Section 8 company compliance
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Overview of Section 8 Company Compliance
The Companies Act, 2013 mandates that all Section 8 Companies adhere to compliance regulations set by the Ministry of Corporate Affairs (MCA).
The primary objective of forming a Section 8 Company is to promote and support activities related to art, science, sports, commerce, and charitable endeavors. These entities are classified as Non-Governmental Organizations and enjoy the benefits of being treated as "Limited Companies," although they do not use "Limited" in their names. In essence, Section 8 Companies work towards the upliftment of communities and sectors in need across India. They are not permitted to distribute income or dividends to their members.
Benefits
of Section 8 Company Compliance
1. Enhances the company’s credibility
2. Prevents legal complications
3. Helps avoid penalties
4. Builds trust among stakeholders
Documents
Required for Annual Compliances of Section 8 Company
1. Memorandum of Association
2. Articles of Association
3. Digital Signature Certificate (DSC)
4. Certificate of Incorporation
Mandatory
Section 8 Company Compliances
Appointment
of Auditor It is
mandatory for a Section 8 Company to appoint an auditor annually to oversee
financial records.
Maintaining
Statutory Registers
Companies must maintain records in statutory registers annually. These
registers contain details of members, loans, charges, and investments, helping
assess the company's annual performance.
Preparation
of Financial Statements Section 8 Companies must prepare financial records yearly and submit
them to the Registrar. These include:
1. Trading Account
2. Profit and Loss Account
3. Balance Sheet
Director’s
Report Preparation
According to Section 134 of the Companies Act, 2013, Form AOC-4 must be filed
for the Director’s Report. This report provides shareholders with an overview
of the company’s financial standing and business operations. Signed
"minutes of meetings" must be kept at the registered office.
Income
Tax Return Filing Section
8 Companies must file their Income Tax Returns by September 30 of the following
fiscal year. Companies registered under Section 12A and 80G can benefit from
tax exemptions.
Board
Meetings For
small companies, at least two board meetings must be held annually, with a
maximum gap of 90 days between them.
Annual
General Meeting (AGM) The AGM
should be conducted by September 30 each year. Directors, members, and auditors
must be notified at least 21 days in advance. Form MGT-15 is submitted within
30 days of the AGM.
Filing
Financial Returns with RoC
- 1. E-form AOC-4 must be submitted within 30 days of the AGM for financial statement filing.
Filing
Annual Return with RoC
- 1. Form MGT-7 must be submitted within 60 days of the AGM. If no AGM is held, the return must be filed within 60 days of the scheduled AGM date.
Event-Based
Compliances for Section 8 Company Event-based compliances are non-periodical and
must be filed as and when specific events occur. These include:
1. Transfer or allotment of shares
2. Appointment/Resignation of Directors
3. Appointment/Resignation of Auditors
4. Change in company name
5. Modification in MOA
6. Appointment of Key Managerial Personnel
7. Receipt of share application money
8. Any structural changes in the company
Tax
Compliance for Section 8 Companies While Section 8 Companies must pay corporate tax,
they can claim exemptions by fulfilling certain conditions:
1. Must be registered under Section 12A of the Income Tax Act using Form 10A.
2. Must comply with conditions outlined in Section 11 to be eligible for tax exemptions.
3. Must secure approval under Section 80G through Form 10B.
Penalties for Non-Compliance
Failure to adhere to compliance requirements may result in penalties, including:
1. Revocation of the company’s license by the Central Government if found operating fraudulently or against its stated objectives.
2. A fine ranging from INR 10 lakh to INR 1 crore.
3. Directors and officers in default may face imprisonment for up to 25 lakh rupees or both.
4. If fraudulent activities are identified, legal action under Section 447 will be initiated against the responsible officials.
Due Dates
for Filing Section 8 Company Compliances
|
Compliance |
Due Date |
|
Annual
General Meeting (AGM) |
September
30 |
|
AOC-4
(Financial Statements) |
Within
30 days of AGM |
|
MGT-7
(Annual Return) |
Within
60 days of AGM |
|
Income
Tax Return |
September
30 |
Fastzeal
Support
1. Fill the form
2. Get a call back
3. Submit required documents
4. Track compliance progress
5. Receive final deliverables
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.
1. 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/ -
2. Inability to lead an Annual General Meeting is punishable with a fine up to Rupees one lakh.
3. 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 provison 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.
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.
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.
