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

• Gives company a better credibility
• Protects the company from any legal trouble
• Help the company in circumventing penalties
• Work in the direction of forming trust amongst the customers

Documents Required for Annual Compliances of Section 8 Company

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

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:

  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 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:

• 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 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:

• Section 8 companies must be registered under Section 12A of the Income Tax Act, with the Principal Commissioner using form 10A.
• It must adhere to the conditions mentioned in the Section 11 if the company wants to fall under the criteria of eligibility for the exemption.
• Section 80G must approve the company through Form 10B.

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:

• The Central Government may disavow the permit allowed to the organization on the off chance that it finds that the organization is working falsely or in a way violative to the object of the organization.
• The organizations will be culpable with fine, which will not be under ten lakh rupees and can be stretched out to one crore rupees.
• The chiefs and each official of the organization who is in default will be culpable with detainment for a term which may stretch out to twenty-five lakh rupees or with both.
• In the event that it is discovered that the issues of the organization were directed falsely, every official in default will be at risk for activity under area 447.

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.

How Corpbiz will help you?