Section 8 Company

Annual ROC Filings and Requirements for Section 8 Companies

calendar02 Jan, 2023
timeReading Time: 9 Minutes
Annual ROC Filings and Requirements for Section 8 Companies

A Section 8 company is a non-profit entity which has been formed for charitable purposes or for social welfare purposes like “promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any other such object”. For an entity to operate as a Section 8 company, it is required to obtain the requisite licence from the central government. Such companies are allowed to make a profit. However, all profits and incomes generated from such companies can only be used to further the objects for which the company was established or to reinvest the money into the company. Section 8 company is prohibited from paying any remuneration to its directors, founders, promoters and members. It is also prohibited from distributing dividends to any of its members. A Section 8 company is regulated by the Ministry of Corporate Affairs and is governed by the Companies (Incorporation) Rules, 2014 and the Companies Act of 2013.  In this blog we will discuss Annual ROC Filings and Requirements for Section 8 Companies.

Section 8 companies are provided many exemptions and benefits by the Government of India. Amongst many of the benefits granted to such companies, Section 8 companies receive tax exemptions under the Income Tax Act of 1961, and the liability of the members of a Section 8 company is limited. They are also granted many exemptions and relaxations when it comes to meeting annual compliances, which other companies are mandated by the MCA[1] and under the Companies Act of 2013 required to follow. These include requirements for Section 8 Companies pertaining, among other things, to the appointment of directors, the appointment of company secretaries for annual general meetings and board meetings, the notice period for meetings, and disclosure of interest by the directors. The exemptions and relaxations granted to a Section 8 company pertaining to annual requirements for Section 8 Companies are as follows:

  • Section 8 companies are required to provide a notice of at least 14 days before a general meeting is to be conducted. The general requirement from companies other than Section 8 companies regarding the notice period is 21 days before the date the general meeting is to be held.
  • Notice of a board meeting can be sent seven days before when such a meeting is to be held.
  • Directors have the freedom to decide upon the venue, time, and place of the general meeting.
  • Section 8 company is exempted from the requirement minutes of board meetings or general meetings, or any resolution passed unless it is expressly mandated to do so in the Articles of Association of the company.
  • Section 8 companies have the freedom to appoint any number of directors. They do not have to pass a special resolution to appoint more than 15 directors, as other companies require.

Annual ROC Filings and Other Compliance for Section 8 Companies – Requirements for Section 8 Companies

All companies, including Section 8 companies, are required to adhere to certain compliances as mandated by the Ministry of Corporate Affairs. There are specific Registrar of Companies annual and event-based compliances that every company must comply with. It is imperative that companies adhere to these mandates to avoid incurring hefty penalties and other penal actions.

Certain forms are required to be filed annually, half-yearly or once with the Registrar of Companies. Below mentioned are such compliance:

  • Form INC 20 A- Appointment of Auditor

Form INC 20 A must be filed by companies that have been incorporated after 2nd November 2018 before 180 days expire from the company’s date of incorporation. This form is filed to inform the Registrar of the company’s operations and business commencement. This mandate is provided for under Section 10(A) of the Companies Act of 2013.

  • Prepare and Maintain Financial Statements of the Company

Section 8 company is required to prepare and maintain annual financial statements for the company. This shall contain financial information pertaining to the trading account balance sheet, profit, and loss account.

  • Form AOC-4

Form AOC-4 is submitted to the Registrar of companies to file the annual financial statements of the Section 8 Company. This form must be filed before the expiry 30 days from the date of the annual general meeting.

  • Form ADT-1

In accordance with section 139 of the Companies Act 2013, every company is required to appoint an auditor. Such statutory auditor shall be responsible for auditing annual reports and the company’s book of accounts. The auditor is appointed for a period of 5 years. Companies must inform the Registrar of companies of the appointment of the statutory auditor. The form must be filed within 15 days of the annual general meeting.

Section 139(6) mandates that the appointment of the first statutory auditor must be appointed before the expiry of 30 days from the company’s date of incorporation. Such arrangement must be reported to the Registrar of companies by filing this form within 30 days from the company’s date of incorporation.

  • Form ADT-3

In accordance with the mandate provided for in Section 140 of the Companies Act of 2013, every company is required to inform the Registrar of companies of the resignation of any statutory auditor before the expiry of 30 days from when such resignation was tendered. Form ADT-3 must be filed with the Registrar of companies furnishing information regarding such resignation.

