Overview

The Companies Act, 2013 has made it mandatory for all Section 8 company companies to comply with Section 8 compliance with MCA (Ministry of Corporate Affairs).

The purpose of formation of Section 8 company is to promote, encourage and nurture activities related to arts, science, sports, commerce, charitable activities etc. Section 8 Company can be categorized as a Non-Governmental Organization. These companies enjoy the liberty of being treated as ‘Limited Company’, though, word ‘Limited’ is not added at the end of their names. Concisely, Section 8 companies work in the direction of promoting needy communities and sectors in India. These Companies are not liable to give income or dividend to its members.

Benefits

• Gives the company a better credibility
• Protects the company from any legal hassle
• Help the company circumvent penalties
• Work towards building trust among customers

Required Documents

• Memorandum of Association
• Article of Association
• DSC
• Certificate of Incorporation

Compliance List

• Auditor appointment

  It is mandatory to appoint an auditor for a section 8 company to take care of its financial recording every year.

• Maintaining registers

  Maintaining statutory records in registers is required from Section 8 companies. These registers are maintained on a yearly basis and the purpose of these registers is to check how the company has performed annually. Information related to members, loans, fees and investments is provided in the register.

• Maintenance of financial statements

  Section 8 The company's financial records are maintained on an annual basis. Once the financial records are prepared they are presented to the registrar. Financial records contain the following information:

• 1. Trading Account
• 2. Profit and Loss Account
• 3. Balancesheet
• Preparing Director’s Report

  Section 134 of the Companies Act, 2013 says that Form AOC-4 is needed to file the Director’s Report. The purpose of preparing a Director’s Report is to give shareholders a preview of the financial position of the company and the scope of its business. The signed ‘minutes of meetings’ is required to be maintained at the Registered Office.

• Income Tax Return Filing

  Section 8 company are required to file for Income Tax Returns on or before 30th September of the next fiscal year. In order to give complete overview of the company’s income it is essential to file for Income Tax return. But if the company is registered under Section 12A and 80G it can avail the benefit of tax exemption.

• Conduct a board meeting

  Board meeting of every company should be held twice a year in case of small companies. The difference between two meetings should not be more than 90 days.

• Conduct Annual General Meeting

  Section 8 The annual general meeting of the company should be held annually on or before 30 September. All directors, members and auditors are required to attend the meeting. They should be informed of the meeting by giving less than 21 days notice. Form MGT-15 is used to present the report of the Annual General Meeting. The report must be submitted within 30 days of holding the meeting.

• Filing of Financial Returns with RoC The

  e-form AOC-4 is used to file a copy of the financial statements. It is filed within 30 days from the date on which the annual general meeting is held.

• Filing of annual returns with RoC

  Form MGT-7 is used to file the company's annual return. The annual return is filed within 60 days from the conclusion of the Annual General Meeting. Where in any year no annual general meeting is held, the annual return should be filed within sixty days from the day on which the annual general meeting should take place, which is on 30 September. The Annual General Meeting should be attached to the Declaration referencing the explanations behind not doing so.

Event-based annual complaints

Incident based, as the name recommends, compliance must be documented on the occurrence of explicit occasions. Unlike annual compliance, these are non-periodic in nature.

Section 8 Checklist for event-based compliance for the company:

• Transfer of shares
• Allotment of shares
• Appointment/Resignation of Directors
• Appointment/Resignation of Auditors
• Modification in company’s name
• Modification in company’s MOA
• Appointment of Key Managerial Personnel
• Receipt of share application money
• Any alteration in the company’s structure

Tax Compliance

Section company is obliged to pay corporate tax as mentioned in Income Tax Act. But by adopting certain measures, the company can exempt its fixed income from income tax. To entertain such exemptions Section 8 company is required to fulfill the following compliance:

• Section 8 companies should be registered under Section 12A of the Income Tax Act, in which the Principal Commissioner can use 10A.
• If the company wants to fall under the eligibility criteria for exemption, then it should follow the conditions mentioned in section 11.
• Section 80G should approve the company through Form 10B.

Penalty

The Ministry of Corporate Affairs has the authority to award certain penalties if it encounters any non-compliance with the procedures.

The punishments to be imposed are as follows:

• The Central Government may revoke the permission given to the organization on a closed occasion, which suggests that the organization is acting unfairly or violently for the purpose of the organization.
• Organizations will be properly guilty, which shall not be less than one million rupees and may be increased to one crore rupees.
• The head of the organization and every officer who is in default shall be guilty with detention for one term, which may draw up to twenty five lakh rupees or with both.
• In the event that it is discovered that the organization's issues were misdirected, by default each officer would be a threat to activity under the 447 zone.

Due dates

Non-compliance can lead to penalties and the best way for a Section 8 company to ignore the penalty is fairly easy, all the company has to do is to comply with the compliance within the stipulated period of time.

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