Overview of Section 8 Company Compliance
The Companies Act, 2013 has made it mandatory for all the Section 8 Company Companies to adhere to Section 8 Compliance with the MCA (Ministry of Corporate Affairs).
The purpose of forming Section 8 Company is to promote, encourage, and nourish activities related to art, 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 of Section 8 Company Compliance
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Documents Required for Annual Compliances of Section 8 Company
List of mandatory Section 8 company compliances
Appointment of Auditor
It is compulsory for a Section 8 company to appoint an auditor to take care of their financial recordings every year.
Maintaining Registers
Maintaining statutory records in registers is expected from Section 8 companies. These registers are maintained on a year basis and the purpose of these registers is to check how the company has performed annually. Information related to members, loans, charges and investment is provided in the register.
Maintenance of Financial Statements
Financial records of a Section 8 Company are maintained on an annual basis. Once the financial records are prepared they are presented in the front of the registrar. Financial records consist of the following information:
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 Board Meeting
Board meeting of every company should be held twice a year in case of small companies. The gap between the two meetings should not be more than 90 days.
Conduct Annual General Meeting
Annual General Meeting of the Section 8 Company should be held yearly on or before 30th September. It is necessary for all the directors, members, and auditors to attend the meeting. They should be notified regarding the meeting by giving not less than 21days notice. Form MGT-15 is used to submit the report of Annual General Meeting. The report must be submitted within 30 days of conducting the meeting.
Filing of Financial Return with RoC
E-form AOC-4 is used to file the copy of financial statements. It is filed within 30 days from the date on which the annual general meeting is held.
Filing of Annual Return with RoC
Form MGT-7 is used to file the annual return of the company. Annual return is filed within 60 days from the conclusion of the Annual General Meeting. Where at whatever year no Annual General Meeting is held, the yearly return ought to be recorded inside sixty days from the days on which the yearly General Meeting ought to have been held that is 30 September. It ought to be connected with the announcement referencing the explanations behind not holding the Annual General Meeting.
Event-based Annual Compliances of Section 8 Company
Event based, as the name recommends, are the compliances should be Documented on the event of explicit occasions. In contrast to annual compliances, these are non-periodical in nature.
Checklist for Event-based compliances for Section 8 Company:
Tax Compliance for Section 8 Companies
Section Company is bound to pay corporate tax as mentioned in the Income Tax Act. But by adopting certain measures the Company can exempt its certain income from the income tax. To entertain such exemptions Section 8 Company needs to fulfil the following compliances:
Penalties to be charged in case of Non-Compliance
The Ministry of Corporate Affairs has the authority to impose certain penalties in case it encounters any non-compliance with the procedures.
Penalties to be imposed are as follows:
Due Dates for filling Section 8 Company Compliances
Non-compliance can lead to penalty and for the Section 8 Company the best way to ignore penalty is quite smooth, all the company has to do is follow the compliances within the stipulated period of time.
|
COMPLIANCE |
DUE DATE |
|
AGM (Annual General Meeting) |
30thSeptember |
|
AOC-4 |
Within 30 days of AGM |
|
MGT-7 |
Within 60 days of AGM |
|
Income Tax Return |
30thSeptember |
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Frequently Asked Questions
Yes, it is the candidate's decision to incorporate a Section 8 Company as a private or public limited company in the wake of meeting the consistence necessity for example 2 Directors and 2 individuals if there should arise an occurrence of privately owned business and 3 Directors and 7 individuals in the event of Public Limited Company. However, One Person Company (OPC) can't be joined as a Section 8 Company according to Rule 3 of the Companies (Incorporation) Rules, 2014.
No, there is a particular exemption to Section 8 and One Person Company from conforming to the Secretarial Standards. In any case, Companies must hold fast to Secretarial norms so as to raise the corporate governance standards.
Tax Benefits: Section 8 Company is a non-benefit association that is the reason they are excluded from certain arrangements of the personal expense. They are additionally given various different conclusions and other tax reductions. One of such exclusion is under Section 80G of the Income Tax Act, 1961, whereby contributors to non-benefit associations may guarantee a half discount against gifts made. The registration done under Section 80G will be legitimate for regularly a time of one-three years.
- Inability to send a copy of audited fiscal reports to the individuals before the Annual General Meeting, and record the minutes of the meetings are each punishable with a fine up to rupees 25,000/ -
- Inability to lead an Annual General Meeting is punishable with a fine up to Rupees one lakh.
- Inability to present a report on Annual General Meeting is punishable with a fine of Rupees one Lakh which may reach out to Rupees five Lakh.
Inability to Document Annual Returns is punishable with a fine of Rupees 50,000 which may stretch out to Rupees five lakh.
Section 2(42) of the Companies Act, 2013 defines the term "Foreign Company" and means any company or body corporate incorporated outside India which has a place of business in India whether by itself or through an agent, physically or through electronic mode; and conducts any business activity in India in any other manner. Now since a Company or a body corporate incorporated outside India for doing not for profit activit es, which has opened a branch/liason office in India, cannot fall in definition of a foreign company as business activity is missing. Therefore, such company cannot be termed as foreign company. However, subject to compliance of FEMA regulations, it can open branch/liason offices. Such not for profit companies or bodies corporate incorporated outside India can promote and register a Section 8 Company in India as a distinct entity.
No. As per proviso to section 2(85), section 2(85) does not apply to a Section 8 Company and accordingly, a Section 8 Company cannot be treated as a small company. Likewise, a small company on conversion to a Section 8 Company shall cease to be a small company.
Stamp duty on issue of share certificates is governed by Indian Stamp Act, 1899 as adapted by respective state or stamp act of respective state, as the case may be. No relaxation of special rate of stamp duty has been provided by any of the state in respect of stamp duty payable on issue of share certificates by Section 8 Company.
There are special requirements to be complied with under the Foreign Contribution and Regulation Act, 2010 before a Section 8 Company can receive any contributions or donations from overseas/outside India from non-residents. The provisions of the said Act are in addition to the provisions under the Companies Act.
Yes. Section 8(1) of the Companies Act, 2013 allows person or association of persons to be registered as a Section 8 Company on fulfilment of certain conditions and procedure as prescribed therein. The term "person" has not been defined in the Companies Act, 2013. Section 2(41) of the General Clauses Act, 1897 provides that "person" shall include any Company, or association or body of individuals, whether incorporated or not. Accordingly, a Society registered under the Societies Registration Act, 1860 is a person. Therefore, Society can be registered/converted as a Section 8 Company.
The prescription under section 149(1) of Companies Act 2013 as to having Minimum of three directors for public limited company and two directors for private limited company and maximum of fifteen directors is not applicable to section 8 company and thus there is no prescription with respect to minimum or maximum directors in a section 8 Company. However, second proviso to section 149(1) requires a woman director in prescribed class of companies. Also section 149(3) requires every company to have a resident director.
