held annually for new small businesses. A board meeting is a requirement that should not be skipped.
  • Internal Company Compliance: Monthly and Annual audits of financial statement must be carried out diligently since they are an essential part of the regulatory compliance. The holding of the annual general meeting, conducting a business analysis, discussing findings with the top staff, etc. It is necessary to update and review firm policies and practises, as well as to keep track of legislative changes and compliance requirements.
  • Maintenance of Required Registrations and Records: Maintaining registration and recordkeeping is a legal requirement for start-ups. The documents must be kept current and accessible to company personnel. A register of directors, a register of company members, a register of shares, a register of chairs, and so on should all be included in the registration. Additionally, the business is required by law to maintain the records. The following documents must be preserved and updated on a regular basis: Transactions statements, Minutes Book of Board Meetings/AGM or other meetings; Books of Accounts; Financial Statements; ROC File etc. Records include decisions made by the board of directors, board meeting minutes, the results of the annual general meeting, and the company's articles of incorporation. It is necessary to keep all of this data.
  • Obtaining Licenses and their Renewals: In India, seeking licenses within 40 days of incorporation is a legal requirement for start-ups. All start-ups must have the following licences: Trade License, Import and Export Code, Shop and Establishment Act License, etc. These licences, depending on their nature, must be renewed annually, before the licence expires, or as instructed by the licence authority.
  • Other Statutory Compliances: Compliance to various acts such as the Employee Provident Fund Scheme, 1952; The Sexual Harassment of Women at Workplace (Prevention, Prohibition, and Redressal) Act, 2013; The Industrial Disputes Act, 1947 The Employee’s State Insurance Act, 1948; Minimum Wages Act 1948; Trade Union Act. 1926 are essential legal requirements for start-ups.

You may also read Pro Bono Legal Service - Know About Free Legal Services

It is pertinent for startups to know the various legal requirements applicable to them. Annual compliance deadlines should not be missed, as failure to abide by the compliance regulations, may lead to punitive liability, that may include monetary or other impositions.


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