Compliances for Section 8 Companies

Things You Need to Know About Compliances for Section 8 Companies

Online Legal India LogoBy Online Legal India Published On 04 Jan 2023 Category Section 8 Company

The Companies Act of 2013 has made Section 8 Compliance with the MCA required for all Section 8 Companies.

Section 8 Company was formed to promote, stimulate, and nurture activities realted to art, science, sports, business, charitable activities, and so on. A Section 8 Company is classified as a Non-Governmental Organisation. These businesses can be regarded as a 'Limited Company,' but the term 'Limited' is not added to the end of their names. Overall, Section 8 companies seek to promote underserved areas and industries in India. These corporations are not required to provide revenue or dividends to their shareholders.

Compulsory Compliances for Section 8 Companies

The compulsory compliances for Section 8 Companies are as follows:

Auditor Appointment

Every year, a Section 8 corporation is required to employ an auditor to oversee its financial records.

Keeping Registers


Section 8 corporations are required to keep statutory records in registers. These registers are kept on a year-to-year basis, and their function is to examine how the firm did each year. In addition, the register contains information on members, loans, levies, and investments.

Upkeep of Financial Statements

A Section 8 Company's financial records are kept on a yearly basis. When the financial records are completed, they are handed to the registrar. Financial records contain the following data:

  • Account for Trading
  • Profit and Loss Statement
  • The balance sheet

Creating the Director's Report

According to Section 134 of the Companies Act of 2013, Form AOC-4 is required to file the Director's Report. The goal of compiling a Director's Report is to provide shareholders with an overview of the company's financial status and commercial scope. The signed minutes of meetings must be stored at the Registered Office.

Filing of Income Tax Returns

Section 8 corporations must file income tax returns on or before September 30th of the following fiscal year. It is necessary to file an IT return in order to provide a thorough picture of the company's earnings. However, if the corporation is registered under Sections 12A and 80G, it may be eligible for tax exemption.

Hold a Board Meeting

In the case of small businesses, board meetings should be conducted twice a year. The time between the two encounters should not exceed 90 days.

Organise an Annual General Meeting

The Section 8 Company's Annual General Meeting should be held on or before September 30th each year. The meeting must be attended by all directors, members, and auditors. They should be alerted about the meeting with at least 21 days' notice. Form MGT-15 is used to submit the Annual General Meeting report. The report must be provided within 30 days after the meeting's conclusion.

Financial Return Filing with RoC

To file a copy of financial statements, utilise E-form AOC-4. It must be filed within a month of the date of the annual general meeting.

Annual Return Filing with RoC


Form MGT-7 is used to file the company's yearly return. The annual return is due 60 days after the completion of the Annual General Meeting. If no Annual General Meeting is conducted during the year, the yearly return must be filed within sixty days of the date the Annual General Meeting should have been held, which is September 30. It should be linked to the notification stating the reasons for not having the Annual General Meeting.

Tax Compliances for Section 8 Companies

Section 8 corporation is required to pay corporate tax in accordance with the Income Tax Act. However, by implementing specific steps, the Company can exclude certain income from income tax. Section 8 Company must comply with the below-mentioned requirements in order to consider such exemptions:

 

Section 8 corporations must register with the Principal Commissioner using Form 10A u/s 12A of the IT Act.
If the corporation wishes to meet the requirements for exemption eligibility, it must follow the conditions outlined in Section 11.
Form 10B must be submitted to Section 80G for approval.

Event-based Compliances of Section 8 Company 

As the name suggests, these are the compliances that should be reported on specified occasions. These are non-periodic in nature, as opposed to yearly compliances.

Checklist for Section 8 Company Event-Based Compliances:

  • Transfer of stock
  • Share distribution
  • Director Appointment/Resignation
  • Auditors' Appointment/Resignation
  • Changes to the company's name
  • Changes to the company's MOU
  • Key Management Personnel Appointment
  • Acceptance of share application fund
  • Any changes to the company's structure

Penalties to be imposed in the case of non-compliance


In the event that the processes are unfollowed, the Ministry of Corporate Affairs has the ability to apply fines.

The following penalties will be imposed:

  • The Central Government may revoke the organisation's permit if it discovers that the organisation is acting fraudulently or in a way that is contrary to the organisation's mission.
  • The organisations will be fined, which will not be less than ten lakh rupees and can go up to one crore rupees.
  • The heads and each officer of the organisation who is in default would face detention for a term of up to twenty-five lakh rupees or imprisonment.
  • If it is revealed that the organization's difficulties were misdirected, every official in default will be subject to activity under Area 447.

Conclusion

Section 8 Companies are one of the categories of corporations defined in The Companies Act 2013. Accordingly, like any company established under this legislation, Section 8 Company must file Compliances as provided in the Act.

A Section 8 Company is formed to promote sports, art, science, religion, philanthropic activities, etc. These companies are in obligation to file annual and event-based (one-time) compliances with The Ministry of Corporate Affairs.


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