Compliance for section 8 companies in India
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Compliance for section 8 companies in India
- Appointment of the auditor
The section 8 Companies are obligated by law to appoint an auditor to handle the Company’s yearly financial reports. Section 139 of the Companies Act, 2013 mandates that each company must submit Form ADT-1 to the MCA informing it about the appointment of the auditor and the details of the same. The auditor will be hired for up to five financial years and audit the company’s books of accounts and financial statements annually.
The auditor shall be appointed within 15 days from the date of the Annual General Meeting (AGM). The fine for delay in filing for this form depends on the days of delay. For example, if delay up to 30 days then the fine is 2 times the normal fees; if more than 30 days and less than 60 days, then the fine is 4 times the normal fees and so on.
- Maintaining of statutory registers
The company is obligated under section 8 of the Companies Act, 2013 to maintain the register in which the details of loans taken by the company, director’s details, change in director, charges created, investments etc.
- Conduct meetings
The section 8 companies are obligated by law to hold an annual general meeting twice a year and also to conduct other statutory meetings.
- Report by board of directors
A document, which consists of the information about the company and its compliance attached with a set of financials, corporate social responsibilities, accounting and other annexures, is referred to as the director’s report. It is compulsory for the directors of the company to make this report as per the provisions of the Companies Act, 2013. This report must be filed as an attachment to the AOC-4 Form.
- Preparing the company’s financial statements
The company must prepare previous year financial statements, which consist of a balance sheet, profit and loss statement, cash flow statement, and other financial documents that must be filed with the Registrar of Companies (ROC) and should be audited by the auditor.
- Filing of financial statements
The AOC-4 Form must be submitted within 30 days of the AGM date. Failure to file it will result in a penalty of Rs. 100 per day.
- Filing of annual returns
The MGT-7 Form must be submitted within 60 days of the AGM date. Failure to file it will result in a penalty of Rs. 100 per day.
- Filing of Income Tax Return
Section 8 Companies must file their income tax reports by September 30th of every year. The purpose of filing income tax returns is to provide a summary of the company’s total income.
- Board Meetings
A Section 8 company is required to hold at least four board meetings in a year, with a maximum gap of 120 days between two consecutive meetings.
- General Meetings
A Section 8 company is required to hold an Annual General Meeting (AGM) within six months from the end of the financial year.
- Compliances under other laws
A Section 8 company is also required to comply with other applicable laws, such as the Income Tax Act, Foreign Contribution Regulation Act (FCRA), and the Goods and Services Tax (GST) Act
- GST registration
If the Section 8 company is engaged in any taxable activity, it must obtain GST registration.
Due date for filing of compliance under Section 8 Companies
Sr.No. | Form No | Compliance | Due Date |
1 | AOC-4 | Financial statement | Within the 30 days of AGM |
2 | MGT-7 | Annual return | Within the 60 days of AGM |
3 | ITR-6 | Income tax return | 30th October |
Penalties for non-compliance
If the section 8 company fails to comply with the conditions or fails to comply with the compliance filing, the directors and company will face the following penalties:
If the Central Government determines that the company is operating dishonestly or against its stated goals, it may terminate the license.
The fines imposed against the company must not be less than ten lakh rupees and can be extended to one crore rupees.
The directors and every officer of the company who is in default are subject to both imprisonment and monetary fines up to twenty-five lakh rupees.
If it is discovered that the company’s operation is carried on fraudulently, then every officer in default will be liable for their actions under section 447 of the Companies Act, 2013.
Section 8 companies are non-profit organizations or non-governmental organizations whose profit is used to promote art, commerce, welfare, research, etc. If a section 8 company complies with all the required annual compliance, then it can enjoy various benefits and avoid the severe penalties incurred for non-compliance. So it is preferable to incorporate your NGO as a section 8 company rather than a trust or society.
Section 8 Company FAQ’s
It is a type of not-for-profit company set up for the promotion of art, science, commerce, charity, sports, education, research, or any other useful activity. These companies are typically formed to benefit a specific community or purpose and are excluded from the provisions of the Companies Act, 2013 that generally apply to other companies.
Yes, Section 8 companies can make a profit. Section 8 companies are businesses that receive subsidies from the government to provide services to low-income people. They can also use different ways to gain incomes such as – Investment, Donations, Funding, etc.
A Non-Governmental Organization (NGO) is an organization that is independently established and operated, usually with a charitable, educational, religious, or social purpose. NGOs are usually non-profit and do not have a profit motive. A Section 8 Company is a non-profit organization formed to promote commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any other such object. Section 8 companies are allowed to generate profit but they must use their profits for the purpose of achieving their goals and not for the benefit of its members.
No, you will not have to be present at our office or appear at any office for the registration of a Section 8 Company. All the documents can be scanned and sent through email to our office. Some documents will also have to be couriered to our office.
Identity proof and address proof are mandatory for all the proposed Directors of the Section 8 Company. PAN Card is mandatory for Indian Nationals. In addition, the landlord of the registered office premises must provide a No Objection Certificate for having the registered office in his/her premises and must submit his/her identity proof and address proof.
FinAccy can incorporate a Section 8 Company for in 20-30 days. The time taken for registration will depend on the submission of relevant documents by the client and the speed of Government Approvals. To ensure speedy registration, please choose a unique name for your Company and ensure you have all the required documents prior to starting the registration process.
Once a Company is incorporated, it will be active and in existence as long as the annual compliances are met with regularly. In case, annual compliances are not complied with, the Company will become a Dormant Company and may be struck off from the register after a period of time. A struck-off Company can be revived for a period of up to 20 years.
A Digital Signature establishes the identity of the sender or signee electronically while filing documents through the Internet. The Ministry of Corporate Affairs (MCA) mandates that the Directors sign some of the application documents using their Digital Signature. Hence, a Digital Signature is required for all Directors of a proposed Section 8 Company.
Director Identification Number is a unique identification number assigned to all existing and proposed Directors of a Company. It is mandatory for all present or proposed Directors to have a Director Identification Number. Director Identification Number never expires and a person can have only one Director Identification Number.
Yes, a NRI or Foreign National can be a Director in a Section 8 Company after obtaining Director Identification Number. However, at least one Director on the Board of Directors must be a Resident India.