  • Form IEPF-2

In accordance with section 125 of the Companies Act of 2013 and IEPF Authority (accounting, audit, transfer and refund) Rules of 2016- Rule 5(6), statements pertaining to any unclaimed dividends or shares is required to be filed with the Registrar of companies under Form IEPF-2 before the expiry of 60 days from the date on when the annual general meeting was held.

  • Form MBP-1

Every director of a company is required to disclose the interest held by a director to the Section 8 Company in the first board meeting in a particular financial year or when there is any change in the disclosures of interests which have already been made.

  • Form DPT-3

In accordance with Rule 16 of the Companies (Acceptance of Deposits) Rules of 2014, every company except a government company is required to give information pertaining to deposits or transactions not amounting to a deposit but which involve money or loan. Form DPT-3 shall be filed every year by 30th June.

  • Form DIR-3 KYC

As is provided under Rule 12A of Companies (Appointment and Qualification of Directors) Rules, 2014, every company director with a DIN or Director Identification Number must file this form annually with the Ministry of Corporate Affairs. Directors who have in the previous financial year had filed the E-form can proceed to complete their KYC by using the web-based KYC services provided by the MCA, which is verified through OTPs that shall be sent on email IDs and mobile numbers which have been registered previously. This form must be filed before the expiry of six months from the cessation of the financial year.

  • Form MR-1

In accordance with the mandate made under the Companies Act of 2013 Section 196(4) read with Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014- Rule 3.

Form MR-1 shall be filed by public companies furnishing details regarding the appointment or reappointment of managers, directors or whole-time directors. Form MR-1 is required to be filed with the Registrar of companies before the expiry of 60 days from when such appointment or reappointment took place.

  • Form MGT-4

This form is to give the Registrar of companies information as to any declaration made by registered owners of shares who do not hold any beneficial interest in any shares of the company. Such statement must be made to the reporting company before the expiry after 30 days from when the name of such person was entered into the register of the members of the company. A declaration shall also be made when there is any change in the beneficial interests in the shares.

  • Form MGT-5

This form is filled to give the Registrar of companies requisite information made by persons having beneficial interests in the shares of the reporting company but whose names have yet to be entered into the register of members of the company. Such declaration must be made to the reporting company before the expiry of 30 days from when the person gets such beneficial interest. A statement shall also be made when there is any change in the beneficial interests in the shares.

  • Form MGT-6

Form MGT-6 is required to be filed by the Section 8 Company with the Registrar of companies giving information containing declarations made by the beneficial owner in Form MGT-4 and Form MGT-5 as is provided for in Section 89 of the Companies Act of 2013. This form must be filed before the expiry of 30 days from the dates on when Form MGT-4 and Form MGT-5 were received.

  • Form MGT-7 or Form MGT-7A

The annual returns shall be filed within 60 days after the annual general meeting is held under Form MGT-7 with the Registrar of companies.

  • Form MGT-14

Form MGT-14 is required to be filed to intimate the Registrar of the resolutions passed. This form is required to be filed before 30 days from when the resolution was passed.

  • Form BEN-1

Form BEN-1 is filed with the Registrar of companies furnishing details pertaining to declarations made by significant beneficial owners to the company. Companies (Significant Beneficial Owners) Amendment Rules, 2019 has stated that significant beneficial owners must make declarations about their interest in the company. Such declarations must be made to the reporting company. The declaration shall also be made, providing details pertaining to any change in the ownership of significant beneficial owners. The form is required to be filed before the expiry of 30 days from the date on which such person was made a significant beneficial owner when any change in the ownership occurred.

  • Form BEN-2

Form BEN-2 is required to be filed with the Registrar of companies by the Section 8 Company providing details of declarations made by significant beneficial owners. This is provided for in the Companies Act of 2013, Section 90(4) and Companies (Significant Beneficial Owners) Rules, 2014- Rule 4. The company is required to file this form before the expiry of 30 days from the date on which declarations made in Form BEN-1 was received.

