A Section 8 company, under the Companies Act, 2013, is a non-profit organization established for charitable purposes such as education, social welfare, or religion. Compliance for such companies involves annual filing of financial statements and annual returns with the Ministry of Corporate Affairs (MCA). They must hold an Annual General Meeting (AGM) and submit their audited financial statements along with Form MGT-7 and Form AOC-4. Additionally, Section 8 companies are required to maintain proper books of accounts, follow regulations related to charitable activities, and ensure compliance with any specific directives issued by the MCA.
Benefits of Section 8 Company Compliance:
- Legal Recognition: Ensures compliance with legal requirements, avoiding penalties and maintaining good standing.
- Public Trust: Enhances credibility and trustworthiness among donors, beneficiaries, and stakeholders.
- Funding Opportunities: Facilitates access to grants and donations, as compliance demonstrates transparency and accountability.
- Operational Efficiency: Streamlines organizational processes by adhering to legal and regulatory standards.
- Reputation Management: Protects the organization’s reputation by ensuring adherence to legal and ethical standards.
Documents Required for Annual Compliance’s of Section 8 Company
| Memorandum of association | Article of Association | DSC | Certificate incorporation |
Mandatory Section 8 Company Compliances
- Appointment of Auditor:
A Section 8 company must appoint an auditor annually to manage financial records and ensure accurate reporting. - Maintaining Statutory Registers:
Section 8 companies are required to maintain registers that record details such as members, loans, and investments, reviewed annually to assess the company’s performance. - Maintenance of Financial Statements:
The company must maintain financial records including a trading account, profit and loss account, and balance sheet, which are submitted annually to the Registrar. - Director’s Report Preparation:
As per Section 134 of the Companies Act, 2013, Form AOC-4 is required to file the Director’s Report, giving shareholders an overview of the company’s financial position. - Income Tax Return Filing:
Section 8 companies must file their income tax returns by September 30th of the following fiscal year. Tax exemptions can be claimed if registered under Section 12A and 80G. - Conducting Board Meetings:
Board meetings must be held twice a year, with no more than a 90-day gap between meetings. - Annual General Meeting (AGM):
The AGM must be held by September 30th each year. Directors, members, and auditors must be notified at least 21 days prior, and Form MGT-15 must be filed within 30 days of the meeting. - Filing Financial Return with RoC:
The company must file financial statements using e-form AOC-4 within 30 days of the AGM. - Filing Annual Return with RoC:
The annual return must be filed using Form MGT-7 within 60 days of the AGM, or within 60 days of when the AGM should have occurred.
Tax Compliance for Section 8 Companies
Section 8 companies, being non-profit organizations, enjoy certain tax benefits. However, they must still comply with essential tax regulations. They are required to file income tax returns by September 30 each year. If registered under Section 12A and 80G, they can avail of tax exemptions, significantly reducing their tax burden. Failure to comply with tax filing requirements can result in penalties, so timely and accurate filing is crucial for maintaining their non-profit status and benefiting from the available tax exemptions.
Penalties in Case of Non-Compliance for Section 8 Companies
- The Central Government holds the power to revoke the company’s license if it finds fraudulent activities or violation of the company’s objectives.
- A fine ranging from ₹10 lakhs to ₹1 crore may be imposed on the company for non-compliance.
- The directors or officers in default may be subjected to imprisonment, or a fine, which can extend up to ₹25 lakhs, or both.
- If the company’s affairs are found to be conducted fraudulently, all officers in default may be prosecuted under Section 447 of the Companies Act.
