Every company which is a member of the 2013 Companies Act must fulfill certain legal requirements. Some of them apply for each financial year, some only after specific business events. Many business owners report to see these two requirements as the same which they in fact are not.
Annual Compliance maintains a company’s legal status through regular filings and reports. Event Based Compliance reports to the Registrar of Companies (ROC) on important company changes like director appointments or registered office transfers.
Knowing what the differences are which in turn enables companies to steer clear of penalties, maintain accurate records, and in turn build that which which investors, lenders, and regulators put their trust in.
Quick Summary
- Annual Compliance is mandatory every financial year.
- Event-Based Compliance applies only after specific corporate events.
- Both fall under the Companies Act, 2013 and applicable MCA rules.
- Missing either type of compliance can lead to penalties and regulatory issues.
What Is Annual Compliance?
At the close of each fiscal year which may or may not see business action, annual compliance reports and related corporate actions are a requirement for eligible companies.
Common Annual Compliance requirements include: Annual common compliance requirements include:
- Filing financial statements (AOC-4)
- Submitting the Annual Report (MGT-7 or MGT-7A).
- Holding the Annual General Meeting (AGM)
- Conducting a statutory audit, where applicable
- Maintaining statutory registers
- Completing Director KYC (DIR-3 KYC)
For instance, even a private company which doesn’t do any sales has to file these reports. Also we see that not putting out any products may still be subject to these rules. Should they choose to ignore which may in turn invite additional charges and regulatory notice.
Regular Annual Compliance also improves corporate governance and, at the same time, sees to it that banks, investors, and government authorities have more confidence in us.
What Is Event-Based Compliance?
Event based compliance includes reports that become a requirement only after a certain corporate action.
Unlike Annual reports, which are on a yearly basis, these filings are a result of a related event that a company reports as it happens.
Common examples include: Includes for example:
- Director appointment or resignation (DIR-12).
- Change in the registered office (INC-22)
- Share allotment (PAS-3)
- Increase in authorised share capital (SH-7)
- Appointment or resignation of an auditor
- Change in company name
- Amendment of the MoA or AoA
For instance if a company brings in a new director it should report that to the ROC in the required time frame which is set forth instead of waiting for year end reports.
Annual Compliance vs Event-Based Compliance
| Basis | Annual Compliance | Event-Based Compliance |
| Trigger | Every financial year | Specific corporate action |
| Frequency | Once a year | Only when required |
| Purpose | Maintain the company’s legal status | Update ROC records after corporate changes |
| Timeline | Fixed due dates | Within the prescribed time limit after the event |
| Examples | AGM, AOC-4, MGT-7 | DIR-12, INC-22, PAS-3 |
Key Differences Between Annual Compliance and Event-Based Compliance
Although there is no choice between the two types of compliance they do differ in some very large degrees.
Trigger
Every year Annual Compliance issues out it’s financial year calendar. Which in turn all eligible companies report on. Event based compliance only comes into play upon a certain corporate action. In the absence of an event no filing is required.
Planning
Businesses can get ready for Annual Compliance well in advance as the due dates are the same each year. Event based compliance requires prompt action. A company which identifies the event, puts together the required documentation, and files within the set deadline is what is expected under the applicable MCA regulations.
Business Impact
Missing Annual Report often results in extra fees, penalties, and long term issues.Company records become out of date, we see delay in approvals, also in the case of future transactions like fundraising, mergers, bank loan applications, or due diligence which may be made harder as official records do not reflect the company’s current status.
Best Practices to Stay Compliant Throughout the Year
Managing when companies put in place a structured approach instead of at the last minute.
Maintain a Compliance Calendar
Track down all Annual Compliance deadlines in advance. Before each filing date do internal reviews to avoid last minute pressure.
Create an Event Reporting Process
Business reports must go to the compliance or legal team as soon as they see fit to appoint a director, issue shares, change the registered office, amend the articles of association or report any other corporate change that requires an ROC filing.
Keep Records Updated
Maintain board resolutions, statutory registers, shareholder records, and financial reports throughout the year. Proper documentation which in turn improves the speed of annual and event based filings also reduces the risk of errors.
Use Compliance Software
Digital tools for compliance which track deadlines, store documents, and send out automatic reminders before key filing dates.
Seek Professional Guidance
Growing companies see great change in their corporate structure yearly. Working with experienced compliance professionals reduces filing errors, we also see they do a great job of timely submission and that they stay current with ever changing regulatory requirements.
Conclusion
Annual Compliance and Event Based Compliance may have different functions but still are of importance under the Companies Act, 2013. Annual Compliance is on a yearly schedule which in turn Event Based Compliance is only a feature after specific corporate events.
Throughout the year those that proactively see to it that they do so reduce penalties, maintain accurate records, and in turn build greater stakeholder trust. Proactive compliance also supports smooth audits, funding, and business growth.
Need advice on your Annual or Event Based Compliance issues? At FinGuru India we have expert support for ROC filings, statutory compliance, annual returns, event based filings, and full end to end corporate compliance solutions.