  • Form PAS-6

In accordance with Companies (Prospectus and Allotment of Securities) Rules, 2014, Rule 9A(8), every unlisted public company is required to file Form PAS-6 before the expiry of 60 days from the cessation of 6 months in a financial year. This form is filed to reconcile the audit report of the company’s share capital. Nidhi companies, the government companies, are wholly owned subsidiaries and not required to file this form.

  • MSME Form 1

MSME Form-1 is required to be filed by companies when they have outstanding payments to be made for supplies which have been obtained from vendors that are Micro, Small and Medium Enterprises or MSMEs. The price to be made must be pending for a period exceeding 45 days. This form is required to be filed half yearly with the Registrar of companies.

  • Every Section 8 company is required to maintain a statutory register which shall hold a record of, among other things, loans which have been obtained, members and directors, and charges created.

Event-Based Compliances for Section 8 Companies – Requirements for Section 8 Companies

Apart from the compliances mentioned above, Section 8 companies are also required to comply with certain event-based compliances on the happening of specific circumstances or events. Below mentioned are some of the event-based compliances:

  • Change in directors

Section 170(2) of the Companies Act of 2013 mandates that any appointment of directors or regularisation of directors or change or cessation of directorship is required to be reported to the MCA by filing Form DIR-12 before the expiry of 30 days from the date on which the annual general meeting was held.

  • If any changes are brought to the company’s objectives, resolutions have to be passed, and consent of the central government has to be taken by such Section 8 company. The company is required to provide information on the resolutions passed to the ROC under Form MGT-14.
  • Form SH-7 is required to be filed when any alteration is made in the company’s share capital.
  • Form INC 22 is required to be filed with the Registrar of companies to inform the ROC of any changes in the address of the company’s registered office within 30 days from the change of address.
  • Form PAS-3 is to be filed with the ROC on the allotment of shares of the company.
  • The ROC must be intimated by filing a form on receipt of share application money.
  • The ROC must be intimated by filing a form on the transfer of shares.
  • The ROC must be intimated by filing a form on entering into any agreement with a related party.
  • The ROC must be intimated by filing a form on any change in the authorised bank signatories.
  • The ROC must be intimated by filing a form on any change with the duly appointed statutory auditor.

Meeting Requirements for Section 8 Companies

Following are some basic requirements for Section 8 Companies:

  • Every Section 8 company is required to conduct its first annual general meeting within 18 months of the incorporation of the company. It is also mandated that the first annual general meeting shall be conducted nine months conclusion of the financial year. The subsequent annual general meetings shall be held within six months from the close of the financial year. The gap between 2 annual general meetings shall in no case exceed 15 months.
  • Every Section 8 company is required to hold its first board meeting within 30 days of the incorporation of the company. It is also necessary to have at least one board meeting every six calendar months of a financial year.
  • All companies incorporated under the Companies Act are required to hold at least four audit committee meetings in a financial year. The gap between two subsequent audit committee meetings must be at most a period of 12 months.
  • All companies incorporated under the Companies Act must conduct stakeholders’ relationship committee meetings at least once a financial year.

Penalties for Non-Compliance

The Ministry of Corporate Affairs has been granted the power to impose penalties to penalise any non-compliance to its mandates and procedures. Below mentioned are some of the penalties which companies can incur due to non-compliance with the MCA norms:

  • The central government may cancel the licence or permit granted to the company if it finds out that such a company is not working correctly, which violates the objects for which it was established.
  • The chief officials of the organisations who are in default may be liable for imprisonment or fine, which may extend up to ₹25,00,000.
  • The company at fault may be penalised with a fine which shall not be less than ₹10,00,000 but can extend up to ₹1,00,00,000.

Conclusion

A Section 8 company is a non-profit entity formed for charitable purposes or social welfare purposes like “promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any other such object”. Every company regulated by the Ministry of Corporate Affairs and incorporated under the Companies Act of 2013 is required to follow certain compliances, and non-adherence can lead to penalties being imposed on the company and its directors. Moreover, being MCA compliant provides transparency into the operations of the company, as many compliances reveal the operational or financial situations of the company. It also grants credibility to the companies , aids in building trust among the stakeholders involved and helps avoid legal troubles. Section 8 companies must be aware of all the annual, half-yearly, and other compliances and requirements for Section 8 Companies involved to remain MCA compliant and avoid incurring fines and other penalties.

Read Our Article: A Closer Look At Benefits Of Section 8 Company Registration

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